Going Down In Flames ...

[MJ DeMarco]

**** Sigh ****

Allow me to vent ...

As you know, I sold my company about 18 months ago. The owners still pay me for periodic consulting to get my opinion. They have spent the last year redeveloping my site for the future ... basically, they wiped the slate clean (my format) and started anew.

Because I felt the management team was solid, I also reinvested $100K back into my company. I fear that was a mistake.

Recently, the company launched a "new version" of my site and wow, am I angry ... to the point I feel the new website compromises my integrity and reputation that I've built for years. People still associate me with the website. The new website looks great, but my customers are angry to the point they are causing a mass exodus. And let me tell you ... they have a reason to be angry. I am fearful for the future.

In my story, I write about the perilous preoccupation with revenue maximization ... it appears the new owners are not immune -- I'm sure over the next few weeks, perhaps months, revenue will skyrocket ... at least short term. What is being compromised however, is service and product. Bad product. Bad service. More cost. It is a prescription for a fast ascent followed by a quick bottom.

I wrote the CEO a note voicing my displeasure and also a prediction that the company would be out of business in 8-14 months if things are not changed.

I don't have anything clever to say ... no tasty tidbit, no lesson to be learned -- I'm just a little saddened at seeing my baby going down in flames, and a piece of my reputation with it. :smxE:

~ MJ

PS: Please, some of you know my company -- please do not say it publicly -- if my clients saw this post it would create a bigger firestorm than there already is. I just felt the need to vent since my regular channels were closed down.

 

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[CMCarlin]

So they went and changed the inner workings of your business model?

A skin change is one thing, but to fiddle with the revenue model that you perfected.... why buy your company in the first place if they are going to put it into the ground?

In any case, do try to stay positive, and continue to offer your advice, as you seem to know what's best. Also, try to keep your emotion out of it. Good luck MJ!

 

[AroundTheWorld]

Sorry to hear that MJ.

I think there is a great lesson in this - and it is that "success" doesn't mean life is now full of martinis and free of trouble. I think some people that dream of millions and the lifestlye they imagine along with that dream also seem to think that all your troubles will evaporate.

The business decisions never go away
The setbacks never go away
The way in which relationships with others (business partners, vendors, tenant base, etc.) impact you and your business never go away

I am sorry to hear this MJ. Maybe in time, people will realize that *you* are not the company as it is currently run.

 

[kimberland]

Well, one of my serial entrepreneur buddies tell me
that once he sells a company,
he walks away as quickly and completely as possible.

For the exact reason you're finding now.
While he is associated with the company
(whether as an investor or a consultant),
he is still linked closely to the company.
When the new owners pull jacka$$ moves
(and they always, ALWAYS do),
it looks like HE is pulling those jacka$$ moves.

As the founder,
you're either in or out,
there is no in between.

I'm feeling for you.

 

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[rlucas]

PhxMJ,

I don't know you or this forum extremely well but of little that I do know you have provided hope and guidance to hundreds of people on here. I think it is time to reflect upon an economy that has taken even some of the best of us through a whirlwind of doubt. Only the true Renaissance Man can weather the rough and rapid waves of this massive recession. The weak will be swept away with rest who have failed to navigate the unimaginable. It may feel like at times we are victims, but it takes real character and charisma to rise above the walls of pessimism.

'Sometimes your flush and sometimes your bust...but it's never the way it seems. Money isn't real (George).'

I think there is some truth to this in a metaphorical sense. There are times in history when people must rise out of the ashes and I believe our time has come. I think PhxMJ has perhaps voiced the message of the people...a cry of disbelieve and a bleak hope for the future. I am here to tell you there is light at the end of the tunnel...god speed to you all.

 

[AroundTheWorld]

Great Great point Kimber. ++

I had an experience with a business.... we own the property - and someone else ran the business. It went down in flames, but we were left holding the bag.

I think that is a smart strategy. You are either in and in control or you are out.

 

[MJ DeMarco]

:thankyousign:

Folks, don't misconstrue the thread ... I perceive the company to be going down in flames ... I am not going down in flames. The worse that can happen is I lose $100K and my reputation tarnishes a bit in an industry I am restricted from working in anyhow (non compete).

It just is a little hard to watch mistakes being made and your input being tossed aside for the sake of bigger revenue gains. :chatter:

 

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[yveskleinsky]

Yeah I'm sure this must be really frustrating for you to watch yet again.

Looking at the new and improved version of what they are doing, I like it (from a user's perspective.) I don't know the back end part of it as far as how the revenue model has changed, but I can guess. Seems like if they do tank it would be pretty quick, and it would also be a pretty easy fix as far as modifying the revenue model back to something close to what it was. It appears to me that they have in fact created a new revenue stream which may be cannibalizing the old one. Is there any way that you can do damage control with your customers with the loose plan of buying the company back in 18 months and then put in a new team? I know it's easier said than done, and I also know that you have a lot on your plate.

...Feel free to vent your little heart out, as I'm sure there will be a lot of lessons learned (maybe not on your end, but definitely on theirs), and I'm sure there will be a handful of us that will be curious to know how this unfolds.

Sounds like now would be a good time for a beer (or four) on that back porch of yours to soak up that amazing view.

 

[bflbob]

MJ:

Didn't this already happen once with this model?

Didn't you come out richer a few years down the road?

Can't you do it again?


Bob "The Glass is Half Full -- So it's Time to Buy a Bigger Glass" White

 

[MJ DeMarco]

I am not buying the company back.

Just to give you an idea of the ineptitude ...

I have 100's of SEO'd pages out on Google, typically ranked 1-5 on front page. These pages drive about 30% of the site's traffic. With their new system, they didn't even 301 redirect those pages or redo them ... nope, they just let them die with a "Page Not Found" message.

In a few days, the site will experience a 30% traffic decline once Google removes the pages.

You think they'd return my call so I can tell them the mistake they are weaving? Nope.

 

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[MJ DeMarco]

MJ:

Didn't this already happen once with this model?

Didn't you come out richer a few years down the road?

Can't you do it again?


Bob "The Glass is Half Full -- So it's Time to Buy a Bigger Glass" White

Yea, it is really deja vu ... this time I have some skin in the game though ($100K).

I have no desire to buy the business back unless it is for 10 cents on the dollar. Not likely since the domain name is 7 figures alone.

 

[AlwaysCurious]

Sounds like a beginners mistake. I don't understand the rationale behind that and the goal of maximizing (even short term) profit.

But well, sounds really like it's going down. Btw, why is your name still attached to the site? I suppose that after 18 months word should have spread...

 

[TaxGuy]

It just is a little hard to watch mistakes being made and your input being tossed aside for the sake of bigger revenue gains. :chatter:

Sounds like the short-sighted philosophy that has put this economy as a whole in the tank :smxE:

I do agree w/ kimber's friend that you have to either be in or out and it'll be an interesting decision once I am in that position as I know that starting a company is like raising a child, you created it, nurtured and developed it and even when it's out of your control you still want to be a part of it.

Hopefully they can see the errors of their ways before it's too late and most of all take the advice from the person who made it successful in the first place!

 

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[CVentures1B12]

I just want to say that you are at a great advantage just because you have actually started a company got it running great and sold it! I am sorry to hear about the unfortunate events that are now happening with the company and I wish you the best with your investment. I do think, however, that you are doing the right thing and taking it the right way. It is very hard to let a "baby" that you raised and brought up right to see going the way of the dodo bird...but it is also important to not get emotions involved. I know a very successful investor who had luck with a few companies, one of them went sour and he poured his heart and soul into making it better and lost close to everything...

Glad I learned from him...

 

[bflbob]

Yea, it is really deja vu ... this time I have some skin in the game though ($100K).

I have no desire to buy the business back unless it is for 10 cents on the dollar. Not likely since the domain name is 7 figures alone.

I don't know...there are a lot of 10 cents on the dollar deals going around lately. The current owners are caught with two issues: a failing model and a failing economy. Even though the client base is somewhat recession-proof, there's a big difference between somewhat and totally.

And thanks to the economy, that $100k is really worth more like $50-60k. :smxG:

See...things are looking up already!

You may have created a new business model by flipping businesses multiple times. Just don't carry the paper.

In all reality, I understand your frustration. This company is, in effect, your baby. As much as you want it to take off and flourish, it doesn't always make the best choices. Sometimes, it hangs with a "bad crowd".

Any of us with kids can understand the concept We just envy the $100k limit on investment.

I look forward to seeing you again at the B&P!

 

[MJ DeMarco]

Btw, why is your name still attached to the site?

Not officially, but I still keep in contact with the customers via forums. People know I am the founder.

Well I just had a long talk with the CEO ... seems like nothing is going to change although they recognize the error of those Google pages. We both have the same destination and goal in mind .... I guess you can say we respectively disagree on the manner and process to which to get "there" ... "there" being a $100 million dollar company.

No problem, I'd love to be wrong as I hope I am ...

 

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[LightHouse]

I like the new images but the opt-in portion looks untested and is not as clear as i would think. That is just the skin though i do not know how the back end works.

Anyway, Let it tank, but it for pennies on the dollar in a few years. Rebuild and hold? or just forget about it completely. If the new CEO is so confident, tell him to buy back your shares at a small premium. That's too bad though. What's the length on the non-compete? 3yrs I'm guessing...

EDIT I saw KBC recently sold their shares as well. Maybe you are not the only one figuring this out.

 

[TOLDUSO]

MJ,

This is something you have already been through. The changes to the site (at least the visual changes) must have come very recently, as I have visited the site within about a month or so before today. I cant say it looks bad, they even added some choice variables to the main page.

I guess all in all, its frustrating to see this happen again even though you have given up ownership once and for all. Its like restoring a car, selling it, and watching someone drive it wrecklessly after they leave your driveway. Ultimately you know its demise is certain.

Put your new money and old talents to work and come up with something else. :smug2:

 

[TOLDUSO]

Sorry if I killed the thread MJ... Just seemed like a small cry compared to what you're capable of.

 

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[lightning]

Sorry to hear about this MJ. From your aggressiveness in the years I have known you (only online of course unfortunately), I have no doubt you will come out okay and possibly 10x better if the right opportunity presents itself to you (such as the chance to snag that .10 cents on the dollar deal ). It just sucks to see your hard work catch fire and begin to burn after everything youve put into it.

Best of luck and I too will cross my fingers that things are not as bad in the company as you fear. Keep us posted.

 

[MJ DeMarco]

Ill update the thread as time will tell if this "new version" succeeds or not. I don't vote. The CEO doesn't vote. The 1000's of people who use it will, as do the advertisers who already stated they hate it ... at least the vocal ones. (The rate of cancel has reached Madoff levels).

Mind you, they had about 2000 paying adverts, so 50 do not make an exodus or a 20-0 vote on OLD vs NEW. It's a small sampling, but I think it speaks volumes.

 

[LightHouse]

Ill update the thread as time will tell if this "new version" succeeds or not. I don't vote. The CEO doesn't vote. The 1000's of people who use it will, as do the advertisers who already stated they hate it ... at least the vocal ones. (The rate of cancel has reached Madoff levels).

Mind you, they had about 2000 paying adverts, so 50 do not make an exodus or a 20-0 vote on OLD vs NEW. It's a small sampling, but I think it speaks volumes.

So whats to stop someone else from developing something similar? besides the choice domain.. Id imagine one of the bigger paying advertisers would have been looking into it?

 

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[andviv]

MJ, just keep me in mind when is time to buy it again and make it work as it should

This also should give you more motivation to spend time doing what you want to do (writing your book, focusing on your health and wellness) rather than spending your time seeing how they change what was already working fine.

 

[MJ DeMarco]

So whats to stop someone else from developing something similar? besides the choice domain.. Id imagine one of the bigger paying advertisers would have been looking into it?

That happens anyway. Every month someone new pops up ... in fact, someone was always hawking another service as an alternative (in the forum area) which I had to delete. Anyhow, I imagine it will be easier for the competitors to find the advertisers.

MJ, just keep me in mind when is time to buy it again and make it work as it should

This also should give you more motivation to spend time doing what you want to do (writing your book, focusing on your health and wellness) rather than spending your time seeing how they change what was already working fine.

As an investor, I still have a minority interest in the business and would like it to succeed, so it is a little hard for me to "set it - and forget it" - I always monitor my investments wherever they may be. I won't lose sleep over it, believe me, but it certainly will be a conversation piece over dinner!!!

 

[andviv]

Is there an exit strategy for your shares? What are the conditions for you to sell?

If you are sure this is the wrong move and don't want to risk your money then liquidate that investment.

Would that work?

That probably would be less upsetting as it is not only your creation, it is also your capital being involved.

 

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[MJ DeMarco]

Is there an exit strategy for your shares? What are the conditions for you to sell?

A liquidation event ... hopefully on the upside vs downside. The goal is to create a valuation in the range of $50M-100M and then sell. Not happening in this economy, but maybe in a few years after recovery.

 

[LightHouse]

A liquidation event ... hopefully on the upside vs downside. The goal is to create a valuation in the range of $50M-100M and then sell. Not happening in this economy, but maybe in a few years after recovery.

Do you think you can accomplish that valuation not having a major controlling share?

 

[MJ DeMarco]

Do you think you can accomplish that valuation not having a major controlling share?

I thought so at the time I reinvested. The management team has had success in their respective industries ... unfortunately, how they rolled out and transitioned into their rendition has eroded my confidence.

 

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[LightHouse]

I thought so at the time I reinvested. The management team has had success in their respective industries ... unfortunately, how they rolled out and transitioned into their rendition has eroded my confidence.

I am siting here trying to rationlize a response... all i could come up with is .... that sucks... haha.

Hopefully a bit of time and a downturn in revenues will shed light on the situation... we hope.

 

[andviv]

knowing what you know today, would you invest on this deal again?

If yes, ride it out.
If not, sell.

Either case, make a decision that brings you peace of mind.