Case Study #29: Replacing Yourself

Replacing YourselfSome years ago, Jim Brown started a software company called TerrAlign. This Sales Territory Management Software designed the best possible territories for sales representatives. They started in pharmaceuticals, but quickly entered into the consumer goods and medical products sectors as well. They would eventually be acquired by a fellow software company, but that couldn’t have happened if Jim hadn’t started the process of replacing himself.

Enter Ken

Ken Kramer had helped design some of the earliest versions of TerrAlign’s software and kept having good interactions with them as a vendor. So when the opportunity came for him to join the company, he took it, and started in partnerships and marketing. He was soon promoted to sales and marketing, and not long after that, was one of three employees that Jim chose to replace his functions as an owner/operator.

This is, of course, the best case scenario: promotion from within of those who have risen through the ranks on merit. They’ve had a chance to build relationships across the company which will only make taking on the new responsibilities easier.

Creative Tension

But, while an owner may be willing to delegate tasks, he might not be willing to let go of profits and cash flow. Ken wanted to use profits to invest and grow the company, while Jim focused on maintaining profitability. Ken had negotiated shadow equity as part of his promotion into the job of president, so while he was frustrated with Jim’s desire to keep things status quo, he knew that circumstances could always change.

Soon enough the ground started to shift. A competitor was acquired after it had been taken private by a VC some time prior. This changed the competitive landscape and led to MapAnything making an acquisition offer. MapAnything was also a software company, but focused on route optimization, so it was a sensible companion product for TerrAlign’s core competencies.


Ken led the transaction team, though he says if he had to do it all over he would have brought in help (like a banker or broker) to cut his learning cycle down and help him make better decisions. It also (naturally) took away his time from helping to run the business. In the end, his focus was on making sure the TerrAlign team all kept their jobs or had opportunities for new positions post-sale. The terms of the sale weren’t made public, but 1-3X revenue is a normal multiplier for slow-growth software companies.

What Ken couldn’t expect or predict was Salesforce acquiring MapAnything just a few months later. Most of the team was surprised, but given that it wasn’t their company anymore, they could hardly do anything other than try to continue on with Salesforce, which many of them chose to do.

Key Takeaways

  • As we’ve said before, apart from having a solid manual in place of how to run the business, demonstrating that the company can run without you by having a president in place makes it very easy for an acquirer to make an offer.
  • Even if you’ve had the foresight to plan for your own succession, you also have to plan for an acquisition. Jim had brought in Ken to do the former, but stifled him as he tried to do the latter, by growing the company aggressively.
  • Consider getting a broker (we’re a bit biased). As we saw with Ken, we help make the process easier, more educational, and often  more profitable.

Case Study #27: From Side Hustle to Millions

Dog WashingAnthony Amos started playing professional rugby right out of school in Australia. But he knew he couldn’t do that forever, and anxious to build something for himself, he decided to start a dog grooming business with his brother – and not just an ordinary one – but a mobile one called HydroDog. He put an ad in the local paper on a Friday, and on Saturday morning he had nine bookings at $10 per dog. He knew he was on to something, and he and his brother excitedly went to their first appointments, accidentally bringing dishwasher detergent instead of the dog shampoo for those first nine dogs.


Anthony had never planned on washing dogs forever, but he stayed in that technical role for a long time, relatively speaking. The first six years in the business he and his brother worked “on the front lines” washing dogs while also signing up franchisees. Anthony notes that many franchisees were really edified and inspired to see the franchisors still very much “in the tools.” The business grew and Anthony and his brother soon hit 100 franchisees. “That’s fine for me,” Anthony noted, “I want to sell.”

But then he learned about master franchising, from the gentleman who had helped him set up the HydroDog franchises. He could sell territories – in the case of Australia, five states and two territories – and have master franchisors that reported to him. Within 18 months, he had sold all of Australia and hit another ceiling. He wanted to sell again.

Diligence Tests Relationships

The acquirer that Anthony found was looking for any reason to pay less than market price and used the due diligence portion of the process to do just that. This kept Anthony and his team buried in obtaining affidavits to cover documents that were missing but both parties agreed had existed. Anthony had made a practice of really getting to become friends (“mates” as Australians say) with the franchisees and master franchisees, and as a result, when this extra paperwork was needed for a sale, they were willing to do the extra work.

He couldn’t let the entire organization know, because, like telling employees before a sale is finalized, great instability could be caused. In the end, both parties got what they wanted. The acquirer got his due diligence “discount,” and Anthony got the sale that he wanted.

Not quite the end

Anthony took all the earnings he had and put them into Australian property development in 2007. The developer was US-based. You can guess what happened next. Anthony lost all that money and got lured to start HydroDog in America. He did, with the help of some financial partners. But they wanted to corporatize while he wanted to franchise and this led to his being bought out. Anthony ended up being right about the model and was able to buy back the business for pennies on the dollar when they went into liquidation.

He’s now continuing to build HydroDog, but in a new country, a little wiser but with the same hustle and passion.


Anthony, like many Aussies, is very no-nonsense, and it was his instinctive, “time to sell,” feeling that drove each of the liquidity events that he experienced. What was important to him was being true to himself, especially when he hit a ceiling that he didn’t think he could grow beyond personally or professionally, whether that was 100 franchisees or 7 master franchisees.

He also learned a lesson we’ve seen in many of these case studies: success in one field does not necessarily translate into success in others. He had grown a franchise to 100 franchisees and sold it at the top of the market, but also managed to invest in real estate development, something he knew nothing about, just before the market bottomed out.

But in another recurring theme, he didn’t feel sorry for himself and wallow in self-pity. He got right back up and went after where he had been successful before, and where he carries on today.

Apex is actively searching for top quality candidates to join our team of Advisors. If you’re interested in a career helping people buy or sell a business, think you have relevant experience, and want to find out more, please call Doug Hubler, President of Apex, at (913) 433-2303.

Case Study #26: When Ego Costs you Money

Mala BeadsAfter law school, Diana House took some time off in Bali, Indonesia, where she discovered that people were fascinated with Mala beads – meditation beads used by serious practitioners of yoga. Sensing a blue ocean opportunity, she built a website and in the very first month of business she had paid for the website and had money in the bank.

The Process

Diana used local Indonesian artisans, as well as factories in China and India to create what she characterized as “luxury yoga jewelry.” Not only was she first to market, but she really pushed the gas, using Facebook organic marketing, email marketing, and influencer marketing long before it was a common practice. She would give the jewelry to well-known yoga teachers in exchange for their sharing it with their communities.

She quickly hit seven figures in revenue and after the first year she wanted to sell. Diana is a serial entrepreneur and personally she was becoming less interested in yoga and wasn’t wearing the jewelry. A sale she pursued fell apart and she didn’t look to sell again for five years.

The Problem

Diana had too many irons in the fire, trying to run multiple businesses while also trying to organize a wedding for herself, and at one point when she asked her accountant when she should sell Tiny Devotions, this yoga jewelry company, he told her, “a year ago.” The revenue was starting to flat-line, and while it hadn’t yet started to decline, all signs pointed to complacency from the founder.

Diana knew that she was mentally checked out of the business, and in a small business, the staff feed off the energy of the leadership team. Diana had been out of operations for years and so without her attention it was simply running on autopilot. In the meantime, literally thousands of competitors had moved into the space and were competing well and driving her once 80% margins way down.

The Failed Sales

E-commerce businesses sell on average for three times normalized EBITDA. Diana used this number in early conversations with potential buyers and started three planned months of diligence with a strategic buyer that had given her a great offer. Despite having a law background, and despite seeing that there was no deposit required at time of the LOI, Diana chose to hold back on stopping things to push this deal point. She was also the one driving the due diligence process: a huge red flag. Unsurprisingly, 2.5 months into the three planned months, the “acquirer” decided to sell his company instead of acquiring hers.

At this point, revenue had started to decline and she thought she was being too smart for her own good trying to sell the business on her own. She hired business brokers to try to sell the business, but kept running into roadblocks like lack of financing, unreasonable requests during the diligence period, and even one fight between spouses about the deposit amount that killed a deal right at the start.


DespairDiana’s lack of engagement turned into despair about the business, and she started to see that her ego was goading her to sell the business because she didn’t want to be one of “those people” who shut down a business because she couldn’t find a buyer. But she realized that the mental anguish she was going through in being tied to something she no longer cared about was much worse, and she set a deadline of “sell or close down” by the end of August. It was August 1st when she made that decision, and on a whim, emailed her customer list letting them know she was planning to sell, but would have very tough deadlines to meet in order to close on time.

The last offer she got, she told the buyer that she needed a deposit that evening, due diligence to complete in 48 hours, and the deal to close in 9 days.  As crazy as those terms may seem, we have seen such deals go through on more than one occasion, and in this case, it happened for Diana, but not without a few bruises, bumps, and lessons learned.


It’s refreshing to hear people who can put their ego aside and point out things they did wrong in order to make sure others don’t do the same.

  • Sell when you’re no longer engaged. Diana did try to sell early on, but she notes she should have simply tried again, probably with a broker.
  • Sell when you’re in a good market position. Diana waited too long, when competitors became entrenched and were bringing great skills to the game.
  • Use a deadline to drive a sale. This isn’t just something you set with an acquirer, but a mental one for yourself, to drive momentum.
  • Get out of your own head. Don’t force a sale for prestige for yourself.  A sale has to be for the right reasons, not just to satisfy your own ego.

Apex is actively searching for top quality candidates to join our team of Advisors. If you’re interested in a career helping people buy or sell a business, think you have relevant experience, and want to find out more, please call Doug Hubler, President of Apex, at (913) 433-2303.

Case Study #25: Leaving Money on the Table

Leaving Money on the TableNathaniel Broughton started Spread Effect in 2010 and sold it in 2014.  Spread Effect was a content middleman. In an era in which content is increasingly king – be it video, audio, or text, Spread Effect helped companies and agencies who wanted content placed or produced do so by working with an extensive network of publishers, featuring everything from travel, to sites about entrepreneurship, to the classic “mommy blog.”

The Business Model

By the time he sold it, he had grown the company to $4M in annual revenues.  The margins were between 18-25%, and while the operations were lean, they were generally intense.  There was maintaining the database, which involved keeping up with software and usability between the different publishing sites that Spread Effect had access to.  There was also the team of representatives who not only maintained relationships with publishers but did outreach to gain new ones.  Most importantly, there was the writing and producing of content itself, which was the most expensive part of the business, especially since the company framed itself as featuring premium content, not the type that you can get on Fiverr or Upwork.

Next Steps…

Nathaniel was happy that he had a functioning business model, but it began to dawn on him that the margins were fairly fixed, and while he was operating in software, the business couldn’t scale like software.  This was because there was really a lot of human grunt work involved that couldn’t be automated or turned over to AI. There was also the limited number of publishers. Even if he should want to scale up the team to handle more work, it would mean the need to find a significant number of new publishers, and there is a limit, even on today’s seemingly infinite internet, of quality websites producing quality content.

Nathaniel realized that if he ever wanted to sell, he would have to find someone who was interested in buying the company in its present state as a lifestyle business, or an entity who wanted to use the database (and his team) as part of something bigger that they were already doing.

Already Moved On

While he was coming to this realization, Nathaniel was already consulting with a private equity firm and was helping to do acquisitions.  In his heart he had already moved on, and as such, lost any desire to hold out for a potentially long sales process.  He priced the business “cheap” (in his words) at only one times net income, when he could easily have gotten 1.5 or maybe 2 times, because he was focused on something else.  The company sold right away, and some who learned about the sale later on told Nathaniel they would have easily paid more, if only they had even known about the opportunity.


  • When you choose to sell a business quickly, you often necessarily sell it cheaply, and leave money on the table that you could otherwise have kept.
  • As such, make sure that you have an exit strategy that doesn’t rely on you as a single point of failure or decision so that you can get more money when you exit.
  • While there are some people who manage multiple companies, and do so well, many of us lose focus (and profitability) when splitting energy.  Sometimes, like Nathaniel, we have to make a decision that causes short-term pain but may have long-term benefits. If you constantly begin with the end in mind and continue to refine that end as you build your business, you won’t be caught off guard by a loss in focus or energy, in whatever businesses you are building.


Case Study #24: Last Chance Saloon

tomatilloJulie Nirvelli never planned to be in the food business.  She was simply someone who enjoyed making a good green tomatillo salsa. 

It was so good, in fact, that her Mexican friends teased her, saying they couldn’t believe “white girl salsa” tasted so good.  

After years of being constantly asked to bring it to parties and prodded to sell it professionally, she took the leap and started a salsa company.

Early Days

Julie wasn’t necessarily passionate about the actual making of the salsa, but rather about the brand and the creation of different product lines.  

As such in the early days she found a co-packer to make the product, which she then picked up, stored in her house, and then went to farmers’ markets with.  

It was a great way to get immediate customer feedback, gain a following, and then use that following to leverage introductions into retail.

The retailers and her team told her the same thing: White Girl Salsa wasn’t going to work as a national brand, for a number of reasons.

In fact, Target specifically declined to work with her, despite really enjoying the product, because of “branding reasons.” Julie made the decision to rebrand as Winking Girl Foods.

Distribution Challenges

It’s one thing to come up with a great-tasting product that customers crave.  It’s even another to develop smart and snappy packaging and branding.

And it’s yet another to market and place your products in stores.  You need to compete for (and buy) shelf space and somehow displace others, especially when you’re in a competitive category like salsa.

Additionally, one of the distributors that Julie worked with managed inventory poorly and issued her a $30,000 chargeback (she had to pay to take back product labeled “White Girl Salsa” at the time of the rebrand) which was a big part of her marketing budget at the time of the rebrand launch.  

Nevertheless, she managed to get into Kroger and Safeway but was just shy of $1M in revenue.

Secret Sauce?

She continued to develop the company with a sauce extension and potential investors told her to come back when the sauce was developed (when she did that, they told her to come back when it had traction).  

She utilized loans for small business, including the Whole Foods Local Producer Loan Program, which offers 5-year, 5% loans.  But she ran into the same problem she did before: good product, good branding, no money left for marketing and getting shelf space.  

So, she decided to start distributing using Amazon to get some traction. And while that did start to take off, her distributor woes continued.

After one chargeback too many, Julie decided she had had enough and was willing to shut down everything and let the personal guarantees get activated for all the credit that was extended to the company…

Send an Email

She sent an email to three vendors, all of whom had experience with Julie and her products over the years. She told them that she had a meeting with Kroger the following week (she did) but that she planned to shut down the company and pass on the meeting unless she had some kind of offer on the table before then.  

Because she had already decided on shutting down the business, a “why not?” attitude served her well, and unsurprisingly, all three were interested.

Julie ended up coming to an understanding with them and took them to the meeting with Kroger. While Kroger didn’t buy in on what would be a newly merged company at that point, they did later. As a result, Julie had an exit and positive liquidity event instead of a failure and massive debt or bankruptcy.

Key Takeaways

  • Don’t be afraid to start slow and small.  Farmers markets allowed Julie to really understand her customers.
  • Find lesser known loan programs, like the Whole Foods program Julie participated in. She also found the Colorado Enterprise Fund, which also gave her money to grow her company.
  • Even if you’ve accepted defeat, consider every possible option.  Julie showed that even when you think it’s over, it’s not over until the fat lady sings.

Case Study #23: Wash, Rinse, Repeat

magazineTom Hannon had not one, but three exits out of businesses. Not just in the same industry, but in the same type of business.

The original company was named FPD and it published and distributed free publications both to retailers and direct to consumers.  

Think of any printed material you could see in free outdoor vending machines or in entryways of local businesses. That’s what Tom’s company focused on.

This type of business primarily focuses on having a strong distribution capacity (clients would want to know that their publications would be seen in many places) and on good relationships with printers (the better the prices on the printing, the more margin FPD could keep).

Beyond that, Tom also created, developed, and managed his own accounts instead of just waiting for business to come to him. This led to a successful pitch to what, at that point, had been a purely online business,, for a companion printed piece in the field.

What started as a 50,000 copy pilot grew into eight regional distribution points and over 1M copies of the magazine.

First Exit

In addition to hustle, Tom had grown the business through acquisitions, primarily on an earn-out basis. When enough of the competition had been bought up, FPD itself became an attractive acquisition target: a strategic purchase from its single biggest customer.

Tom had a two-year non-compete he had to sign and he went on to work for the new owners. During those two years the buyer itself was acquired. With his noncompete finished and unhappy with the new direction of the company, Tom started another company with the exact same name as he used the time before: FPD.  

He’d benefited from even more education and relationship building in the years he’d worked for his acquirer…and it showed. In 18 months he went from zero to $3M in annual revenue, on an 8% margin.

Here Tom stalled, as he lacked the ability/time to find a serious number two. Because of that, he spent a lot of time working in the business instead of on the business.  

Despite a strong revenue number, he couldn’t get a valuation beyond $1.8M. This was in part due to it being a service business, but mostly because 50% of his revenue came from one client, leaving him vulnerable.  

He did manage to sell for $1.5M, due to his taking his eye off the ball (as he put it) as the deal drug during the due diligence phase, and he lost some accounts, thus forcing him to accept a haircut on the valuation.

Third Time Lucky

Once the sale closed and Tom signed another non-compete, he took some time off and built a house on a plot large enough for a whiffle ball field (about ¼ the size of a baseball field).  

He ended up selling that property years later but recalls many happy summer evenings when hundreds of neighbors came over for games of whiffle ball.

You can guess what happened…he got the itch again, particularly after his non-compete expired. He ended up starting Hannon Distribution, his third company, doing precisely what the last two iterations specialized in.  

The company was growing nicely, though Tom ended up injuring himself very badly, almost fatally, during Ironman training. He chose his health and recovery over continuing to build the business and sold this third company to a publicly traded firm for undisclosed terms.


While you may not end up starting three very similar businesses, there are still two excellent takeaways from Tom’s interesting story.

  • There’s no shame in going back to what you know.
    A lot of first-time sellers get it into their heads that success in one field means the probability of success in another field, and they spend quite a few tears and not a few dollars learning that delusion is precisely that. If you still have fire, expertise, and desire in a field, why fix what ain’t broke? Do what you know.
  • Non-competes aren’t forever.
    Non-competes are primarily there to protect the buyer, but they don’t foresee what Tom did each time. He had the patience and time to wait it out. Sometimes he got paid to do so by the acquirer themselves! Non-competes are there to make sure that you don’t undermine the new buyer, but with the right amount of time, they’re also your legal freedom to do what builds great businesses and economies: compete.

Case Study #21: Confidentiality Rules

confidentialityScott Miller started Miller Restoration, a firm in the property damage industry, in 2005.  

He managed to sell his company after 12 years for 3.5 times earnings, but only after two failed attempts.  If we pay attention, we can benefit from his hard-earned lessons.

Building to Sell

Scott had always assumed that he would sell the company at some point. He had a passion for growing businesses and honestly just wanted to see how far he could go.

After five years and hitting $1M in annual revenue, he thought it was a good time to explore the possibility of a sale. He hired a broker, but even with a 1-year listing engagement, the broker didn’t bring in a single buyer.  

During that time, as he grappled with the idea of letting go, he realized that with a 20% margin on his revenues, as well as a great team, he had a great business.

So while he was surprised not to get any looks, he was also somewhat relieved and therefore went back to building the business.

A few more years down the road, a friend of a friend approached him via casual conversations about the possibility of selling.  This time, Scott chose to deal directly with the buyer without a broker, and 15 months later, the deal fell apart.

Scott noted that it felt very much like an emotional rollercoaster, with the end often in sight, only for it to be taken away at the last moment.  Finally, a week before the expected closing date, the buyer said that the financing had fallen apart and asked if he could he have another month or two.

Scott firmly said no, but again, with a sense of relief: “Why am I selling?” he wondered, “I’ve got a great team and a great business!”

Third Time’s the Charm?

With two failures to sell behind him, Scott instead started a second business in a related industry (again, that love of “growing things” inspired him).  But some of his senior management at Miller Restoration respectfully pointed out that this looked to be “shiny object syndrome” and that if he wasn’t careful, the restoration business could pay the price.  

Rightfully chastised, Scott put a manager in place of the new business and stayed focused on the restoration business. And yet, the second business continued to grow on its own, without his being involved full time.  He saw the second business for the subconscious message it was: it was time to move on.

Scott hired a broker he felt really understood his type of business and within a few months had a couple of serious buyers competing for the sale.  The first one began the process but dropped out three months into due diligence, and Scott could feel that deja vu creeping up.

But the second buyer ended up being the one who went to the finish line with him, and Scott got the exit he had long craved.

Telling Employees (Don’t)

Scott confessed that the most difficult part of this process was not telling his staff.  Many of them had been with him for a decade or more and felt like family. In fact, right after the wire hit his account, he went to personally meet or call every single member of the team individually, so he could tell them in person and do what he could to soften the blow.  

The overwhelming majority of the team took it well, but two relationships were strained as a result, one temporarily, and one permanently. As difficult as it was to keep the secret from them (and here at Apex, it’s an industry standard we abide by and always recommend), he knew it was the best thing: “if the sale didn’t go through,” he pondered, “and I told them, I may have lost them.”  

There was a tough period of adjustment to the new owners at first, but most of the team is still there, and continuing to grow and develop the business.

Key Takeaways

Scott wasn’t bothered by a failure to get any nibbles the first time he listed.  He took solace in the fact that he had a good business and kept trucking on.

When he tried to go on his own, his personal involvement in the deal (instead of enlisting a broker) dragged him through a process that was three times longer than it should have been and ended in failure anyway.

When he did finally sell, he used a broker and he followed his broker’s advice and didn’t tell his staff, as much as it went against his instincts and desires, because he saw the greater good and the necessity of confidentiality.  

Trust the professionals: we’re speaking from experience.

Whether you’ve listed with other brokers in the past or you’ve tried on your own, we’re here to help you if you’ve decided it’s time to list your business.  We have brokers experienced in selling all kinds of companies.  See if one of us can help you!

Case Study #20: When You Had No Plans to Sell

sell a businessJim McManaman owned Solution One, an accounting and tax firm that handled business and personal accounts.  

At its peak, he had six employees and had just added a fee-only financial planning practice to the company.

The company was very much a “main street” business, and for Jim, apart from tax season, it was a lifestyle business as well.

This was mostly because he had read The E-Myth early on and ensured that his entire company was systematized, even down to having an internal wiki that had hundreds of pages.  

Out of the Blue

Jim had no plans to sell.  One day a letter came to him out of the blue from a competitor in town with a soft offer to buy his firm.  Jim didn’t think this person was a good cultural fit for his clients, so he unhesitatingly turned it down.

But a few months after that, he got a second letter, this time from someone who he considered a friendly colleague more than a competitor, and he took a meeting with her.

He had a productive first meeting, but spent most of the time politely thanking her for the interest, but reiterated that he had no intention of selling.  

And yet, as it often does, even the thought had pushed forward one domino. Within a couple weeks, he started a series of meetings with her that lasted six months, with only a delay for a few weeks during the peak of tax season.  

At the end of the day, the potential buyer didn’t have the finances put together to really make the deal happen, and so the deal collapsed.

Ball was already rolling

Jim wanted to take the momentum from that deal and move it in another direction. Soon, he became the hunter instead of the hunted.  

He reached out to another respected colleague and let him know he was interested in selling. There was a clear meeting of the minds.  They started the process in midsummer and closed on December 31 of that year.

The buyer was very slow and methodical. Jim is an A-type personality and at times he mistook their difference in styles for a lack of seriousness about the deal.  

But they got their communication style down. The buyer was so impressed with how Jim’s operation worked that he vowed he wouldn’t change a thing, from the name to any of the employees or operations. The buyer even had the humility to say he would be taking some of the best practices and applying them to the two offices he had.

The Deal

Jim worked off a 1.25X multiple on gross revenue. This was something he saw in the two previous offers and the buyer himself had used that approach in a previous acquisition.  

It’s a number that’s often used in regards to accounting practices. However, sometimes those sales are subject to earnouts and financing, but Jim held firm. If he had a good business, he wanted to get paid. He ended up getting an all-cash upfront deal, with no financing.

Key Lessons

Jim went through six months with one buyer only to find out at the end she didn’t have the funds to even be having the discussion in the first place.  

One of the things we ensure at APEX is that you’re not dealing with a potential buyer who doesn’t have what it takes to buy your business. We do our diligence so you don’t have to.

Keep in mind that whatever your personality is, your correspondent – be he/she the buyer or seller, may not have the same personality.  

A broker can stand in the gap and help ease those communications so that a text or email doesn’t get misinterpreted and blow up a deal for absolutely no reason whatsoever.  It’s happened, believe us. Lean on our experience to help you manage the communication flow.

Finally, remember that it’s important to manage how you tell your employees and customers that a sale is happening.  

Ironically, Jim mentioned that months later some clients still thought he was involved in the business because it was running how he’d always run it…in a lifestyle manner.  

Case Study #19: Happy to Take Your Call

take your callIn 2003 Jill Nelson founded Ruby Receptionists to help small businesses provide a great first impression to new potential customers by providing an answering service.  

This could help the business who just needed one person to provide skeleton phone coverage or a growing firm that needed scalability over time.

She’s still in charge of the company today, after guiding the firm through a $38.8M acquisition by a venture capital firm.

The Subscription-based Model

Long before the Software-as-a-Service (SaAS) trend that we’re so used to these days, Jill was focused on growing a company in which the revenue was entirely subscription-based, and recurred monthly.  

In addition to a culture that fostered positivity (Ruby Receptionists are trained to always be positive-outcome-oriented with all incoming calls), Ruby had, from the start, focused on the technology side of the equation.

She made sure that they owned all their own infrastructure and even developed a mobile app which would allow their clients to track their incoming calls and messages and respond in real time.  

In fact, Ruby had proprietary technology that ensured a call never got missed and was always routed to a live person.

EBITDA vs Revenue

Believe it or not, Jill spent five years as a business broker herself before starting Ruby. Because of that experience, she was familiar with valuations and, while she wasn’t considering an exit in the near-term, she always assumed it would be on EBITDA, not revenue.

That changed when someone who wanted to represent Ruby in a potential sale came to her. They pitched the idea that Ruby could very well be a strategic acquisition, and hence be acquired for a revenue multiple, not an EBITDA one.

His argument made a lot of sense and echoes ideas that we’ve discussed here before. Not only did Ruby have all its clients on recurring contracts, but most of those thousands of clients were simply paying a few hundred dollars per month.  

Not only was it unlikely that a wave of them would quit simultaneously, but even normal churn could easily be made up by strong new sales. And since Ruby had developed such customer loyalty, churn was low anyway.

Maybe, maybe

Jill had taken the company to $11M in topline revenue and in the process had become somewhat of an absentee owner who was disengaged from the business.  

But the possibility of such a strong exit woke her up to at least exploring opportunities. She engaged with an investment bank to help Ruby through the process.

There was a fair amount of interest for what Jill had built, and over 100 NDAs led to 20 Letters of Interest, some of which offered as low as 30% of what Jill eventually got for the firm.  

Of those 20 she and her team selected six that were most aligned with Ruby’s values and vision and were in the uppermost range of offers.

They finally got to Letters of Intent with three of them before closing the deal with the firm that bought them.


As part of the terms of the sale, Shelley was originally constrained to stay on when the deal closed in 2014. But she’s still there today. During the process, she found that she fell back in love with Ruby and the work they were doing. 

In addition, she found that working with a venture capital firm could be a whole new professional challenge. She notes that the entire executive team the firm helped hire has taken the business and her performance to the next level.  

And what about one of the early believers in Shelley who made a small investment in the beginning just when she needed the capital? He got a 25,000% return on his faith in her.

Although Shelley had a business broker background, many business owners don’t, and even despite her expertise she didn’t choose to represent herself in the sale of her own firm. A broker can bring cool-headed objectivity to something that is often very emotional. Give us a call today to find out what kind of valuation might make sense for your type of business.

Case Study #18: Coming Back from Failure

failure and successShelley Rogers has been a leader in a field that’s now very trendy.

But many years ago no one even knew the field existed.

That field? Electronics recycling.  

Little did she know that her initial success would lead to an even more ambitious move that ended in catastrophic failure.

She didn’t let those lessons go to waste. Instead, she went on to an excellent exit in the next business she built.

Easy Money

Shelley’s first business in this space was Admincomm Warehousing.

They helped companies recycle their old technology. Several Chinese firms were interested in many components that were inside old computers and phone systems.  

Shelley would take in the equipment from Canadian companies. Chinese recyclers would then fly into Calgary, where she was based, in order to bid on the equipment.  

She had a check in hand before the equipment ever left the port, and the companies who sold her their old equipment got paid 30-60 days after that. Excellent cash flow and what seemed to be significant supply.

In fact, at some point, she started getting new phones and computers that had never been used. Unsurprisingly, a government program had been inefficient, leading to sales of perfectly good, never used equipment.  

Shelley started a new division of the business that would resell that equipment rather than earmarking it for scrap.

Bad Press

As the businesses continued to thrive, there was a news expose about bad practices among the Chinese recyclers. There was blatant disregard for the environment in the methods that were used, to say nothing of the use of child labor.  

Shelley realized she would need to ensure the recycling was done at home, and done right, in Canada.

This required a fair amount of work and capital. Not only would she need to advocate for favorable recycling legislation from the Albertan government, but she would need to acquire the expensive machines from Europe that could do the work well.  

This business could do well if it could scale up and do a fair amount of volume

Reverse Merger

She changed the name of the original business from Admincomm to Maxus Corporation and bought a shell company in the US in order to go public on the OTCBB (pink sheets).  

She did a “friends and family round” and raised $3M via this IPO. But this was the last thing that really went right for her in this particular company.

The first squeeze was cash flow. Unlike the last business, in which she was paid upfront before product was delivered, the program in Alberta mandated that she couldn’t get paid until the recycling was complete and she had provided proof.  

Additionally, she had to pay to acquire some of the equipment for recycling up front.

The second squeeze was a dishonest CFO who was consistently promising letters of intent from strategic partners, but was failing to deliver those and was embezzling money via the US shell corporation.

Very quickly they hit a wall in which much of this fraud was revealed. Many relationships were tested. Some were broken. Many of the people who backed the IPO were friends and family and a failure of this level was devastating for a number of reasons.  

Shelley lost her marriage and lived on her savings for a year while she continued to try to battle to make the rest of the company work while the Canadian division went into receivership.  

But, very little could be done.

The comeback

Even during the difficult period of the collapse of Maxus, Shelley had pulled aside a couple of her best salespeople. From there, she proposed to start a business with them in a related field.  

This new company, Top Flight Assets Services, would go to large organizations and offer to take out old computers and phone systems on consignment.

Top Flight would then refurbish these systems and sell them wholesale. When a company called E-Cycle bought the remaining assets of Maxus, Top Flight built a partnership with E-Cycle to handle any recycling of equipment that couldn’t be refurbished.

Time to sell

After building Top Flight over seven years, Shelley decided to sell the company in order to pursue a relationship abroad. Initially, she went to a “sell your small business” course. Feeling unimpressed, she decided to try to do the sale on her own.  

She compiled a list of 150 companies and sent out an anonymous infosheet with information on Top Flight. Interested parties could then contact a consulting firm she had contracted with. Of the 150, seven parties were willing to sign an NDA to proceed further, which led to 3 serious buyers.

After further discussions, Shelley decided on a closed bid process that required a deposit and asked for 6 times EBITDA in an industry in which sales were between 3.5-7X EBITDA at the time.  

This led to one buyer returning the bid with a request for audited financials, whereas the other two submitted bids, including a leasing company who was already one of Shelley’s largest customers.

The final sticking point for the LOI was the earnout. She had obtained 6X EBITDA upfront for her and her partners. And the full earnout would have brought her to 7X in total.

And while she resisted this for a while, an old friend asked her if she was happy with the upfront number. Because if she was, the earnout was just a bonus.  

She realized she was holding up the sale over something that wasn’t key to her, and the sale closed. She and her partners ended up only realizing 50% of the earnout over a 3-year period.

Shelley is a great example of the fact that you can be down, but not out. More importantly, she shows how not to shy away from building another business, almost in the rubble of the last one, just because of failure.  

She also didn’t let the amount of the earnout hold her back from closing the deal. This was smart as she’d already obtained a number she was honestly pleased with.

Worst case scenarios happen every day, but we’re defined by how we respond to them. Shelley chose not to give up on herself or her business partners and had a handsome exit as a reward.

Shelley didn’t use a broker. But when interviewed about her exit, admitted that she could probably have obtained more, and faster, had she not tried to do everything herself.  Managing a sale of a company by yourself, while trying to run a business, while trying to keep it all secret from your employees…isn’t something most people can do well. So before you try that route, give us a call to see if we can help you with your situation.