My Worst Investment Ever Podcast MJ DeMarco – Do Not Sign an Earnout When Selling Your Business
BIO: MJ DeMarco is the international best-selling author of The Millionaire Fastlane, Unscripted, and the Great Rat Race Escape. He’s also the founder of Viperion Publishing and the Fastlane Business Forum.
STORY: MJ sold his business in 2000 for $1.2 million. Of this, $700,000 was held in an earnout. Because of the recession, the buyer paid MJ $500,000. He put the money in tech stocks, but they imploded in just a few months. MJ lost everything he had invested.
LEARNING: Never accept an earnout.
“Don’t let the stock market control your wealth.”
MJ DeMarco
Guest profile
MJ DeMarco is the international best-selling author of The Millionaire Fastlane, Unscripted, and the Great Rat Race Escape. His books have been translated in over 25 languages worldwide and he’s the founder of Viperion Publishing, and the Fastlane Business Forum, a global business and entrepreneurial community with over 70,000 users and nearly 1,000,000 contributions.
Worst investment ever
In 2000 MJ decided to sell his business for $1.2 million. $700,000 of this amount was held in an earnout. This was at a period when the tech stocks were booming. A few months later, there was a recession, and MJ got $500,000 of the $700,000 owed.
MJ put the entire $500,000 in tech stocks, and a few months later, the stocks imploded. He lost most of the money, and because he had not paid tax on this money, he owed almost as much as was left. MJ had to liquidate, and he had virtually nothing left of the $500,000.
Lessons learned
- Don’t tie all your wealth to the stock markets.
- Don’t accept an earnout when selling your business.
Andrew’s takeaways
- Alternatives to an earnout you should consider:
- Build a business with robust systems.
- Take a lower price
- Be an advisor and get paid for it.
- When building your business, always ask yourself if you’re overexposed to the market.
No.1 goal for the next 12 months
MJ’s goal for the next 12 months is to write another book related to goal setting and productivity.
Parting words
“You only live once, so go after your dream, whatever it is, and do not live in fear.”
MJ DeMarco
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Connect with MJ DeMarco
Andrew’s books
- How to Start Building Your Wealth Investing in the Stock Market
- My Worst Investment Ever
- 9 Valuation Mistakes and How to Avoid Them
- Transform Your Business with Dr.Deming’s 14 Points
Andrew’s online programs
- Valuation Master Class
- How to Start Building Your Wealth Investing in the Stock Market
- Finance Made Ridiculously Simple
- Become a Great Presenter and Increase Your Influence
- Transform Your Business with Dr. Deming’s 14 Points