Summary:
Jim and Todd talk about Todd’s journey through building and owning his own hedge fund business right out of college and his eventual desire to sell. They take you through a journey of great decisions and ones that left money on the table. Join them now to learn everything you can about buying, maintaining and selling your business.
Main Questions Asked:
- What is the business model of a hedge fund?
- What led you to decide to sell after 12 years?
- How long did it take from the point you talked to your partner about selling before you sold?
- How did you market your business?
- Did you have a firm sense of the business valuation?
- If you would have held onto it, would you have had the same valuation today?
- Did you come to the realization that you were selling for too little before you sold or after you had already signed the papers?
- As you look back on the experience, what kind of advice do you offer?
Key Points made:
- A hedge fund is skill based investing. Passive investing is what you get 95% of the time. There is a small subset of skilled investors with different strategies.(5:00)
- My partner and I were headed in different directions and the hedge fund business could no longer take us there. (5:36)
- It took us about 2-3 years to sell once we first talked about it. (6:09)
- Well, the nature of the business is that you can’t just take it to a business broker, we just put word out to the network. (6:24)
- There was someone that wanted to buy it, that this business would complement his current business. (6:36)
- One of the lessons I took is that I would rather be a buyer than a seller. (7:17)
- In this case we sold for a multiple of its earnings. (7:30)
- It was probably one of the dumbest decisions I ever made. (7:45)
- It has to do with the nature of the business more than the business. (8:30)
- We walked away from a regular cash flow stream for a small multiple. (9:15)
- We knew before we sold it wasn’t a great deal, but it was a life decision to sell, not a financial one. (9:54)
- My vision for the hedge fund business was to create a money machine and we did that. (11:10)
- My mistake was I had linear thinking. I had the mindset to run it or sell it, it never occurred me to bring in key employees and go do what I want. (12:40)
- If you get successful, your mistakes are more expensive. (13:45)
- I think there is a revolution in financial planning. The days of a financial planner extracting 1% in fees to set up a passive portfolio are numbered. (16:45)
Resources Mentioned:
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Tennessee Valley Group
Jim Cumbee established Tennessee Valley Group to help business owners fulfill their dreams for life after business ownership.
It’s a mission that his 30+ year career history had prepared him well for—in addition to being an attorney, transition mediator and business broker, Jim has been a buyer, seller, and entrepreneur. His broad range of experience gives him unique insight into how business buyers and sellers can achieve their goals.
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