Coloring Book E-Comm Biz Sold for Millions 🎨 PT.2
The Teams Reaction to the Sale
For part 1 of this analysis, go here.
Quick Context 🎨
What is ColorIt: E-comm business that sells coloring books and supplies…But for adults.
Founder: Mike Jackness
ColorIt’s customers: Adults
When was it founded: 2015
Business hours Spent per Week by the Founder: ~ 6 Hours
Team Size Including Founder: ~5
The founder, Mike Jackness, put it beautifully…“While the process of selling a company is mostly between the buyer and seller, most people forget that it also greatly affects the people on the front lines of running a business: the employees.”
The Teams Reaction to the Sale 😧
“We were shocked and sad. It was a roller coaster of emotions since we loved the team. We’re not just coworkers, we are like a family. To have heard the news that ColorIt was going to be sold along with us was scary, we didn’t know what to expect”.
An immediate reaction like this is expected and normal. Humans love certainty…because it gives us comfort. Whenever something challenges our ‘certainty’, a flight or fight response is triggered and our protective instincts kick in. Knowing that this is our innate human reaction, there are measures a buyer and founder can do to mitigate these. But before we go into those, let’s go through one more reaction. 😳
“The change was really scary and we didn’t know who the new owners were going to be. Thats why my initial reaction was fear…But when we got to know Nirav and Matt[New owners] and their big plans for the business, we got excited”
The buyers emphasized the #1 positive element of the sale which was to speed up growth. Everyone wants to be part of something successful...Employees are no different. So Nirav and Matt were intelligent in highlighting this positive element during the transition. More importantly, the new buyers shared how the employees were part of their growth plan. Often what will happen is a firm will buy another company and perhaps cut the # of employees in half…this is where the fear comes in. When buyers emphasize the important role that current employees will play for the future of the company, it gives the employees a sense of security. A sense of security is one of the cornerstones of trust…Business buyers that ignore this are guaranteed to pay big time when employees quit three months down the line out of fear of being let go.
How was the team rewarded? 💰
The founder of ColorIt set aside a portion of the sale to give it to the team. For every year that a member had worked for ColorIt, they were given one month pay. So if they had been there for 2 years, they get two month’s worth of pay. If they had been with ColorIt for six months, they got half a month of pay plus a bonus.
Ensuring the Team Doesn’t Leave 🏃
Every team member that moved to the new company was promised a full month of extra pay once they had been with the new company for six months. The goal of this was to to encourage them to stick around and have something to look forward to.
This did two things:
1) Terms like these reduce the risk that employees will quit.
2) If new management has treated them fairly, then after those six months are over, the employees might say…”This wasn’t too bad, I guess I’ll stay, I like these new owners”.
Overall, being intentional during this period of transition can make or break relationships and future deals. These transactions are full of emotion and stress. The easier one is to work with, the better the outcome will be.
What’s next for the Founder? ⬆️
Take a few months off to clear his mind and focus on his other three brands
It will be at least a year before Mike begins the process of selling the other brands. Mike has already gotten approval from Amazon to separate the three remaining brands into individual Amazon accounts & LLC’s. This will help make future acquisitions easier and faster. Ka-ching!
And that’s a wrap my friends. Subscribe and I’d love to hear from you. What are you liking about these, what can I do better and what are your goals?!
Say hi on Twitter (@JaygerMcGough) & LinkedIn , together we’ll become smarter about buying and selling businesses.
Don’t forget to subscribe and thank you to everyone who shared last weeks analysis with their friends, I appreciate you and trust this will also help them.
Mike’s Interviews of ColorIt: Why I sold ColorIt, Preparing for the Sale of ColorIt - Pt 1, Part 2, How Our Filipino Team Reacted to the Sale
My lawyers told me to include this:
This newsletter is presented for informational purposes and educational purposes only and should not be construed as professional financial advice. Should you need such advice, consult a licensed financial or tax advisor. No guarantee is given regarding the accuracy of information on this letter. The newsletter is composed of opinions and is not intended to give investment advice.