A Shark’s Tale: Turning A $1000 Loan Into A $66 Million Exit
Most entrepreneurs had a boss at some point before they started their own business. Barbara Corcoran had 22. Real estate mogul Corcoran had 22 jobs before she ventured out on her own, and enjoyed all of them but one.
“Other than that one exception I enjoyed every one, the only piece I didn’t enjoy was having a boss,” said Corcoran. So when her boyfriend at the time offered her $1000 to start a real estate firm she quickly accepted. As for how she decided on real estate, it was also a hasty decision. She says she didn’t grow up dreaming of becoming a real estate agent, her boyfriend pushed her in that direction. “It wasn’t even my idea,” she says. “He said you’d be really good at real estate sales, why don’t you start a real estate business.”
That real estate business became Corcoran Group, a five billion dollar company, which she sold for $66 million in 2001. The 22 jobs she held earlier in her career showed Corcoran her biggest strength, which she applied to her new business. “Anything having to do with people, my people skills,” she says. “I know that sounds boring – I got along with people very well at every job I had, people liked me and I liked them and I loved being on my feet.” She didn’t realize people skills translated well to her new role as CEO. “I didn’t realize then that it’s the perfect background for real estate or the perfect background for any sales position.”
While Corcoran says she excelled at bringing business in, she didn’t always get the close. “It’s rumored that doing well in real estate is to be able to close a deal,” she says. “I did not find that to be the case for myself, I was probably the worst closer out there and I didn’t find that was true of my top super stars either.” She says generally the best sales people had a better ability to bring people in than close a deal.
Corcoran’s strategy for early growth was simple. If she found herself with a commission check that she didn’t need to pay her rent, her bills or for her ad in the New York Times, she would put an ad in the paper and hire another salesperson. If that salesperson did well they would produce more extra commission that would allow her to further increase her sales team. “That’s basically what I did, it wasn’t like it was a great business plan,” she says. “It was like wow, I had some spare change so I got another salesperson and when I realized I had an additional $400,000 coming in I hired a whole office.”
In the early days she didn’t have budget to hire anyone to answer the phone or cover other roles at the company, and her reason for focusing on sales was simple. “Salespeople produce income, everyone else cost money. I was very reluctant to hire anyone that cost money,” she says. “I was always happy to spend money that would produce more money for the firm. We were proudly 500 people strong before we had an advertising director.” Corcoran says she often begged salespeople with a talent to take on part-time jobs to cover off the other roles until she was willing to devote budget – she said they believed the firm was going somewhere so were willing to help out. “People stayed with me and worked extra hard for me because I could see the potential in them – I’m not so sure they could see the potential in me.”
Despite these additional roles, she says she never had a turnover problem, despite being deathly afraid that her capable hires would go out and start their own firm. “I was rightfully scared because they had the talent, they knew what they were doing, and they had the confidence,” she says. “I was so surprised – no one ever did.”
Corcoran had her first child at 46 years old, and when he turned five she knew she had to make a change to her work life balance. “I wanted to be a 150% entrepreneur and a 150% mom, and I found that I was having a very hard time doing both,” she says. “I was about 75% and 75% – still better than 100%, but not what I was accustomed to at work.” So one day while running the numbers on the competition with her business partner she realized that hers was the largest firm in NYC at the time, and knew it was time to sell. Her acquisition strategy was simple – she went on the Board of Directors website for the company she was interested in, found out who their acquisition attorney was, and called him and said “I’d like to sell my firm.”
She was overall the process was quite easy, and while some people say she should have shopped around, she sticks by her choice. “They were the biggest buyer in the market, they were paying the biggest price, why wouldn’t I want to sell to them.” The deal closed four months after the initial phone call, but not without some negotiations. She didn’t have a sale price in mind when she set out to sell, and was offered $22 million cash. But for some reason she decided that her lucky number was 6, and told her attorney that she had to have $66 million to sell. “I signed the contract on the Friday night before 9/11, and of course that Monday the whole world changed.”
As for what she learned from the acquisition process, Corcoran says it was all about timing. “I learned that they’re going to beg to give you French kisses the day before the closing, and they’re not going to remember your name the day after – no matter what they promise you. You are an unwanted visitor in your own home the day after the closing.” She stayed on as company figurehead for a couple years, but left her daily duties a week after the deal closed.
Now Corcoran is a Shark on the ABC hit show Shark Tank, which sees young entrepreneurs pitch their ideas to successful businesspeople in hopes of getting investment. She says she invests in people based on the same criteria she looked for when she was first starting out. “Picking a great entrepreneur is no different than picking a superstar salesperson in my book,” she says. “You have to realize everyone I’m picking, I’m picking them because they’re great at sales.” She brings them in, they close the deal – true Corcoran style.
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