Jay Steinfeld parlayed a $3,000 investment in a crude online advertisement for his blinds store into a $100 million+ e-tailer called Blinds.com. Steinfeld sold his business to Home Depot in 2014, and I recently had a chance to interview him for my podcast.
Here are five lessons learned from Home Depot’s acquisition of Blinds.com.
Be a big fish in a small pond
Blinds.com got acquired, in part, because they were a big fish in a small pond. At more than $100 million in revenue, they were the largest online retailer of blinds in America by a long shot. Even though Home Depot has close to $90 billion in sales, Blinds.com were outperforming them in their tiny niche and that made Blinds.com absolutely irresistible to Home Depot.
My day job is running The Value Builder System™, where we help owners prepare for an exit and one of the first things we focus on is picking a product or service you are differentiated in offering. Companies like Home Depot have a “make or buy” decision to make when they see a competitor winning market share. They could opt to buy the competitor or choose to simply re-create what they have built. The only way an acquirer will opt to buy your company is if you are so dominant in your niche that recreating what you have built would take too long and cost more than acquiring it from you .
Run it like it’s public
At the time of the Home Depot acquisition, Blinds.com had 175 employees, yet Steinfeld had been running the company as if it were public for years. He had built a top-drawer management team and taken the unusual step of assembling an outside board of directors. There were quarterly board meetings with formal presentation decks, and Steinfeld hired a big four firm to complete a full audit of his financials each year. Steinfeld credits this rigorous approach to running a relatively small company as a major reason Home Depot was interested in Blinds.com and able to close on the acquisition so quickly.
Keep most of the equity
Steinfeld invested $3,000 of his own money into a basic online presence for his blinds store back in 1993 and grew Blinds.com to more than $100 million in sales without diluting himself by taking three or four rounds of institutional money, as would be typical of an internet start-up. Steinfeld took a small investment from friends and family and used bank debt to help him buy distressed companies for pennies on the dollar. It wasn’t until 2012—almost 20 years after starting the business—that he accepted his first round of “professional” money from a private equity firm who wanted to invest more, but Steinfeld refused, only taking enough to buy out a few of his original investors and pay off some debt.
Alignment is key
One of the reasons Steinfeld accepted an investment from a private equity group was that he had become misaligned with two of his original investors. The investors saw the success of Blinds.com and wanted Steinfeld to start declaring regular dividends. Steinfeld, by contrast, was focused on building a growth company and needed the cash to fuel his 25% per year growth. After a while, his investor’s expectations got so far out of whack that Steinfeld opted to buy them out.
Share the love
One of Steinfeld’s best memories is the day he told his employees Home Depot had acquired Blinds.com. Steinfeld had made sure every one of his 175 people had Blinds.com stock options and so stood to gain financially from the sale. Steinfeld went further and gave each employee $2,000 of his own money to start an investment account as a personal thank you for all they had done.
