Think of Your Exit, When You Start Your Green Business

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Many entrepreneurs are starting green businesses now, but a number got their start a few years ago and are already thinking about moving on.

Willem Maas started GreenHomeGuide.com back in 2004 and sold it this summer to the U.S. Green BuilGreenHomeGuide.comding Council, developers of the LEED rating system.  I asked Willem to share his experience with Ecopreneurist readers, and the following is my interview with him.

Leah: How did you think about your ultimate exit when you were starting GreenHomeGuide? Did you think about how you would maximize your investment either by sale of the company, long-term operations, etc.?

Willem Maas, Founder of Green Home GuideWillem: I didn’t at all.  I took GreenHomeGuide on as a cause. There was a need out there. I had talked with a lot of people who wanted to remodel green but ran into hard questions, such as which paints are safe, how to find a green contractor, etc.  I didn’t spend a lot of time focused on how it would be a sustainable business.

I figured I’d give it a shot, get a Beta of the site up and running, and learn along the way.  I had just spent nearly a decade in enterprise software, so the home improvement market, web publishing, consumer marketing, etc were all new to me.  I tried but couldn’t forecast a P&L for the business because I didn’t know what the right basis for the forecast would be, so I just plunged ahead.  Today, with a 16-month old son and a daughter on the way, I take financial projections much more seriously.

Regarding an exit, I wouldn’t advise planning for an exit as you start a business.  Focus on creating a valuable business that you enjoy running.  If and when you’ve created sufficient value that someone wants to buy it, great.  Selling a business is non-trivial.  Randy Komisar, he’s a partner at Kleiner Perkins ironically, wrote a great book that touches on this called “The Monk and the Riddle.”

Leah: How did you decide you wanted to sell GreenHomeGuide?

Willem: I was pursuing sale and investment discussions in parallel. We have a great model and need to scale it–to build a green “Angie’s List”.  I needed outside investment to do that, one way or another.

More than three years into the business, I was surprised and disappointed at the rate of growth of the green market. We have a second child on the way, I was looking to reduce my risk, so I had been talking with all of the green building organizations including the U.S. Green Business Council.

Leah: What is your Advice for People Looking to Sell a Business?

Willem: An acquisition is a sale, but a special, complex one. For both seller and buyer, a business sale is time consuming and distracting.  If you’ve built a large business you hire an investment banker to shepherd the process.  We negotiated the business terms ourselves and hired an attorney who’d handled a lot of transactions like this.  I didn’t get him involved until we’d agreed on all the business terms, to minimize my downside.

There are financial buyers and there are strategic buyers.  With a strategic buyer, so much depends upon what the acquirer wants to do with the company after they buy it–-how much they will invest in it, what they want from it, how it fits their strategy and supports goals. To be successful in negotiations, it’s classic sales, you need to think in their shoes–-how they will benefit, what problems they will face if they let you continue on as you are or if one of their competitors would acquire you.

Leah: How much information should you give and when?

Willem: Of course, I would get an NDA in place early, and then be open with facts about the business, not so much forward looking plans. I wanted to create an exchange of information, to assess their level of interest and build  commitment. I wanted agreement on milestones and a timeline to get a letter of intent.

Leah: What will your role in the company be ongoing?

Willem: It is not uncommon for the founder to stay working for the firm. I have a part-time contract to continue publishing to move the site ahead–continuing to publish the site content, handling development , doing sales and marketing and giving advice to support the U.S. Green Building Council’s goals. It’s a perfect commitment because it frees up some time, so I can take on other projects and research several ideas of my own.

Leah: Do you have the entrepreneurial bug? Will you start another business?

Willem: I believe there are quite a few niche markets where a site that combines community and directory can do really well.  This time around, I’ll be much more diligent about the financial model. It is a lot of fun to talk about a market need and strategize about filling it, but having just done this, soup to nuts, I know how important it is to be really clear about how you create lasting value.