Rick Day built Daycom Systems into a $26 million dollar business over a 17-year run. Daycom sold phone systems but the company had a problem: it had become too reliant on one supplier.
Daycom sold phone systems but the company had a problem: it had become too reliant on one supplier in a business where the technology was changing fast. Motivated by the fear of becoming obsolete, Day decided to assemble an advisory board to help him prepare the business to sell. The board helped him to see his business through the eyes of a potential buyer and exposed a number of things that Day needed to fix.
About Rick Day
Rick founded, built, and sold Daycom Systems, a telecommunications VAR (value-added reseller) and Avaya-authorized dealer based in San Diego. The company, with revenues of $26 million, was the largest Avaya VAR on the West Coast and the only one to have both US and Mexican nationwide authorizations. Daycom was acquired by Carousel Industries (Exeter, RI) in April 2009.
After the sale of Daycom, Rick co-founded, serves as CFO, and is a Director at South Coast Yachts, the Beneteau authorized dealer in San Diego. He is also the founder of BusinessbyDay.com, a business coaching firm, and Steadfast Finance, a California-licensed financial lender. Rick is a Managing Partner in Phenix Salon Suites and is a Limited Partner in Moore Venture Partners.
Some Highlights of the Show
0:28: The challenge in the sale was that the business had become way too dependent on a single supplier.
3:00: The trigger to sell? I saw the change from the traditional TDM architecture (a separate computer and phone system) to the integrated system…a much more complex environment, and competition from big companies.
7:00: I had never sold a business before…so I wanted to put together an outside board of director…five directors including myself.
9:25: I didn’t want to go into it blind. I wanted outside guys with experience to have a vested interest in the outcome…. I used a recruiter, an executive search firm.
10:40: I gave each one of them a half a percent of the company phantom stock. It’s a written promise to pay…whatever I negotiate for myself, you’ll share in a percentage of that….
12:25: I used the board to help me create a recurring revenue stream…they really helped me streamline the business. We worked on that for two years and then we had our first company that came along to acquire.
13:00: Why didn’t you work with your management team? Why did you choose the additional layer?
14:35: We decided to hire a broker…he prepared a book on the business and strategized on good acquisition targets.
16:05: Out of 15, we negotiated with 5…and then 3 got pretty serious. That lasted 3 to 4 months, but one stood out.
17:15: So the industry is dying…you’re bailing out. How did you convince others…how did you dance around that question?
20:10: About the price, the multiple of EBITDA….
25:30: A tremendous exit, and respect between you and the CEO. Is there anything you’d do over?
26:00: The broker was involved; the M&A attorney for finer stuff…I knew when to go to those guys and when I could just talk to the CEO.
29:00: Being the sole owner and operator…there are great rewards…but it’s very lonely at the top. I wanted to be around for my kids for mid and high school.
30:00: I wanted to become an investor, an advisor in several different companies – help other entrepreneurs, and create an income for myself, and I did….
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