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Episode Summary
You sign the equity deal with your dad. The valuation is set. The buy-in is structured over several years, with a second-stage option to take the rest at the end. The cash flow projections that fund the whole thing assume the next five years look like the last five. Then 2008 happens and customer budgets shift from annual to monthly. Kurt Theriault sat in that exact chair. He came back from a corporate sales career to join the consulting practice his dad founded, bought in at year nine, and watched the buying behavior of his clients change overnight. We got into how the deal was valued (one resource, in hindsight not enough), what the third-of-a-third-of-a-third project billing structure did when the second and third installments became at risk, why the partnership couldn’t crack the build-IP-and-scale problem before a surprise buyout offer from the third partner landed in February 2015, and the one piece of advice Kurt would give his younger self before signing anything.
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## Top 10 Takeaways- If your buy-in is funded by future growth assumptions, your deal is exposed to whatever happens to that growth.
- Get more than one valuation before you sign. One resource doing the math is not enough information.
- A two-stage transaction sounds clean until the option year arrives in a completely different economy.
- Project-based billing means the second and third installments are always at risk. Your contract structure is your cash flow risk.
- When buying behavior shifts from annual budgets to monthly approvals, your pipeline assumptions stop being assumptions and start being fiction.
- If your business runs on custom work and partner labor, there is nothing to sell when partners leave.
- Without IP or revenue generated by people other than the partners, there is no long-term value in the business.
- Working on the business gets crushed by working in the business every time, unless someone forces the calendar.
- When a surprise buyout offer lands, the question stops being “what’s the plan” and becomes “what do I actually want.”
- Have the vision and alignment conversation with your partners before you sign the equity deal. Not after.
Sound Bites
“I knew if we didn’t scale at some level and start to create revenue that was generated other than the partners in the business, that there would be no value in the business long-term if people left it.” (@TBD) — Kurt Theriault
“I’m not interested and willing to buy something that isn’t there.” (@TBD) — Kurt Theriault
“It’s amazing how an unexpected offer like that will distract you, isn’t it? Where you kind of just got your head down and you’re running towards a plan, and now you’ve got an interesting option on the table, and now you have to internally reflect on what do we want.” (@TBD) — Ryan Tansom
“Go get more valuations on the business. Bring in a second and third party to do that. So you’re dealing with a set of information that kind of level sets everything and everybody.” (@TBD) — Kurt Theriault
About This Episode
Kurt Theriault spent 16 years inside a sales management and leadership consulting practice, the last several as a partner alongside his father (the founder) and a third partner. He bought into the business in 2008 through a two-stage equity transaction, watched the financial crisis reshape how clients bought consulting work, and ultimately exited in 2015 after the third partner made an unexpected buyout offer. Today Kurt is a partner at Allied Executives, the Twin Cities peer advisory group founded by John Palin, where he works with 180+ owners and CEOs on the same kinds of decisions he had to navigate himself.
Resources Mentioned
- Allied Executives — Twin Cities peer advisory group where Kurt is now a partner. — alliedexecutives.com
- John Palin — Founder of Allied Executives and Kurt’s longtime peer group director.
- Vistage — Peer advisory organization Ryan was part of with his dad at Imaging Path.
- EO (Entrepreneurs’ Organization) — Referenced as another peer group option.
- EOS — Referenced as the operating system Kurt’s firm used to try to work on the business.
Connections
Phase + Module:
- Module 9 — Operator Transition — Family business succession and the internal partner buy-in
- Module 1 — Ownership Goals — The “what do I actually want” question that surfaced when the surprise offer landed
Milestones:
- Milestone 26 — Recruit Successor — The internal-equity-buyer path Kurt walked with his dad
- Milestone 5 — Market Value — The valuation discipline Kurt would do differently if he could go back
Concepts referenced:
- The Owner-Operator Trap™ — Custom, partner-dependent consulting revenue that can’t scale and can’t be sold
- Value Gap — The space between “we’ll figure it out as we go” and a real plan with vision alignment