Jeff Hoffman sold his business to American Express in a nine-figure exit. After the Letter of Intent (LOI) was signed, American Express proposed paying part of the acquisition in an earn-out, and you’ll never guess what Hoffman did next.
During the interview, Hoffman shares the surprising question he uses in an interview to assess whether someone is going to be an A player on his team. Getting employees to care as much as you do is about engagement, which we tackle in module seven of The Value Builder System™. The first step is getting your Value Builder Score. Get your Score now.
About Jeff Hoffman
Jeff Hoffman’s accomplishments cover an astonishing range of fields; as well as being a successful entrepreneur, proven CEO, internationally renowned motivational speaker and published author, Hoffman has produced concert tours, Hollywood films and a 2015 Grammy-winning jazz album, working with stars like Elton John, Britney Spears and NSYNC. Hoffman has been the founder of multiple startups and has served as a senior executive in many capacities, including being part of a number of well-known companies such as Priceline.com. uBid.com, CTI and ColorJar. He currently serves on the boards of companies on six continents.
Hoffman also continues to support entrepreneurs and small businesses on a global basis. He serves on the board of directors for a number of national and international organizations fostering growth and development, including Global Entrepreneurship Week, the US State Department’s GIST program (Global Innovation through Science and Technology, working in 49 emerging nations), and the APEC Startup Initiative (the Asia Pacific Economic Council’s 21-member nation association). Hoffman also contributes to economic growth initiatives and entrepreneurship programs run by the White House, the State Department, the United Nations, and similar organizations.
His work has been recognized through numerous awards; some highlights are a Lifetime Achievement Award and introduction into the Entrepreneur Hall of Fame for his contributions to the field of entrepreneurship, the Champion of Entrepreneurship Award from JP Morgan Chase, Citibank, and Rising Tide Capital, and the George Brown Award for International Cooperation. Hoffman’s expertize is widely sought after. As a result, he has been invited to speak in over 50 countries, and teaches innovation workshops to major corporations on a regular basis. He can also frequently be found featuring as a business expert on Fox News, Fox Business, CNN, CNN International, Bloomberg News, CNBC, ABC, and NPR, and in publications like Forbes, Inc., Time, Fast Company, the Wall Street Journal, and more.
Some Highlights of the Show
Business: Competitive Technologies
2:40: “One of the first business intelligence companies in the travel industry.”
3:03: “Early on, don’t focus on exit, focus on entrance… You have nothing to sell anyway until you create excellent products and services.”
3:39: “We had built something that analyzed all of your travel patterns and history, as well as all of your booking plans.”
4:12: “Why would we trust you guys… We did it for free and took a percentage of the savings as commission.”
5:15: “As we added other services … they were all on a monthly subscription model.”
6:02: “By year three we were at $12 million in sales.”
7:06: “The piece that I underestimated … talent, it was the scarcest resource.”
9:09: “No one ever quit… We built a company where the best people all wanted to work and nobody wanted to leave.”
9:38: “Tell me one thing you absolutely have to do before your life is over… It was the cultural fit, not the resume fit.”
10:50: The triggering event.
11:20: “We started to beat the big name-brand players in our industry… That’s the day I realized that this might make me an acquisition target.”
13:24: “American Express was the 800lb gorilla… They called and said … ‘We’re losing bids because our customers want your products not ours.’”
14:22: “I had to actually go back to American Express and say, ‘No thanks.’”
15:00: Going from a license deal to an acquisition.
16:15: “Stoke the competitive fire… They react strongly to competition.”
18:00: “I’m on the same row as the company thinking of buying us… Then I invited every customer possible and all my friends to stop by.”
19:50: Valuation is in the eye of the beholder.
20:40: “We paid [the consulting firm] just to give us ammo… They were paid to educate and arm us, but they did not negotiate. We hired a law firm with an M&A department.”
24:06: The discounted cash-flow methodology. “If you buy the company from me [as the business owner], do a projection that says we as owners would be making this much money personally and as a business for the next ten years… You’re buying my whole future.”
27:05: “Part way through it I suddenly got worried about whether all of my team was on the same page; we called a halt in the negotiations, pulled everyone off-site and had everybody go up to the white-board and write down their true minimum.”
29:00: Having the M&A firm set the valuation expectations.
31:50: “The leverage principle: the only way you actually have leverage in a negotiation is if the other side believe you might actually walk out.”
33:15: The walkout and the final breakthrough.
35:00: Negotiating the collar.
37:10: “We showed them that the products they were buying from us were far superior to any other on the market. We showed them the lead we thought we had over any competitor starting to build the product … there was negative value, lost revenues, competitive advantage lost if they didn’t do this deal now.”
39:07: “The letter of intent didn’t say how they were going to pay us.”
39:29: “When you are at the letter of intent stage, this is where your opportunity to negotiate your terms, including whether or not there is an earn-out.”
41:30: “Go find someone else who has negotiated a deal against that firm and won. Hire them.”
45:03: “If all you are working for is things and money, you will get there and then say, ‘Now what?’”
46:00: “I have been very blessed… I wanted to give back by mentoring business owners and entrepreneurs.”
47:00: @SpeakerJeff | JeffHoffman.com
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