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- [00:00]
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- [01:04]
Jackie Lamport
The price tag when Vinay Hiermath sold his business was just under a billion dollars. Yet his take home was around 70 million, which is still a lot, but it's significantly less than a billion. On the other hand, Donald Spann sold his business for about $12 million and his take home was about $12 million. When we talk about exits, we or when they're in headlines, the big number that usually gets repeated is the sale price because, well, it's the big number. But when you're trying to figure out what a founder actually took home, that can often be pretty misleading because there are a lot of things that can factor into the outcome, like co founders and investors and deal structure and life circumstances, lots of things. So for this video, we're gonna do something quite interesting. We're gonna take five exits from, from past Moneywise guests that are roughly the same size, about $30 million. And we are going to compare what the founders actually took home because, well, it's quite different. I'm Jackie Lamport and this is Money Wise, a podcast made for the community of founders over at Hampton. That's a community of high net worth founders who are navigating everything that comes with the lifestyle, including finances, business growth, personal growth, relationships, everything. So if you're a founder doing at least 3 million in revenue, you should check it out. It's largely in real life as well, which is pretty cool and also really Unique. So if you're looking to connect with real founders in real life, then check it out. Join Hampton.com okay, so here's the plan for this episode. Like I said, we have five founders who have had roughly the same exits of $30 million. And we're going to break down one, what their actual exit size was, 2, what they actually sold because it's not always the full business, and three, what they actually took home and the factors that led to that and why they're all so different. First up is Aaron Galperin's exit. That was worth $32.5 million, and that was for his company that is now known as Gym Desk, which is a gym management software which he developed as a side project originally after he saw the need while doing Brazilian Jiu jitsu. The sale was for a majority stake in the company, which left him with some rollover equity, almost 50% worth, actually. So he's hoping that in five to six years, there will be another liquidity event that he can also take part in. And that also kind of means that he hasn't actually walked away from the business.
- [03:22]
Aaron Galperin
I'm definitely not checked out. I'm learning a ton from all the people that we brought in for customer success, for sales, for marketing and the new CEO. We're all, like, feeding off each other. I'm fine not being the main guy anymore. And more than fine, I actually relish it to a degree. I do see myself eventually reducing my involvement in the day to day of the company and focusing on other initiatives. But for now, this is. This is great.
- [03:46]
Jackie Lamport
But I know what you're wondering, which is, well, what did he actually get from that? And the answer is a lot. He says that of the 32.5 million, he actually got 30.
- [03:57]
Aaron Galperin
We joined the tiny seed accelerator. So they take 10%. I had 90%. So most of the equity, we rolled over different amounts. So they actually rolled over more equity from their share than me. So the final amount, how it breaks down is a bit more complicated. But let's say 30 went to me. There was also a seller note involved, so I didn't get the full amount immediately. I gave them a seller note for three years, which also bears interest. And there were a few other mechanisms there that deluded me to a degree, like we needed to establish an option pool before the sale when I was still the majority stakeholder. But at the end of the day, the outcome was amazing. And, you know, I was very happy with how it went down.
- [04:44]
Jackie Lamport
So with the seller's note, it means that he didn't actually just get a straight $30 million check. The way it works out is essentially he has loaned them that money and they're going to pay it back to him over time with interest. Unfortunately, he didn't specify exactly how much the seller's note was worth. However, he did break down his portfolio for us and we learned that there was about 25 million account for in investments that does include past investments or other investments like crypto and just regular investments. But we can assume from that even so that there is a substantial amount that he got in cash. And of that cash, he went out of his way, quite literally to make sure that he got the most of it.
- [05:22]
Aaron Galperin
The idea was this is back in 2019, we were living in California. California has a very high state income tax. And I knew that at some point I would probably sell the company. If I moved directly to Japan from California, California would still be taxing me. It's one of two states in the US that do this and it's very grabby. It's very hard to convince California, yeah, you actually moved and you're not coming back. And if you do come back, they would make you pay back taxes. So we moved to a zero income state, Texas. We had a trip planned for April 2020 to come and scout out potential places to move to. And then the COVID started in March and Japan completely closed off to visitors. We ended up, in a way, getting stuck for two and a half years in in Austin.
- [06:09]
Jackie Lamport
Okay, so to recap for this one, Aaron was a bootstrapped founder, minimal outside investment. He sold a majority stake in his company, but kept nearly half the equity. He was taxed on the sale based on his residency in Austin. And there was a seller's note included in that deal. So not all cash, but all things considered, pretty good.
- [06:30]
Interviewer
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- [07:42]
Jackie Lamport
Moving on, we have an exit from Scott Galloway. This one was worth $33 million, yet he took a significantly less amount than Aaron did. So kind of early in his career, Scott had built a brand strategy company called profit. And in 2003, he exited from that company. But, yeah, he didn't get that much. And there's a couple reasons for that.
- [08:02]
Scott Galloway
When I was 26, I started a strategy firm. It grew to a couple hundred people. I sold it for $33 million, so had some money, had to split it with my ex wife.
- [08:11]
Interviewer
Well, how much did you make from Profit?
- [08:13]
Scott Galloway
Well, I mean, I owned about 20 or 30% of the company. And then after splitting it with my ex, and then after taxes, I had 2 or 3 million bucks, which felt like a lot of money at the time.
- [08:23]
Interviewer
But I dumped how old at 32?
- [08:25]
Scott Galloway
Yeah, early 30s. So I thought that was a lot of money. And it wasn't.
- [08:28]
Interviewer
That is a lot of money.
- [08:29]
Jackie Lamport
But hey, you know, Scott Galloway. And that also means that, you know, that this was just an early learning experience for him. In 2017, he exited another one of his companies, this one called L2, and, well, it was, it was worth a lot more. He talked about it on my first
- [08:43]
Interviewer
million, what it sell for? 200 or $300 million?
- [08:46]
Scott Galloway
No, it sold for 158 million. But we'd only done one round of venture capital. So the, you know, the common shareholders, you know, I was the largest equity owner, so the top, you know, between me and the top six employees, we probably owned 70% of it. So that was that. You know, that was a lot of money for me. I'd never had that kind of money before. I'd always done well, but I'd never had that kind of capital.
- [09:10]
Jackie Lamport
Okay, so to recap, Scott sold that first company for $33 million, yet because he only owned about 20 to 30% of it. He had to split the profit with his ex wife and then he had to pay taxes on it. That only ended up netting him about 2 to 3 million dollars, which is a great example of how a big headline number $33 million doesn't always mean that, yeah, that you made $33 million. Next up, we have an exit from Alex Hormozi, and this one was worth about $31 million. And we have another gym company, which you might have guessed based on looking at them. Gym Launch was a business that Alex built after running his own gyms for a while and launching other gyms and then eventually scaling that into a licensing model. At the time of the exit, he had built the company to a valuation of about $46 million and he sold 66% of it. And unlike Aaron's deal, it was quite simple.
- [10:03]
Chris or David Sinkinson
So we sold 2/3, all cash for 31 and then we paid 20% on that. So what are that is 20, 22 already.
- [10:12]
Jackie Lamport
$20 million is a crazy amount of money. But what's crazier is how much he actually took out before he even exited.
- [10:20]
Chris or David Sinkinson
We had taken 42 million in distributions from Gym Launch before the sale.
- [10:25]
Jackie Lamport
That means that his total after tax take home was actually more than the total Exit deal. He added it up for us and it was roughly 45 to 50 million do and he kept, I mean, 30% of the company. So, yeah, that worked out pretty well. This next one is a bit unique, and that's for two reasons. One is that there are two of them, as in there are two people. We're talking about two brothers. There are two brothers. Chris and David Sinkinson sold their business for $40 million. But this is the second thing that makes this entry unique. That's 40 million Canadian. So unfortunately less than what it seems. It's about $29 million USD, which is why it's on this list. It was almost half that, though.
- [11:01]
Chris or David Sinkinson
Basically. Just as the pandemic started was the first time the company that bought us approached us and they said, hey, would you be interested? And they kind of, they made an offer for us. We'd be willing to give you $20 million for the business, which I wasn't really happy with. I thought that was a pretty low multiple. And we're in software, like, as you know, the multiples are usually better than that. And so I wasn't pumped with that and I said, you know what, maybe later, not right now. Chris and I made that decision and then jump ahead after we had this unbelievable pivot during the pandemic, we reach out to that company again. Hey. And say, hey, are you still interested? And they immediately said, cool, we'll Double the offer, $40 million. We are reducing the earn out from a year and a half to three months. You get more direction over sort of how this is coming together.
- [11:46]
Jackie Lamport
The good news for them is that this was all pretty straightforward.
- [11:48]
Chris or David Sinkinson
So cap table is easy enough to understand. Two people, Chris and David Sinkinson. That was it. We had no debt, nothing. It was as simple as it gets.
- [11:57]
Jackie Lamport
So the only real thing here was splitting it two ways. And that's what happened.
- [12:00]
Chris or David Sinkinson
Feel my pocket buzz. And I look at my banking app and I go, you have an incoming deposit of $20 million. And I was like, whoa, hey, that's cool. I think as I was looking at my phone, I just got a text message from Chris that said, hey, did you get it?
- [12:16]
Jackie Lamport
As for taxes, in the province of Ontario, which is where they live, when a founder sells shares of a business, they typically have to pay capital gains tax. And on that size it'd be roughly 25 to 30. So if we're saying that they got $20 million, then they would roughly have taken home mid teens. Let's say that's 15. We're looking at about 10 to 11 USD million, obviously. But speaking of taxes, there was actually a part of this deal that was taxed a little bit more aggressively.
- [12:45]
Chris or David Sinkinson
So during the initial sale of the company for the $40 million, we were working pretty closely with the private equity group. I basically just said to the guy right away, and actually he's in our book, his name is Good Guy Gal. He's awesome. And, and I said to Gal, like, are you guys, you guys are planning on spinning this company out and selling it probably within the next like 12 months, right? And he's like, yes. And I was like, if we want to be part of that, like, like as part of that full package, first thing, do we have to do this now? And we want to participate in that. And he said, yes, you have a two month window. There are some complexities for Canadians, Canadian citizens to have equity in American companies. So instead what they did is they basically gave us almost like you could call it a promissory note. It was a legal instrument at least where basically if you, if the company sells then you will get this percentage of the overall value. It wasn't super lucrative. If the main deal was, as we said, 40 million, that was probably, I want to say, like, what was it, like 400 grand? Each or something like we.
- [13:44]
Aaron Galperin
And we had to give half of
- [13:45]
Chris or David Sinkinson
it to the government because it was treated as earned income. So at our marginal tax rate, which is like 50%. So we saw 200 of the little disappointing, I think.
- [13:55]
Jackie Lamport
So to recap for this one, Chris and David sold their company for $40 million. We'll keep it in Canadian. So it's simple for $40 million. And because they didn't have any big outside investors or any debt or anything crazy, they each just got 20 million after tax. That's it. They just got it. So pretty good actually. AI search is quickly becoming one of the easiest ways for companies to get in front of customers right now. And. 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. Imagine being able to go back in time and buy Facebook ads in 2007 with all the knowledge that you have now. Or even being able to go back and create TikTok content in 2017. The companies who took advantage of these growth channels in their early stages experienced insane growth. And guess what? This is exactly the opportunity you have right now with AI search and the ability to show up right in front of your customers on LLMs like ChatGPT. Mentions so makes it easy. AI search platforms like ChatGPT that are so highly trusted, people are using it for everything from relationship advice to legal advice or even as their own personal therapist. That's why many companies are reporting conversion rates of up to 17 times higher when their products are recommended on ChatGPT compared to traditional search on Google. So go to Mentions so right now and sign up with the discount code moneywise for 50% off your first month and a free AI search from the Mentions team who are behind the SEO campaigns of some of the biggest and fastest growing companies in tech like Beehive, Kajabi and American Express. That's Mentions so code moneywise for 50% off your first month and a free search audit. Last up we have Marshall Haas with an exit of $29.7 million. And that's back to USD. Yeah, what's interesting about this one is that it was actually purchased by another guest of the show, Nick Huber and the purchase was for a controlling stake, Marshall's controlling stake in the company. At the time, the company was valued at about $52 million. Here's what Marshall got from that sale
- [16:12]
Marshall Haas
deal was basically I got about 18 million in cash at close, there's about 8.2 million of a seller note, but there's heavy interest on that, so I'll should see more than that over time.
- [16:26]
Jackie Lamport
And like a few others on this list, Marshall also held onto equity in the deal, which is something that he recommends.
- [16:31]
Marshall Haas
People think about an acquisition as like a binary all or nothing kind of thing. That's not true at all. Like everything's negotiable. So when I started, you know, considering selling, I talked to a lot of friends that had sold and there's a thread of a few themes that I noticed which is one, like the guys that completely sold out the whole thing, they immediately go into worrying about, you know, they have money coming in and now they're worried about like making it last. And that's a different kind of anxiety that I don't want to have to deal with. And the other thing is just like they don't have any action, they get really bored, maybe they get depressed. And so I optimized for a few things in the deal. One was to hang on to a considerable amount of equity, still have cash flow where I wouldn't have to cut into my principal and live off of that. I can just let that compound and then live off of the cash flow that my equity that I would hang on to would still spit off. I still get to see action like I'm on the board, I'm advising the company. I don't have a day to day role. The torch has been passed to Nick and the new ownership. But I can help when I'm needed. And then of course there's a life changing sum of money where you don't have to worry about working ever again, which is obviously the first motivation in selling. So I hung onto equity to basically optimize around all that. And I think that was, I'm very happy with doing it that way.
- [18:02]
Jackie Lamport
To recap Marshall's deal, that's an exit of $29.7 million, 18 million in cash, another 8.2 million in a seller's note, which is about 26 million in total. Ish. And then he still has equity, another great deal. And with that we have now looked at five different exits, all valued at about $30 million, but with vastly different founder take homes. The lesson here obviously is that the headline number is only ever just that, the headline number, which is important to understand for a couple reasons, and the first one being that if you are planning to exit someday, it's really vital that you know that these things can be really unique. You have to think about the different founders, the different types of structures and deals, different taxes, how much of the company is actually being sold. All of these things matter. So what you are going to expect is not really going to become super clear until you figure out exactly what your situation is. The second point here is a little bit more pointed. It's that. That scoreboard number, it's kind of bullshit. And I say that because it does seem that founders sometimes get caught up in the competition side of things, which is okay, because competition is a great motivator. But a reality check is often also necessary. It can mess with your head if you start comparing yourself to somebody on Twitter or LinkedIn or something that is bragging about, like, an $80 million exit, and you don't know what they actually took home. You don't know how much of the business they actually owned, if they had what the deal structure was like, if they actually got anything in cash, if it was deferred, all the investors, all that stuff. You don't really actually know. The big number is always going to lead, especially in those kinds of spaces. But what actually matters is how your finances were impacted, not the score. And again, just to highlight how dramatically different exits can be, Scott Galloway and Marshall Haas both exited for roughly the same amount, yet Scott walked away with about 2 to 3 million. And Marshall 18 million in cash, and then another 8.2 in a seller's note. And you, yes, Marshall had to pay some taxes on that that we didn't account for, but still, it's a very different sum. Oh, yeah. And at the beginning of this episode, I mentioned V. HigherMath, whose company Loom sold for just under a billion dollars, yet he only walked away with about 70 million, yet it could have been double, actually. And that's a pretty interesting story in itself. So. So if you want to hear that, click here.