In April of this year, I sold TinyPilot, the bootstrapped hardware company I founded and ran for four years.

I wrote a post in May that told the story of the sale, but I’d like to share more about the practical lessons I learned from the experience.

In this post, I’m sharing what went well, what I want to improve in the future, and what surprised me about selling my business.

Table of contents

• Details of the sale
• What I’m glad I did
  • Invested heavily in documentation
  • Created a transition checklist
  • Worked with a broker I trusted
  • Avoided seller financing
  • Assumed I’d get nothing after closing
  • Recognized the limits of my influence on the business post-close
  • Revised the broker agreement so that the broker gets paid when I get paid
  • Discussed contentious issues without lawyers first
  • Used dedicated accounts for the business
• What I’ll do differently in the future
  • Offer incentives for a cash buyer
  • Discuss key contract terms earlier in the process
  • Begin working with a lawyer earlier
  • Create an unofficial “small stuff agreement” with the buyer
  • Announce the sale to my team later
  • Don’t catastrophize every setback
  • Reveal vendors earlier, but put tighter restrictions in the LOI
  • Eliminate inventory from the broker’s commission
  • Assume from the start that nothing written is private
  • Define what happens to money flows around the time of closing
  • In the transition agreement, value calendar days more than work hours
  • Disconnect non-transferable accounts from business email before closing
  • Take even fewer dependencies on Google
• What surprised me
  • Due diligence is unbounded, high-stress work
  • As you prepare to sell, everything costs 4x as much
  • You don’t strictly need a broker to sell
  • If the non-compete is too restrictive, you’re screwed
  • If there’s no cap on liability, you’re screwed
  • Buyers have incentive to keep the seller happy
• Resources that helped me prepare

Details of the sale

• Sale price: $598,000 (2.4x annual earnings)
• Broker commission: $88,900
• Legal fees: $18,297
• My profit from the sale: $490,803
• Payment terms: Full cash payment at closing (no earnout, no seller financing)
• Seller obligations: 30 days of free consulting (max of 80 hours total)
• Lifetime profit from business (including final sale): $920k over four years

What I’m glad I did

Invested heavily in documentation

Before I started my first business six years ago, I read the book Built to Sell by John Warrilow. It encourages founders to build businesses that run smoothly without the founder actively managing day-to-day activities. An effective company should have a set of well-defined processes and a team that knows how to execute them.