I HAVE GAS PUMP LOTTERY TICKET DREAMS. It’s not just when
I’m pumping gas. Sometimes it’s when I’m passing a Powerball billboard, or even waiting in line at the grocery store that sells tickets and rolls the prize amount by you on red LED numbers and letters. The dream starts with a simple inner monologue: “It’s math.” If I won the [blank] hundreds of millions and took the prize up front, then the government grabs 28% in taxes (crap, I’ll average up, I can’t do this in my head), so I get to keep about a third after all that. I don’t know, let’s just say it’s a third of whatever original number. Man, I can’t believe they take that much. Every time I do this I’m surprised. What would I do with [blank] millions of dollars? The monologue stops because I have been interrupted and am now in a dialogue with the gas pump wanting my credit card, someone talking, or my short attention span just moving on. However, the math is a strong motivator once I have the calculated winnings. What would you do with the money? In my mind, my wife and I buy a bunch of stuff, give a chunk to family and our church and live on what’s left, giving as much away as we can in order to serve humanity, humbly and quietly—after all, the joy is in the giving, right? I didn’t win $160M, but I came close enough to having it that I could almost touch it. Before you start to judge me, like “How could you be so stupid as to lose $160M?” I want to get a few things clear before you read my story:
• It wasn’t sitting in the road and I forgot to pick it up. • I’m pretty sure I would have gotten screwed out of it later somehow. (OK, those are just sour grapes and I can’t prove that; it just makes me sleep better). • I never believed that the money opportunity was real, because I did not understand IPOs at that age. • I didn’t see the knife coming until it was in my back. My opportunity was not through the lottery. It was through the old-fashioned way of hard work and the new-fangled thing called stock options in IPOs. How do you get hired with the opportunity to make that much money? You can be hired on Wall Street as a money gun, in Columbia by a drug cartel as one of their hired guns, or in my case, at a call center company, hired as a growth gun. My résumé reads GROW FAST. I won’t apologize for it or soft pedal it with an “aw shucks.” It ain’t bragging if you’ve done it. Companies at that time and later hired me to grow their companies very quickly. For that, I got lots of salary, benefits and baubles, and sometimes I received stock or stock options. The company I was hired to work for offered all of that. They were less than $15M per year in revenue after almost fifteen years in business. That’s a long grind for small money in that industry. Tired of the incremental growth, they wanted explosive growth and were willing to invest. As a part of that deal, I had 10% of the company’s shares that would vest over three years. All that means is that if I perform and stick around, I get a third of my 10% each for three years, and then I own 10% of the company. This math is really important later. If you are going to grow a company like this one fast, you need some talent at the top to bring in clients and lock down operations. It had some great people including the absolute best, Tim Searcy, Senior VP of Sales and Marketing. He picked up options on 5% of the stock. Keeping up with the math, the owner now will own 85% of the company and he
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has just “given up” 15% for the first time in as many years. Hmm… Might not feel so good. Clients started rolling in. The business triples in revenues per annum within fifteen months. Margins doubled at the same time! Then we landed the largest contract in the history of the industry, beating out IBM and EDS to name a couple out of thirty. We closed deals with a number of other Fortune 500 companies and we were on a roll. The business was booming! As executive vice president, I interviewed all senior personnel. One day, a new operations consultant is brought in by the owner, to “help us with our growth.” Someone I have never met or interviewed. Pretty soon, a new guy starts attending staff meetings, my staff meetings. Famous last words, “I’m not trying to step on your toes, I’m just trying to understand the business better.” This guy was a lawyer and an IPO specialist, I came to find out later, another helper. A fool once said, “Numbers don’t lie.” I say he was a fool because I believe that numbers always lie depending, upon how you are using them. The company was set for a growth curve between all the new contracts that would more than double its size every year for the next three years. Lucky me, my vesting period was just around the corner. If I am the owner and I have the next two to three years locked at 100%+ growth in contracts and 15% of stock that is about to begin vesting, whatever I pay for the 15% is cheap compared to what I will make in an IPO. It helps having an operations consultant ready to step in to make the transition easier. It’s arithmetic. Do I know that I am firing the guy that got me here? Maybe. More likely I think to myself, “I got the business here. I took all of the risks of the capital. I am the one who steered us through the tough times. Everyone else was hired. Some were good, some bad, some great. But in the end, this is my business, and I got us here.” I have been fired before, so it was not as emotional as it once might have been. I have been fired by phone, by HR having me escorted off the premises, over dinner. I was once fired, then hired for twice the rate as a consultant in the same meeting. This particular termination that I am describing now was two weeks to the day before my first shares would vest. I had smelled this coming for a while, but I really did not know why. No H o w I W o n a nd Lo st $160M
one in our industry had either consolidated or been in the private equity or IPO markets of any size. We were under-capitalized for the growth, but we could finance it in a variety of ways. Besides that, the business is a service business; who would buy shares in an IPO of that? (spoke the man who knew nothing, me). The owner asked me out to lunch at an Applebee’s. We never ate lunch together—odd. We drove separately to lunch even though we left at the same time from the same offices and were returning there—odder. He asked me how busy my afternoon looked. He had never asked about my schedule or availability, ever—oddest. A: Well, I’m not going to beat around the bush, Tom. We’ve decided to go in a different direction. T: We just tripled the size of the company, doubled the margins, and closed the biggest contract in the history of the industry. Why are you letting me go? A: Tom, it’s not about performance. T: Am I being terminated for cause? Because, to be honest, I have been working too hard to have given much cause. A: Tom, it’s not about cause. T: I don’t understand. Usually EVPs are fired for performance or cause. If it’s not that, then what did I do? A: We’ve just decided to go in another direction. Our CFO will work out the separation agreement. Tom, I will always recommend you to anyone you choose to work with, as long as it’s outside of our industry. T: This is my industry. A: Just work things out with the CFO. And I want you to know I really appreciate all your hard work. Those conversations are surreal. It took me almost 14 months to understand why we had that conversation. The CFO conversation should have been more telling. I just was too shell-shocked to catch it. I asked for the kitchen sink. A year’s salary, done. Keep the company car for a year, done. Keep my computer for a year, done. Benefits, done. I was
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running out of things… Signed baseball cards, maybe? I don’t know. The CFO was known for, and actually prided himself on, being a prick. Here he was rolling over on everything. I just had to sign my non-compete and recognize my termination. How do you “not recognize my termination” when Santa drops off a sleigh-full of presents? Thirteen months later, the company went public to an opening valuation of $400M. Within another 8 months it was valued over $1.6B. Folks, that’s how you lose $160M. TRADE #1 Don’t Be Someone’s First. First time that this guy had shared
stock with anyone in fifteen years means he does not understand how it works, how to value and how to share. It means he does not have a mental or emotional structure for that type of business relationship. TRADE #2 Minority Ownership. When you own less than 50% of an
ongoing business, you barely have influence, and most definitely not control. You have a job with a hazy promise that at some undefined date, at an undefined rate, under undefined terms, your shares will be worth something. Value is known only when it is paid for. TRADE #3 Beware of If/Then Money. My namesake grandfather was a
gambler. It was how he paid his bills. Cards, golf, pool, bowling, things people bet on where he could bet on himself. He didn’t bet on sports or horses; he wasn’t in the game. If/Then money is about winning when the uncontrollable falls in your favor. Here’s the truth, and it took me a very long time to accept it. I was not cheated out of that money, I did not lose that money, the money was never mine. The money was always if/then money. I signed up for an if/ then relationship. I became worth more to fire than to keep. Someone reading this is possibly thinking, “That’s not fair!” (Well, I hope someone is). What’s fair? It is exactly what it was laid out to be. I overperformed and I smashed the clock. If I had matched the clock, who knows, maybe I
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would have held on to shares in a smaller but profitable company. Instead, I received a sleigh full of toys, and the owner became a paper billionaire. When he started to divest some years later, he only took a chunk of $100M in the first cashout. He had to work there for a couple more years to keep the confidence of the shareholders, or the stock value would have dropped. Actually, before an IPO, most of the senior management and definitely those that hold shares have to sign on for a few years. That means I would be in servitude and unable to cash out for a couple more years, and might only be able to get $10M to start with. There’s that darn math again. It really kills off any motivation. I guess I should be glad to get out. In today’s world, $10M hardly seems like enough.
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