Training Camp for Company Owners
A newly launched e-learning company, Inner Circle Sessions, educates entrepreneurs on the badly neglected subjects of business valuation and exit strategy.
Scott Ferguson (left) and Zane Tarence, partners in Inner Circle Sessions, an e-education company that trains business owners in the one skill they should not be too busy to master — exiting with maximum value.
Every person who starts a business will exit it some day, one way or another.
But for those who want to sell their business, “It’s not really a question of whether you want to sell,” says Birmingham businessman and self-described serial entrepreneur Scott Ferguson. “It’s: Can you sell when the time comes to exit? It’s a question of how will you exit and will you get paid for what you built or do you just write yourself a paycheck and close the business?”
Educating entrepreneurs about building value in their businesses and how to sell them is the primary purpose of The Inner Circle Sessions, an online venture in its early stages begun by Ferguson and two Birmingham partners, all of whom have been there, done that.
Ferguson, 41, started his first business in his early 20s, sold his share in it six years later and has since been involved with a number of other transactions and businesses. That includes Birmingham-based ChartCapture/Influence MD, which he founded in 1995 and now serves as chief executive officer.
Other Inner Circle Sessions partners are Zane Tarence, 48, managing director and partner at Birmingham-based Founders Investment Banking (FIB), and Birmingham investor Roy Gilbert, 50. Tarence has done about 80 deals totaling more than $1 billion during his career, and prior to joining FIB he started and sold two successful businesses of his own. Gilbert was involved with both of those multimillion-dollar transactions and numerous others.
Tarence, a former IBMer with a technology background, explains that FIB’s business is facilitating buying and selling transactions. It is not set up to educate entrepreneurs on the intricacies of growing and selling their businesses. That’s where The Inner Circle Sessions comes in.
In short, the venture centers on a website, innercirclesessions.com, which provides videos and other content to make entrepreneurs more aware of the ins and outs of building and selling their businesses. “I’ve seen companies that should have sold for $15 million, maybe $20 million,” Tarence says, “but they didn’t even get an offer, because they didn’t know how all this works.
“We decided to do The Inner Circle Sessions when we determined that entrepreneurs have an insatiable appetite to understand what their options are if they want to exit their business,” Tarence says. “What if they want to transfer their business to their employees, how do they do that? Or if they want to transfer it to a family member or sell it to a financial buyer or a strategic buyer or a foreign buyer? They don’t know the answers to those questions because they do this (sell) only one time.
“Sellers are at an information disadvantage in these situations, because buyers who purchase companies do it all the time,” Tarence says. “They’re good at it. They might be a strategic buyer, or they might be with a company who has a whole group of corporate mergers and acquisition buyers. They do it every day.”
Ferguson, whose background is heavy in video and digital communications, is the host for many of the online videos. In one of the homepage videos, Ferguson tells the story of his exit from the first business he started. The business had taken off, the industry was young and booming, and it was a great time to sell his share of the business.
But when he got into the sales transaction, “It turned into a train wreck,” Ferguson says on the video. “I wasted six years of sweat equity I had put into the business, and it was painful. I didn’t understand the three basic options for selling my equity in the business.”
Ferguson then explains those three options — a full exit, in which you sell the business and leave; a majority recap, in which you sell a majority of the business but remain for a given period of time, shooting for another big payday at the time you leave, and a minority recap, in which you trade a portion of the ownership for a cash infusion but retain majority ownership.
There is a generous amount of free content at innercirclesessions.com, but the venture is intended to be a money maker. “Basic training” content, which can be covered in about a half day, is available for $195. The next level of membership, with much more content, is selling for $2,000. But the venture is still in its early stages, and its pricing and marketing efforts are still being refined.
“Have we really projected how much we need to make this work?” Tarence asks. “No, we haven’t. I think if we had, we would have quit. Right now, we’re trying to make sure the content on our site is awesome.”
FIB does not own The Inner Circle Sessions but has helped the new venture by allowing it to use content videotaped at FIB-sponsored sessions and with clients who agree to be interviewed about their transactional buying and selling experience. The idea is to populate the ICS website with content and insight from a stable of expert sources with a high level of credibility. Sources on the website currently include a best-selling author and other names well known in Birmingham’s business community.
“The goal is a comprehensive, best-of-breed educational platform for entrepreneurs to help them get ready for payday,” Tarence says.
FIB was the major sponsor of the Birmingham Venture Club’s 2013 annual event, which drew some 800 entrepreneurs, investors and other business leaders. But it’s ironic that 99 percent of the entrepreneurs at that event are too small to be FIB clients, and FIB isn’t set up to talk with companies under a certain revenue level, according to Tarence.
So, from Tarence’s perspective, The Inner Circle Sessions is a way he can help. “I want these entrepreneurs to be successful,” he says. “I want them to get what they need. I’m like an Alabama football coach; I want to know you if you’re a 9th grader and known for your speed, but I can’t give you a lot of attention. But I want to know you in case you really get to be good.
“So if you do come up and are a prospect, you’re not going to say, ‘I remember that time I called Zane and he wouldn’t even talk with me. So now that I’m somebody I’m going to use a different bank.’ This gives me a way to say, ‘Hey, we all realize we can’t make money with each other yet, but I’ll give you this (ICS), and then if you ever do get big enough, we can talk.’”
According to Ferguson and Tarence, some 300,000 people search Google each month with questions about the worth of their businesses and how to sell them. When such questions are Googled, The Inner Circle Sessions wants to be at the top of the list. ICS’s emphasis on new content from expert sources is one way to encourage more website hits, and the venture is also considering a range of online advertising, e-marketing, social media and traditional advertising to increase exposure.
The timing for The Inner Circle Sessions offerings is right on, says Ferguson. For starters, cash stockpiled by corporations and financial institutions during the recession is finding its way back into play. “You’ll have a massive availability of cash looking for deals,” he says.
On top of that, as more baby boomers who own businesses retire, many of them will want an exit strategy. And as technology continues to change, ICS plans to use its digital expertise to reach prospects on personal computers, cell phones and tablets.
“There’s going to be a massive rash of transactions,” Ferguson says. “Right now, the value of privately owned businesses is high, but five or 10 years from now, it might be the best possible time to have a liquidity event or exit transaction.”
Charlie Ingram is a freelance writer for Business Alabama. He lives in Birmingham.