Ep. 343 — Josh Golden: The Five-Year Decision to Sell TXI to an ESOP

6 min read

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Episode Summary

Most exit conversations start with a multiple and a check. Josh started his five years before the close, sitting at an inflection point that a lot of owners recognize but never name out loud: I built something special, the standard buyer pool will pay me for none of it, and if I sell to PE or a strategic, the thing I actually care about disappears within 24 months of the close. I met Josh on a chairlift at a YEC trip when he was right in the middle of that mess. What I watched over the next five years was the cleanest version of the work I try to get every owner to do: clarify what you want financially, clarify what you want intangibly, then engineer the business so the path that lines up with both is actually available to you. We get into why he couldn’t sell to PE without destroying the asset, the visionary-integrator wake-up call that let him hand the CEO seat to Mark Rickmeyer, the pricing and margin work Kelly Ewer drove that took TXI from 7% EBITDA to 20%, why he paused the first ESOP attempt and did internal private placements instead, and the choice not to take any bank debt at close. Real decision-making, real EBITDA math, and the honest version of how messy and slow this gets when you actually do it on your terms.

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## Top 10 Takeaways
  1. Optimize for everything except profitability, and no third-party buyer will pay for the things you actually built.
  2. Visionary and integrator are two different seats. Trying to fill both keeps your team confused and the business stuck.
  3. Disconnect your time from your ownership before you try to sell. The asset has to work without you in it.
  4. Stepping down as CEO gets easier when you stop trying to do a job you were never built for.
  5. Pricing is where most professional services firms leak the most value, and tuning it can double your EBITDA.
  6. Earnouts perversely align incentives. Your team starts working for someone else’s payout, not the business they built.
  7. With PE, you can vet the buyer. You cannot vet who buys them next, or what your culture becomes then.
  8. An ESOP is the rare exit where the seller gets paid for risk and the employees never have to write a check.
  9. Tuning a services business from 7% to 20% EBITDA is about what drops to the bottom line, not revenue growth.
  10. The clearer you are on what you want intangibly, the more options you have to actually get there financially.

Sound Bites

“Revenue scales linearly to headcount and hassle scales exponentially to headcount. They make a lot of sense when they’re small, but when they’re big, you really have to think about how you counteract that exponential people scaling problem.” (@TBD) — Josh Golden

“Josh, you need to figure out how to be a capitalist in the context of your business. That doesn’t come naturally to you, but you need to disconnect your time and your ownership.” (@TBD) — Josh Golden

“There are sort of two kinds of people who start companies. Ones who think they should have it all and ones who want to give it all away. And neither of these are the correct answer to the allocation of early stage equity.” (@TBD) — Josh Golden

“Earnouts. What a perversion of an incentive alignment structure. Instead of growing the value of the company now, the best way for them to grow the value of the company is to grow its enterprise value through revenue and EBITDA growth, and to generate cash flows to pay down the debt.” (@TBD) — Josh Golden

“Regardless of how you feel about the specific outcome that Josh got, what is crucial to be paying attention to is his level of clarifying his thought process and going through the decision-making to keep him on track and actually go get the outcome that he wanted.” (@TBD) — Ryan Tansom

About This Episode

Josh Golden is the founder and executive chair of TXI (formerly TableXI), a Chicago-based product innovation consulting firm with around 75 employees that helps clients figure out what to build and then build it right. Josh started TXI in his early twenties after two prior startups failed, and ran it as CEO until 2016, when he stepped into the visionary seat and handed the CEO role to Mark Rickmeyer. After a multi-year process that included tuning the business for profitability, opening internal private placements to expand ownership, and ultimately running a full ESOP transaction with Menke and Associates, TXI closed on a 100% sale to an Employee Stock Ownership Plan on December 31, 2022. Josh is one of the rare owners who actually engineered the exit to match his values instead of the other way around.

Resources Mentioned

  • TXI — Josh’s firm. — txidigital.com
  • Menke and Associates — ESOP banker that structured the TXI transaction.
  • Mark Rickmeyer — CEO of TXI, took over from Josh in 2017.
  • Kelly Ewer — Former COO of ThoughtWorks; joined TXI to drive pricing and financial discipline.
  • ThoughtWorks — Reference point for values-driven professional services firms.
  • Gail Golden — Josh’s mother, management psychologist, prior Intentional Growth guest.
  • Jay Schwan masterclass series — Referenced on values-driven service business strategy.
  • Intentional Growth Bootcamp — Two-day in-person bootcamp at Rollins College, Orlando, May 11-12.

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