How I Bought Out My Employer

It is becoming more common for individuals who like their jobs so much, that they buy their employer’s company.  Deborah Sweeney is one example.  After a successful career as a business law attorney, she entered the corporate space to lead MyCorporation.com while it was in the hands of Intuit.  How Ms. Sweeney eventually acquired MyCorporation may be a textbook example of how a dedicated C-level executive could put themselves in a position of favor with their company’s ownership for the acquisition of the business outright. Join Jeff Allen as he gets all the details from the owner of MyCorporation, herself—Deborah Sweeney.

Questions Answered For You

I think one of the best qualities during the transaction as it relates to entrepreneurs is sometimes the ability to sit back, be calm, and wait.

- Deborah Sweeney

Key Takeaways

  • Be really familiar with the business that you're offering to purchase.
  • It's not great to whimsically offer to buy a business unless you're confident that you can make a difference and make it more profitable or more successful under your ownership.
  • Be willing to negotiate and give, because if they're selling to an employee they have different expectations than if they were selling to someone else off the street, or a venture capitalist, or some other avenue.
  • Be patient.

Read Full Interview


Jeff: Welcome to Deal Talk brought to you by Morgan & Westfield, I'm Jeff Allen. If you're a business owner, entrepreneur, or investor this is the place to be because it is our mission to educate and inform you with the help of some of the most credible, highly regarded experts in the industry of transacting businesses so you'll be equipped with the knowledge to help you make some important decisions when the time comes to sell your business or to buy one. 

Today we've got kind of an interesting story for you to talk about because it's one of those stories that is indeed rare. While we all have different stories to tell this is kind of an example of one of those situations where you have an individual who spent a lot of time working for an organization and they actually ended up buying the company that they were working for, believe it or not. That portion of a larger corporation that they were working for and I'm going to kind of stop and give the person that we're talking to kind of some time to relate kind of their thoughts and how this all went down. You're going to learn a lot here. I can absolutely promise you that. Our guest is Deborah Sweeney. You've heard her before chances are if you're an avid Deal Talk listener. She's the owner and CEO of mycorporation.com in Los Angeles, a provider of business services to small businesses nationwide. Deborah Sweeney welcome back to Deal Talk, it's good to have you back on.

Deborah: Jeff, thanks so much for having me, I appreciate you having me back. 

 

Jeff: For those people who may not have heard the first show we had a chance to do with you earlier in 2015 I was wondering if you might be able to kind of re-introduce yourself and tell us a little bit about what MyCorporation is all about.

Deborah: Sure. We do incorporation and LLC filing primarily for small business owners and entrepreneurs throughout the US and Canada. We also do a lot of renewal filings considering small business have to do with annual filing each year, they have to do trademark filing, there are tax IDs, S corporation elections, any type of filing that a small business owner would need at the state, county or federal level.

 

Jeff: Let's talk about this story of yours and being someone who was employed by an organization you were working for for several years and you got apparently so interested in what you were doing and really enjoyed what you were doing that you decided to actually pursue ownership of this company. Let's talk about first of all going all the way back. The corporation you worked for was whom and what did you do?

Deborah: It was MyCorporation originally and we were acquired by Intuit back in 2004. I was on the team at My Corporation at the time. And so when we were acquired I was very involved in the acquisition of the company by Intuit. And so ultimately I was appointed to become the general manager of the whole division. The original owners did not stay on. And so I became as you mentioned very acquainted with the details of the business and running the business. I have an attorney background with a business degree but I've never worked in a business environment in the corporate world. I had always worked at a law firm and I was a partner in a law firm prior to going in-house. So it was a really fantastic learning experience for me. Intuit has what they call centers of excellence for every different aspects of our business, whether it was finance, marketing, online advertising, design of the site, so I was able to learn from these fantastic centers of excellence how things worked and how we could improve as a business. So I had a fantastic opportunity to work with amazing people at Intuit and offer to just spend my time learning more about the business, how to run the business, how to become more profitable and grow the business, and that was over at the course of five years while we were at Intuit before I bought the company back.

 So I had a fantastic opportunity to work with amazing people at Intuit and offer to just spend my time learning more about the business, how to run the business, how to become more profitable and grow the business

Jeff: You had mentioned that you have a law degree and a legal background. Tell us how you made that leap?

Deborah: I really enjoyed working with small business clients and my partnership with my law firm, that's what I focused on with entrepreneurial ventures, advising them on intellectual property and corporate-related matters. So it was a really nice opportunity when MyCorporation offered for me to come in-house and run those pieces of their business. Ironically within six months we were in acquisition talks so they've completely transposed where we were headed but gave us a really neat direction to rethink how we were growing to grow the business.

 

Jeff: When you said you were in acquisition talks you were in acquisition talks with Intuit at that time, is that correct?

Deborah: Yes. And they ultimately bought the company for $20 million and then the owners left. A lot of our team, who is actually still with me today, stayed on through the transition to Intuit for those five years that we were with Intuit. 

 

Jeff: Okay. Intuit has the company. They acquire MyCorporation. And you had mentioned for, I think you talked about a period of five years. Did you approach the boss? I'm just kind of interested in how that transition was made. They come in there to buy the company. You're working for them. You're an employee, essentially, there on staff. Tell us a little bit about what happens next.

Deborah: I saw that Intuit had different divisions within the company and we were exposed to the consumer tax group which held as you mentioned TurboTax and the small business group which held QuickBooks. And we were a part of those divisions. We're fortunate in that because they didn't really have a home for our company. We were relatively small in comparison to the larger corporate organization. So I got to know a lot of people in the company. And ultimately I saw a lot of divisions that were closed down through the course of either assimilated Intuit products or just not successful at the independent standalone businesses. So we sort of had this history of thinking, "Oh my gosh, I wonder if we ever get assimilated or closed down, or something ever happens." And so that was always in the back of my mind. So we were really pushing for growth and really pushing for how do we develop units toward if we brought customers in to small business roles how do they transition to become QuickBooks customers or TurboTax customers and really help the overall ecosystem of Intuit. And we realized that we weren't that huge of an impact on a multi-billion dollar company. So I started thinking could there be a chance that we might be in a situation where they might think that it's just wasn't focused for the ongoing growth of Intuit. And as I saw smaller divisions be divested like you mentioned there was a website division and a search company that they acquired and then divested. What I did was I presented to my bosses. "If there's ever a chance that you would sell this business or close it down I would like to be considered as an acquirer." And they looked at me like that is crazy and, "No, we would not be considering this." This was around end of 2008. 

 So I started thinking could there be a chance that we might be in a situation where they might think that it's just wasn't focused for the ongoing growth of Intuit.

Jeff: Was this four or five years into the ownership of the company by Intuit?

Deborah: Exactly, four years in.

 

Jeff: Okay.

Deborah: 2008. Yeah, I had a good experience knowing the different people. I knew our team very well, I knew my leadership group. And I just mentioned, it was one day in passing, we were having a strategy meeting. And then come beginning of 2009 and the economy was changing, and Intuit was restructuring, and I was asked to go through as with the whole company strategic layoffs and reductions in force. We went through that and again during that time I said if there's ever a consideration of divesting this company we have ongoing legal obligation of the business to our clients. We do annual filings for them, we do registered agent services. It wasn't right for completely shutting down the business if it wasn't successful to Intuit. So I said I would be thrilled and would assume the liability of those requirements because I knew that we were successful in what we were doing.

 

Jeff: What was the response you got the second time you brought it up?

Deborah: They were always responsive in terms of, "We get it, Deborah. We know how passionate you are about this business. Basically this isn't in our framework. We're not making a transition with this business.” So fine, I let it go. I think one of the best qualities during the transaction as it relates to entrepreneurs is sometimes the ability to sit back, be calm, and wait. Because I feel that if I had pushed and showed that I was over anxious, or was concerned, or that kind of thing, I think they would've just completely disregarded me. But because I said, "Okay, I just want to let you know I'm here, if anything ever happens, even to just discuss what are good transition strategies." And so, literally, I don't want to say three months after the second time I mentioned it I got a call and they said, “You know what, we've been thinking and we are doing some restructuring,” in this particular with the web division at that time and there was a new leader that I reported to. And he called me and said, "Hey, I don't know the whole history and I'm new to this group, but we'd be interested in you presenting a strategy for how you would buy the business out of Intuit. In doing that we'd also like you to present other options. What if we go to another competitor? What if we closed it down entirely? What if we kept it as part of Intuit with a different strategy? 

My task as the general manager of our division was to try to look semi-objectively at all of the different options and they were wonderful with me because they gave me a finance leader to support that initiative. They gave me a marketing leader to help me think through this presentation because they were thinking not only could it be beneficial to me, they wanted to find the right place for MyCorporation to land. One thing I noticed during the process was they were really hyper focused on finding a positive landing place for the company. It wasn't like just shut it down and who cares. They wanted the employees to be having a good situation. They wanted the company to be in the right place. That was the approach they took. So they supported me with the right resources to help them to make those decisions.

 I had a good experience knowing the different people. I knew our team very well, I knew my leadership group

Jeff: Did that also help, Deborah, kind of allay any concerns that you may have had, possibly going in and moving forward with all the things that they asked for from you with regard to presenting them with these options. Did that help to kind of make things a little bit less anxious, their desire to kind of look at some opportunities that would allow the company to not only continue to exist, but really to thrive under the best case scenario under the right circumstances? 

Deborah: Yes. And I felt like I was best served by leveraging the resources that they gave me and coming up with as an objective approach as I could. If I'd made it look so one-sided and said, "I'm the only answer. You have to sell it to me." I feel like they would've, again, backed off. But because I said, "There really are other options. I'm not your only option." And I did say I feel like I am the best option for the safest landing, for all the employees and all of our customers. The basic point to that were I have a good history with this company. I was there through the acquisition. I was there during the transition and how we integrated with overall Intuit. And I said I knew the details and I would be happy to help them undo it. And spin out the same employees, keep the same insurance policy, and have everybody in a good place. I'm thinking from their perspective they're saying, "The customers will be happy because it's continuity. The employees will be happy because she's keeping everybody employed with all the same insurance, and all the same benefits, and all the same salaries, etc. And it would just make an easier transition, and the due diligence would be so much simpler because I didn't need to be educated on what was going on with the business. I knew it. So that was a huge benefit for them that they were going to save a ton of time and money just even legal fees in the transaction with me than they would with any other company.

 

Jeff: As an attorney, you really kind of had an advantage in working with this company, not just from the outside but once you came in and working as general manager. You knew the ins and outs, and as an attorney with your background working with small businesses you kind of really had a leg up where many business owners may not have that kind of advantage. Deborah Sweeney is our guest. She is the president and CEO of MyCorporation in Los Angeles, and we're going to talk more about her story and how she came to buy her company when Deal Talk resumes after this.


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Jeff: Welcome back to Deal Talk, I'm Jeff Allen with my guest Deborah Sweeney, CEO of MyCorporation and we're learning from her story of buying the company that she worked for, talking about MyCorporation, formally an Intuit brand and now in the hands of Deborah Sweeney. You're performing all your regular responsibilities as you were putting together these presentations and these options for the parent corporation to consider as far as possible options for selling off MyCorporation. How did that all go?

Deborah: A lot of it was about educating them on our business and the strategy that I had from a go forward perspective. Because a lot of the leaders, they cared about the P&L, they want to know how we're doing, but they didn't know the ins and outs in our business. So pieces about why we had ongoing legal requirements and why we had to work with our customers and put them in a good place as they spun out from Intuit. I think that was really helpful, the fact that I had that background, internal knowledge to the business and they didn't. So I think the more educated they became the more they realized that this business needed to fall into the hands of someone who knew what was going on at the company. Whether it was a third party that did something like getting corporation services or me, they realized we can't just really shut it down. And so the discussions became very, "How are we going to strategically do this? What are the criteria under which you'll accept the business?" And really they wanted me to have legal representation independent of myself because they felt like they didn't want an employee of theirs to end up in a worse position because I was trying to help them transition the business to something else. And I thought that was to me unbelievable. The fact that not only do they care about a good landing for the company but they cared about me as a person and wanted us to be in a good position. 

So then I hired an attorney who, funny enough, was a colleague of mine from years prior at my law firm but had moved to New York because I really did not want anyone in our area or in our industry to have any idea that this was going on. And I felt it was safer to have somebody who was on the East Coast and who really didn't have as many connections and ties to the industry and that was a great idea because the law firm was able to support me from a purely independent perspective. But I really did kind of run the transaction myself and I think the benefit I had was I had gone through the acquisition representing MyCorporation as an attorney and knew what the details were and could translate that very nicely into the divestiture component of the deal so that I could buy the company out. I think honestly the best part was open communication and me just being candid. "Here's some ideas that I have.” I would be willing to take on which I knew others weren't, the liability of the business which is a huge thing during a transaction. So many companies they want to disclaim all liability prior to their purchase. There's so many nuances with regard to that. And I said, "You know what, I'll get proper insurance. But I really feel confident that the ongoing liability is nominal if anything." An independent owner might not feel that way but because I knew the history of the business I knew we had solid background and solid management of our clients and our employees, I didn't feel that there was a ton of risk associated with the acquisition. So those are the insights that I think I had that were unique to someone who was a part of the business prior to an acquisition.

A lot of it was about educating them on our business and the strategy that I had from a go forward perspective. 

Jeff: Okay. A lot of people out there would have depth of insight if they're in a position like you, perhaps a managerial position, mid-level management perhaps, even if they've got perhaps a general manager or a boss who may not be necessarily interested in continuing with the company. This is for those people listening who may have ideas of their own about somebody purchasing the company that they worked for. So you contacted a former colleague of yours, an attorney. It sounds to me like that's probably the first contact or the first call, the first outside help that you contacted. Other professionals that you work with in helping you to pull this transaction off smoothly, Deborah, anyone else that you can tell us about?

Deborah: My accountant, the bankers that we’ve worked with over the life of ... My husband has a business also, so as we grew and built relationships and bought a home and whatever, they were a huge impact in our business and took a risk on me beyond what anyone I think would normally do. The bankers came out, they were cracking up about they were going to do this and support us. I think it's because they knew us and they had the history, and we had good credit and we were good people, and we had good relationships with the bank. So I think those were huge factors, and how this translated to a successful opportunity. 

Also, frankly, other business owners and entrepreneurs that I knew from being an attorney representing them were all valuable. But I really tried to keep it pretty tight in terms of not ... We could not let the employees know that this was going on until it's final. I didn't want anyone to feel afraid, so we really kept the group pretty close so that there wasn't a whole lot of chatter about transition before it was complete and we knew it was going to be a closed deal.

 

Jeff: So you were able to really keep the conversation confined to really some key people, a few key individuals that you worked with there, and of course among the team of people that you're assembling to help you in the transition. Any unanticipated challenges or anything that came up that maybe caught you a little off guard, weren't expecting that may have altered your thinking, or slowed things down a little bit for you?

Deborah: The technology was a big one. We had to de-integrate with Intuit and Intuit had taken on so much of how we ran our business, how we ran our website, and how we managed our customers, our CRM system. And I couldn't afford to keep all of those huge technology platforms as a privately held business because Intuit just ... And even the way we managed our domain name, we spent thousands of dollars to an independent domain name management company. Why are we doing this? There's GoDaddy or there’s other options out there. But Intuit doesn't do things that way. They spent the money to make sure that their independent party's watching the domain name, making sure that they were managed, making sure that they renewed properly. So those were some unexpected things that I was thinking, "Gosh, I have to make quick decisions. We have to go through these transactions quickly, and I need to be prepared for less expensive alternatives." From our servers to our management of our intellectual property, and all of those things needs to be done quickly and more efficiently. And I did not anticipate that it was as expensive as it was when it was under Intuit.

 

Jeff: From the time that you first went in and said, "I am an interested inquirer", that first time to the time that the deal closed, how much time did that take?

Deborah: It's about a year and two months.

We have to go through these transactions quickly, and I need to be prepared for less expensive alternatives

Jeff: A year and two months.

Deborah: Yeah.

 

Jeff: Okay, now is that...

Deborah: The negotiation of the deal was quick.

 

Jeff: Is that really considered a fairly short space of time for most small businesses of that size, Deborah?

Deborah: I think so. I feel that once it gets to a law firm scenario and the deal is kind of in place then it takes sometimes longer when it's not a company like ours because I knew what was going on and our deal negotiation was fast. But I do think that the process of buying a business and getting buy in from the leadership and thinking through all of that. I feel like in a year or two months it was very quick.

 But I do think that the process of buying a business and getting buy in from the leadership and thinking through all of that. 

Jeff: Is that 2009-2010 when you took over officially?

Deborah: Exactly. October 2009 was when I took over and the whole discussion started in late 2008. 

 

Jeff: You're taking over this company is imminent and you're working toward that, you must have had in mind a number of different things going in about ways that you would improve your company and improve the value of your company right away, some changes that you would institute. What were some of those things that you had in mind or what was the one thing that was really important to you that you believe would bring that value of your company up in relatively short course?

Deborah: Our primary method was to create a lifetime value of our customers. We knew from our research and our history that small business owners are not usually just doing one incorporation or a single filing, they do registered agents and annual report. They need business licenses and trademarks. So what we wanted to do is identify the customers that we have now, how can we grow that relationship to create more revenue, yield it from our relationship with those single customers, rather than simply focusing on pure growth and units. We wanted to delve deeper into our relationship with our customers. And that single-handedly created the most successful growth strategy for our company, our renewal services. Every year we renew customers for an annual filing, or a registered agent, or a business license that they need to renew under the law. And we do this automatically, we notify the customers. And we made a very huge success out of what used to be under Intuit, about 15 percent to 20 percent renewal. So we do over 80 percent on some filings every single year. And so that's been a huge success in growth strategy for our business. And the way we connected those pieces was to create better relationship and offer better customer service to our customers so that we built trust and value that they continue to pay us year over year. And if I had one thing to say, how we change is creating long-term value and really being hyper focused on return of investment.

Our primary method was to create a lifetime value of our customers. 

Jeff: Was that really a wholesale change philosophy, Deborah, or was this something that you were kind of working on doing when the company was still under Intuit's control?

Deborah: Yes, we really were focused with long-term value of customers under Intuit and that was a huge strategy toward our last year or two at Intuit because they wanted not only to have the long-term value for our business but also to transfer those translate those into TurboTax customers and QuickBooks customers. So it was a philosophy that we were embracing. The return on investment, not the case. At Intuit the resources are limitless. We could spend $10 million in paid search and make $8 million and it was okay because we were growing. And under my leadership I could not spend $10 million to make $8 million for marketing because I would be $2 million negative and that I can't be. So we had to right size our decision making from a marketing standpoint. And that was a wholesale, complete change from the way we were running under Intuit to the way I running as a privately held company.

 

Jeff: Knowing now, Deborah Sweeney, what you know about buying a business, is there anything you would've done differently looking back on it?

Deborah: I feel like I might have been quicker to identify return on investment issues and quicker to act with regard to my employee discussions and communication. However, I always feel like things happen for a reason, not to sound too philosophical, but I learned a lot from key mistakes early on, like spending too much on radio advertising that was not profitable, or making decisions for the company without educating my entire team so they were onboard and didn't know where we were going. Those types of things I learned a lot about and I think they became crystal clear as the mistakes were made and then opportunities learned and transition changes occurred. And then I was able to execute more effectively. While I would say, "Oh, if I had known then" I do think what I didn't know was very beneficial to me because I learned quickly and was able to make adjustments. 

 

Jeff: Deborah, we're running out of time and I was just wondering a great way to probably end this conversation, such a unique story that you have, what kind of advice would you give people who like you might be interested in buying all or maybe even a portion of the company that they worked for?

Deborah: I would say there's a couple of key points. One is be really familiar with the business that you're offering to purchase. Make sure that it's a good decision. It's not great to whimsically offer to buy a business unless you're confident that you can make a difference and make it more profitable or more successful under your ownership. The second piece I would say is to be patient. I think one of the biggest things I offered to this relationship with Intuit was my patience. I did not push, I offered, and then I waited. And then they came to me. I think that meant more to them because they didn't think I was trying to pull one over on them. They actually ended up after I offered coming to me and saying, "Now, we think we're interested in doing this.” The other thing I would say is to be willing to negotiate and give, because if they're selling to an employee they have different expectations that they were selling to someone else off the street, or a venture capitalist, or some other avenue. So really being strategic and thoughtful about your negotiation pushing where you really feel that you need to push on the negotiation but backing off once you know it's just not a huge deal point that's the big issue. I think that's how when the transaction can move smoothly, and you can be patient and negotiate calmly without being too aggressive you're going to have the biggest success.

 

Jeff: Knowing now, Deborah Sweeney, what you know about buying a business, is there anything you would've done differently looking back on it?

Deborah: I feel like I might have been quicker to identify return on investment issues and quicker to act with regard to my employee discussions and communication. However, I always feel like things happen for a reason, not to sound too philosophical, but I learned a lot from key mistakes early on, like spending too much on radio advertising that was not profitable, or making decisions for the company without educating my entire team so they were onboard and didn't know where we were going. Those types of things I learned a lot about and I think they became crystal clear as the mistakes were made and then opportunities learned and transition changes occurred. And then I was able to execute more effectively. While I would say, "Oh, if I had known then" I do think what I didn't know was very beneficial to me because I learned quickly and was able to make adjustments. 

 However, I always feel like things happen for a reason, not to sound too philosophical, but I learned a lot from key mistakes early on

Jeff: Deborah, we're running out of time and I was just wondering a great way to probably end this conversation, such a unique story that you have, what kind of advice would you give people who like you might be interested in buying all or maybe even a portion of the company that they worked for?

Deborah: I would say there's a couple of key points. One is be really familiar with the business that you're offering to purchase. Make sure that it's a good decision. It's not great to whimsically offer to buy a business unless you're confident that you can make a difference and make it more profitable or more successful under your ownership. The second piece I would say is to be patient. I think one of the biggest things I offered to this relationship with Intuit was my patience. I did not push, I offered, and then I waited. And then they came to me. I think that meant more to them because they didn't think I was trying to pull one over on them. They actually ended up after I offered coming to me and saying, "Now, we think we're interested in doing this.” The other thing I would say is to be willing to negotiate and give, because if they're selling to an employee they have different expectations that they were selling to someone else off the street, or a venture capitalist, or some other avenue. So really being strategic and thoughtful about your negotiation pushing where you really feel that you need to push on the negotiation but backing off once you know it's just not a huge deal point that's the big issue. I think that's how when the transaction can move smoothly, and you can be patient and negotiate calmly without being too aggressive you're going to have the biggest success.

 

Jeff: A sensational story, just absolutely fantastic. We've really enjoyed it, Deborah, and you are someone with a depth of knowledge I think that we could probably go ahead and use from time to time on the program. Maybe there's another edition of Deal Talk we could have you onboard and go on to a deeper conversation about some areas regarding the types of services that your company provides and why it's important for example for companies to stay on top of their filings, and really pay strict attention to those legal requirements that their business needs to be mindful of. And I'd like to do that with you at some point down the line.

Deborah: Absolutely. I'd be happy to do it.

Make sure that it's a good decision. It's not great to whimsically offer to buy a business unless you're confident that you can make a difference and make it more profitable or more successful under your ownership. 

Jeff: Deborah Sweeney, thank you so much.

Deborah: Thanks for having me.

 

Jeff: Deborah Sweeney, CEO of MyCorporation based in Los Angeles, what a unique story she has. We hope you enjoyed the discussion.

To listen to more Deal Talk visit morganandestfield.com and click on the podcast link at the top of the site. And if you consult or work with business owners prior to, during, or after transaction process and you like to join us as a future guest expert to share your expertise contact me directly 888-693-7834 extension 190, or you could email me at jeff@morganandwestfield.com.

Deal Talk is presented by Morgan & Westfield, a nationwide leader in business sales and appraisals. Find out how Morgan & Westfield can help you at morganandwestfield.com. For everyone here at Deal Talk I'm Jeff Allen, thanks much for listening. We'll talk to you again.

 
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