Why I Walked Away From My $20 Million Company

Last Updated Feb 25, 2011 2:07 PM EST

By Derek Sivers, Founder, CDBaby.com, Portland, Ore.
I launched CDBaby, an online marketplace for independent musicians looking to sell their recordings, as a side project in 1998. My initial goal was to get 1,000 musicians to sell their products through the site, but word spread quickly, and it soon expanded beyond what I'd ever envisioned. Within the decade we had 250,000 musicians on the site and $20 million in annual sales.

As the sole owner of the business, I was making millions in personal profit each year. I could have delegated all of my responsibilities and kept raking in the money. But for several years, I'd had this nagging feeling that I just wanted to be free of my company. In January 2008, I finally reached a breaking point and realized it was time to walk away.

An accidental business
I'd never wanted to be a businessman in the first place. I was making a living as a full-time musician before I started the company -- I was already living my dream.

The idea for CDBaby came to me because none of the big online retailers would sell my albums, so I needed a way to sell them online. Soon, my musician friends wanted to join in, so I sold their albums on the site, too, for a commission. Before long, I was getting calls from strangers who wanted their music on CDBaby, and I realized I'd accidentally started a business.

No other online retailers were focused on selling products for independent musicians, so the site grew quickly. At first I enjoyed running the show, but by 2007 we'd grown to a staff of 85, and I spent a lot of time managing them. I provided my employees with great insurance plans and countless perks, yet they were always complaining. I said yes to everything, but it was never enough. The company culture had rotted to the point where it was making me miserable every day.

The breaking point
I stepped away from day-to-day management, and decided to focus my time on upgrading the site's software -- I'd written the initial code a decade ago, when I didn't know what I was doing. I spent months perfecting the new software and it worked beautifully. We used it that Christmas season, and business was better than ever.

But as soon as I'd finished the upgrade, I thought, "I'm done." I felt like a painter who'd completed the final brush stroke on a work of art. I'd already done everything I'd set out to do. I had no future visions for the company.

I realized I was doing my clients a disservice by remaining at the helm. They were musicians who wanted to grow their careers with the help of my business, but I no longer wanted my business to grow. I was frustrated with the company culture, and wanted to simplify my life and focus on my music. I didn't want to be a billionaire; I didn't want to be famous. By that point, any additional money in my pocket wasn't changing my life -- so why was I doing this?

Entertaining offers
That very week, I received three offers to buy the company. I'd gotten plenty of offers in the past, but I'd always turned them down because I'd wanted to retain full control of the company. Now that I'd accomplished all of my goals for the business, I felt prepared to turn it over to someone else and be free of it.

I told the potential buyers I was ready to talk, and gave them access to my accounting books. Within a month, I had a couple of firm offers.

Amazon was one potential buyer, and they made the highest offer -- we never got into exact figures, but it would have been very generous. I turned them down because I thought my clients would get lost in the shuffle working with such a big company.

I went with a CD manufacturing company instead: Disc Makers. For years, they'd been sending clients to me, and I'd been recommending them on CDBaby. They had years of experience working with independent musicians, and knew how to handle their fragile egos. Even though Disc Makers' offer -- $22 million -- was considerably less than I stood to make from Amazon, I decided to sell to them because I knew they'd be a good fit for the company's culture.

Letting go
It took around eight months to finalize the entire process, and I wasn't allowed to go public with the news until then. It was a frustrating period: I'd emotionally disconnected from the company in January, and I just wanted to be done with it. I stepped back from day-to-day operations and left the company running on auto-pilot under a manager's control for that time period. It was a huge relief when I could finally make the announcement that the company was in new hands.

I haven't looked back at CDBaby. I'm not concerned with how the new owners are running it. It's kind of like when you sell your home: You drive by a year later, and see that the new owners have painted it pink. It might feel a little strange, but it's not yours anymore. I choose to look forward instead.

Derek Sivers now lives in Singapore, and writes about entrepreneurship and music at his personal website, sivers.org.
-- As told to Kathryn Hawkins

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