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In 2017, I started a business. Thankfully, I was able to convince my best friend to join forces with me on the venture. This was not new territory for us. In fact, we are both serial entrepreneurs who have started and sold more than half a dozen businesses between us, but this was the first business we had founded together. What made this business different was the meteoric growth it went through. In three years, we grew Byte (an at-home dental aligner company), from an idea in my head to a billion-dollar company that sold last year for a figure I never could have anticipated. It was a whirlwind.
As I reflect on the incredible company we founded and look forward to new business opportunities, I find that the billion-dollar sale we achieved was due to several key business practices that will seem counterintuitive to most.
Here are the three lessons I learned selling a billion-dollar company.
Lesson 1: Say “no” to investors
Byte was entirely self-funded. We did not look for investors, did not approach private equity firms, and stayed far away from Shark Tank (although we are both obsessed with the show). My motivation, as it has always been, was to fund this venture myself in order to maintain complete control. When you accept money from an investor, you become beholden to their best interests rather than your own. Do not fool yourself and let them convince you otherwise. There is never a scenario in which your interests and your investor’s interests are completely aligned. Any smart investor will dictate the deal terms so that at the end of the day when things don’t go as planned, they have control. Pro tip: things never go as planned. Early in my career, I realized that every promise an investor makes should be seen through the lens of what I call the double/half rule. Generally speaking, once you accept outside investment you should expect to work twice as hard as they say you will, for twice as long, in order to make half of the money they promise. Investors keep their portfolio companies lean and their founders hungry. Receiving a lucrative check from someone who believes in your business sure feels great, but it comes with massive strings attached. For every penny you are given, you are going to have to make it up as profit. Remember, you aren’t accepting money, you are accepting debt.
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Self-funding a venture will not be possible for everyone, but if you apply my attitude to the money you do accept and set boundaries with investors, you will not find yourself in a huge hole you will then have to dig yourself out of. The best way to limit your funding is to develop a small-scale model that is cash positive. If you are making money off of only two or three units sold, then you are guaranteed to be making profits when you scale. Do not take money just because it is offered. If possible, do not take their money at all. That way, when you do eventually sell the business the profit belongs to you and you alone.
Lesson 2: Stay “hands-off”
This is another counter-intuitive piece of advice, but I have found that giving the perception of being hands-off in a business allows you to walk away after a sale. I have seen too many founders make the mistake of inserting themselves into every aspect of the business as it grows. When I start a business, I am incredibly hands-on at the beginning. Once my business model begins to prove itself, I step aside and let others handle the day-to-day operations. At that point, I transition to staying on top of the metrics. I stay keenly aware of how everything is operating, and I may close attention to both the competitive landscape and upcoming regulatory changes. I constantly ask myself What could disrupt our operational fluidity? And I had off potential issues before they ever had the chance to arise.
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I know absolutely everything about Byte. I have the line-item budget memorized, I understand our marketing strategy, and I can recite our one, five, and ten-year goals on command. Byte is my business, and I made it my business to know absolutely everything. That being said, I do not gate-keep my knowledge. In fact, I made it my goal to create knowledge redundancies within the organization. Everything I know and understand is known and understood by someone else. This allows me to defer to their expertise when the need arises. When I foresee an issue, I am able to delegate the handling of that issue to someone else. This is because I do not want to be tied to Byte once we sell it. When I am asked a question about the business, I look to my team for answers, even though I can answer every question myself. This serves two purposes: 1) It ensures that your company is in good and capable hands for when you do step away, 2) It does not tempt any buyer to write your continued services into the contract. By painting myself as generally hands-off, I have secured my freedom from Byte. That non-commitment frees up my time to pursue new ventures.
Lesson 3: Consumer trust is your most valuable asset
Byte’s CEO, Neeraj Gunsagar says that consumer trust is Byte’s “true north”. Throughout the incredibly challenging year that was 2020, Gunsagar and the entire leadership team at Byte made decisions in service of obtaining and keeping consumer trust. First, they were 100% honest with consumers about supply chain and shipping delays, and even whether or not someone was a good candidate for the Byte system. Second, they demonstrated that they cared more about humanity than profit by using their production resources to create personal protective equipment for front-line workers. Third, they opened their nationwide network of dentists to everyone with a dental issue or question, free of charge. Every step they took communicated to the marketplace that Byte is run by good, honest people. Amazingly, that trust translated into profits as more and more people turned to Byte for at-home dental care. It turns out that trust is not only an asset but a strong financial decision as well.
If you plan on founding and selling a business, just remember, the quickest path to success may not look the way you think it does.
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