When we first started out in business, we envisioned competition with secondary ticket marketplaces such as StubHub and Ticketmaster. We started with next to nothing in 2011 and reached nearly $50 million in ticket sales in the last 12 months, so our company has lived up to many of our original expectations. Yet realistically, we only represent a small percentage of the ticket resale market. Though we continue to grow, the question of “When should we sell the company?” is always looming.
Last year, a healthy acquisition offer made its way to the table: it promised a seven-digit payout and 10% ownership in the new joint company. Sure, the prospect of selling our company was appealing, especially after five years of hard work and a pretty dismal salary. However, we felt the valuation was too low. In order for the acquisition to be successful, and to ensure additional paydays for us, the new joint company needed a much higher valuation.
Is your valuation fair?
We learned a lot from this first opportunity to get acquired. First, there will likely be a discrepancy between how much you think your company is worth versus what others are willing to pay. To prepare for this, many companies take the comparable model approach.
Look at other transactions that have taken place within your industry to see which terms are practical for your business. With this knowledge, you can make the argument your company should be similarly valued. However, these terms are often private and difficult to obtain.
At the end of the day, if you value your company at $100M but no one is willing to pay that price, then it’s up to you to become more realistic. Your business is only worth what someone else is willing to pay for it. A general rule of thumb: If the discrepancy is within 15-25%, you should be able to make a deal. If it’s off by 50% or more, you’ll have big problems.
Mission and vision alignment
We want to find a partner who not only has deep pockets, but who is also on board with our mission. This can be incredibly challenging, since it’s difficult to find buyers in the first place. But when the time is right, we’ll spend a considerable amount of time reaching out to funds, companies and individuals that are positioned to align in these key areas.
Though money is certainly a dominant factor, it’s not our only driving force. So we’ve continued to roll the dice, a decision based primarily on gut feeling and knowing what is best for the company — or at least what feels best.
Balancing gut instinct and strategy
We knew if we could continue to double our sales, we could hold off, keep scaling the business, and in the end be in a much better place to sell. And we did just that. Still, after partly achieving what we set out to do, a sale seems inevitable.
Part of being an entrepreneur is taking on greater financial risks in order to operate and organize the business you set out to create. If we were to sell to a private equity company, one that would likely increase commissions to double profitability, our brand value would be damaged; in a few years I’d likely find myself battling the same problems I had with the ticket industry five years ago. For the time being, we’ll continue to roll the dice as long as we can afford to, or until we meet the perfect potential buyer.
As for now, we can afford five more years to grow the business without compromising our mission. If (and when) the time comes for us to sell, I hope my driving motivations will be to maintain a company whose intentions are good and to keep the business on the path forward in this difficult industry.
Brett Goldberg is the co-CEO and co-founder of TickPick, a technology company focused on improving fans lives by providing them access to cheaper tickets and by creating products and services that simplify the consumer experience.
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