Timothy Ferriss wrote The 4-Hour Workweek, chronicling how he turned his sports nutritional supplements company, BrainQUICKEN, from an 80-hour-a-week time suck to a four-hour-a week “muse” by leveraging automation, virtual assistants and relentless de-cluttering. With all of that extra time, Mr. Ferriss became a tango champion and, along with dance partner Alicia Monti, holds the Guinness Book of World Records record for the most consecutive tango spins in one minute. He also won a national Chinese kickboxing title, learned multiple languages, and travelled to virtually every country worth seeing.
So when I heard Mr. Ferriss recently sold BrainQUICKEN to a London-based private equity firm, I figured you would want to know why.
Question: In The 4-Hour Workweek, you advocate readers set up a muse to fund their lifestyle. Your muse was BrainQUICKEN. How could you sell your cash-flow engine that started it all?
Answer: First of all, I was getting bored of it. Secondly, my brain felt like a computer running anti-virus software in the background. Even though the company didn’t take much time to run, it was consuming more than 10 per cent of my mental energy.
Q: How did you go about marketing your business for sale?
A: I was travelling in Mexico with a friend of mine who invests in companies. I asked him if he wanted to see how I run my company. I logged on to my e-mail and sent off a few messages, and in the span of 20 minutes, I was done for the week. My friend was impressed and told me to let him know if I ever wanted to sell.
Shortly after the Mexico trip, I spoke at an Entrepreneurs’ Organization (EO) event and mentioned casually that I would be interested in selling my business, and a number of people approached me after my talk. I went back to my travelling friend and said, ‘if you’re serious, now is the time.’
Q: Was it awkward to negotiate with a friend?
A: We kept it very simple. We agreed on a fair price, which included all of the usual reps and warranties. As is normal, they asked me to stay on as a consultant for a while. I really wanted to move on to free up the mental energy my business was consuming, so I offered to drop the price by 20 per cent if they would allow me to make a clean break.
Q: It can’t have been that easy….
A: It was up until the UK pound tanked against the value of the U.S. dollar. The acquiring group was based in London, and as the UK pound dropped, the price we agreed to in U.S. dollars kept going up. Right before the deal was to close, the pound took another major drop, and we had to renegotiate. I didn’t want to reduce the price, so they agreed to pay me 50 per cent up front, with the other 50 per cent in the form of a promissory note that would become due on either of two conditions: six months’ time elapsing from the closing date or a predetermined strike price of the pound to the U.S. dollar was reached. In the end, that gave the acquirers a little bit of currency protection, and we got the deal done.
Q: What did you learn from the process of selling your company?
A: I had always assumed that my company was unsellable because the supplements were not protected by any patents — just trademarks and brand equity. What I had underestimated was how valuable the model and customers were. I had created a low-friction business that used capital efficiently and printed money, with a solid database of reliable customers as a cherry on top. That’s what the acquirers bought.
Mr. Ferriss’s next book is called The 4-Hour Body: An Uncommon Guide To Rapid Fat Loss, Incredible Sex and Becoming Superhuman.
Special to The Globe and Mail
John Warrillow is a writer, speaker and angel investor in a number of start-up companies. He writes a blog about building a valuable – sellable – company. Follow him on Twitter @JohnWarrillow.