Using an Exit to Fund Another Venture

Dan Faggella founded a Brazilian Jiu-Jitsu Academy to pay for college and grad school which sparked the idea for his eCommerce business, Science of Skill. Science of Skill was created for the sole purpose of eventually selling it and using the exit money to fund an artificial intelligence market research company. He grew Science of Skill past $2 million in revenue, sold it in 2017, and TechEmergence was born completely funded by the exit.

If you listen, you will learn:

• How recurring revenue helps the value of your business
• Importance of finding a marketing channel that ensures consistent profitability and growth
• Having key employees that can run the company without the owner can increase the value of the company and provide for a smoother transition/exit
• Importance of knowing how the processes of your company tie into growth and profit
• How to figure out and analyze the core metrics of your business
• Finding the right broker makes a ton of difference when selling a business

Building Up Science of Skill

Dan went from owning a physical Jiu-Jitsu gym to starting an eCommerce business. He started taping the Jiu-Jitsu seminars he was giving in person and putting them on the internet. He took the curriculum he used and studied himself and turned the videos, information, and skill development exercises into monthly subscription based lessons which would allow the company to have recurring revenue.

“I had it impressed on me early on that recurring revenue is a good thing. Recurring revenue is going to help you sell for a higher margin. Recurring revenue is going to give you less nightmare than businesses that don’t have recurring revenue. The only reason I was able to sell that gym was because it was recurring so I think that lesson kind of traveled over. I transferred that to an online business model I could run from anywhere,” explains Dan.

The Jiu-Jitsu videos and information quickly extended out into general self-defense and self-protection lessons which attracted a broader audience to Science of Skill making the company more diverse and valuable to a buyer.

Starting With The End In Mind

TechEmergence was always the goal at the end of the tunnel. Dan wanted to start a purpose led business in AI technology by growing and selling something highly profitable. He spent half his time giving Ted Talks, writing articles, and building a media business around artificial intelligence and spent the other half of his time selling self-defense materials on the internet.

Dan wanted to sell Science of Skill quickly to fund his AI research company. He thought it would take a year or so and ultimately, it took over three years. He didn’t realize when founding the eCommerce business that it would be so difficult to sell.

“I thought I am going to flip this bad boy and call it a day,” says Dan.

Dan was under what he calls a “naïve belief” that he would be able to sell the company easily. In reality, he had to grow the company for four years before a bank would facilitate a seven-figure transaction. The banks required three years of tax returns and valuations.

“Banks don’t like stuff that involve the internet,” says Dan.

He did find a buyer who had previous experience in the eCommerce space with a bank that backed them. They purchased Science of Skill in early 2017. It was three years longer than what Dan originally planned and was anxious to get TechEmergence going on more of a full-time basis. 

Lessons Learned

Dan learned a lot throughout the process of starting and selling his eCommerce business. Not only shouldn’t you expect to sell a small company a year after founding it, you also shouldn’t expect a “glamorous exit” unless you have a strategic buyer in your space, proprietary list, or something more than just your cash flow.

“One of those naïve notions was that we could get some decent multiple of profit to sell the company. It is unusual for a small business to sell for that much more than 3X profit,” says Dan.

Another lesson was that finding the right broker makes a ton of difference. The broker Dan dealt with had previously sold similar eCommerce businesses for around what he hoped for with his exit.

Two of Dan’s biggest takeaways that allowed him to successfully scale and exit Science of Skill involved marketing and his team. Figuring out the marketing channel that worked for them was extremely important for growth. They invested heavily in marketing once they nailed down that email marketing was their channel.

The next biggest takeaway was the importance of training a good team. “The owner shouldn’t be the guy responsible for bringing money in the front door,” says Dan.

Training his team to be able to know and do everything he could allowed him to step away from the company and use his exit money to fund his next venture that had been brewing since the beginning.

Contact Information and Bio for Dan:

LinkedIn: https://www.linkedin.com/in/danfaggella/
Twitter: https://twitter.com/danfaggella
Blog: http://clvboost.com/blog/
Company Website: https://www.techemergence.com/
Company Facebook: https://www.facebook.com/TechEmergence/
Company Twitter : https://twitter.com/TechEmergence
Exit Article : www.emerj.com/exit
Science of Skill Website: https://scienceofskill.com/

Daniel Faggella is a recognized email marketing expert, entrepreneur, and speaker. Starting his first business in his undergraduate years, Dan began with his second business while attending the University of Pennsylvania’s prestigious Master of Applied Positive Psychology program. His expertise lies in targeted marketing strategies and exceptional attention to maximizing the ROI from email.

Selling his first business at age 25 and moving from Rhode Island to Boston, Dan has a passion for helping startup and existing businesses use marketing automation technology to drastically increase their Customer Lifetime Value (CLV), and drive business metrics that matter.

Dan has been recognized not only by the many companies he’s helped directly, but by major media sites such as the Boston Business Journal, MarketingProfs, Direct Marketing News, and more. He has been interviewed on popular shows such as MIXERGY, GrowthHacker.tv, Entrepreneur on Fire, and many others. He also speaks around the country on successful marketing strategy and business, including the eMarketing Association’s national conference, Bryant University, the Cambridge Innovation Center, and more.

Today, Daniel works with a select group of companies ranging from software, hard products, eCommerce, service businesses and beyond. His consulting efforts focus entirely on email marketing, marketing automation strategy, copywriting, and conversion-rate optimization.

He is the CEO / founder at TechEmergence, the only market research and company discovery platform focused exclusively on artificial intelligence and machine learning.

“I’m of the belief that the most important ethical considerations of the coming thirty years will be the creation or expansion of sentience and intelligence in technology. My time is focused exclusively on this major concern. TechEmergence is intended first as a vehicle to proliferate an open-minded conversation about the implications and applications of AI. Business model came later, purpose was and is first.”