Case Study #51: Gold Medal Service, Gold Medal Exit

ElectricianWhen he was only 15, due to circumstances outside of his control, Mike Agugliaro was living with his brother, only 2 years older than he was.  They had to learn how to pay bills and live on their own without too much support or help from their parents.  Despite this challenging situation, Mike graduated from high school and decided to go into the trades, electricity specifically.  He couldn’t have imagined that two decades later, he would sell his own general contracting business, Gold Medal Service, for tens of millions of dollars.

Build a Better Mousetrap

Like anyone fresh out of vocational school, Mike went to work for one of the electricians in his area.  The business was run so poorly that Mike thought, “if this guy can run an electrical company, surely I could do a better job.”  He reached out to a close friend who had a solid job: “Look, I don’t know anything about business, but I can be an electrician,” Mike said.  “Let’s be 50/50 partners and you run the business side.”  Thus began a partnership that in its first decade was generating almost a million dollars of annual revenue.

But there was a price to be paid: they were both working seven days a week, and at one point Mike’s partner threatened to quit and Mike had a vision of repeating the mistakes of his father: working so much that he never saw his family.  He took the weekend off, took a hard look at everything they were doing, and decided to hire people who knew how to make his company better and listen to everything they had to say.

Game Change

One of those new contacts arranged for Mike to visit an electrician doing $10M annually in neighboring Pennsylvania (Gold Medal was based in New Jersey) and while Mike thought the uniforms looked nice, he didn’t think the electricians they had were that great.  The experience inspired him: he already had the great electricians, he just needed to build a better business.

This led to three obsessions that changed everything:

  • Marketing
  • Customer Service
  • Billing Immediately

His first marketing move was to get a double truck ad for the Yellow Pages (remember those days?).  He went from spending $500/month in that channel to $50,000/month.  Having such an ad telegraphed to potential customers that he was the best company (they were the first listed, and look at that ad, etc.).  Most business owners were afraid to spend and didn’t understand the different channels.  Mike wasn’t afraid to spend and got focused on learning each of those channels, looking for his target customers.

When it came to customer service, he made sure his team members were answering the phone with excitement and energy, and had the tools to upsell and cross-sell.  Yes, someone might be calling about an electrical problem, but Gold Medal also helped with plumbing issues.  Often people called having a terrible day (power might be out or a toilet might be stopped up), and the team always tried to assure those clients that it would be a better day when they had a chance to fix the problem.

Finally, to balance his cash flows out as he accelerated his spending on marketing, he decided he wasn’t going to play by the “rules” when it came to paying for services.  “When you go to a restaurant and eat a steak, do you tell the waiter to send a bill and that you’ll get to it 90-120 days?” Mike asked.  Gold Medal instituted a “pay when the job is completed” policy and customers went along with the policy.  Mike changed the rules of the game.


When it came time to sell, Mike and his partner didn’t want to stay on.  They made the case to the buyers that the team had been running the company for years.  With $32M in annual revenue, 165 trucks, 200 employees, and double digit profit margin, it wasn’t that surprising.  The sale only took 45 days to close and on that 45th day Mike and his partner gave the team an emotional farewell and moved on to new adventures.


As always, every exit has lessons any business owner that wants to sell should take to heart.

  • Make your own rules.  Mike didn’t want to deal with long billing cycles.  So he delivered such great service that his customers accepted his “pay when completed” rules.
  • Be brave.  Mike probably never planned to 100x his spending on Yellow Pages, but his mentors encouraged him and showed him what would result.  While others were afraid to increase his marketing spend, Mike went all in.
  • Stand out.  A lot of his competitors just went about the business of being in business.  They didn’t stand out in the marketplace.  Mike led with customer service and the word spread.
  • Make the hard changes.  After his first ten years in business, Mike nearly lost everything because he wasn’t getting help from top performers.  He sought that help, made the changes, and reaped the rewards.

Are you where Mike was at the end of his first decade in business?  Do you want your next decade to be, as his was, 32 times better, with a fantastic exit at the end?  We’d love to help achieve a dream exit.  Give us a call!

Case Study #50: A Pet Adoption App that Lured in PetSmart

AllPaws AppDarrell Lerner was sitting in an office with an employee looking at various business ideas.  He had just sold an early-stage Facebook dating app that at its peak had 100M users.  His family and friends were so excited about his success that they gave him $1M of their own money in exchange for roughly 25% of whatever Darrell planned to do next.  

As he looked at different ideas he kept coming back to wanting to do something with pets. 

As he considered the online dating world he had recently exited, he thought about creating a platform for people to “match” with pets they could adopt.  He realized he would need a critical mass of users in order to make the site viable. 

He hired a programmer and a paid search specialist.  The programmer tapped into animal rescue groups around the country and found a way to pull those listings into one centralized location.  The paid search specialist helped create Facebook ads and landing pages around the concept of a “pet adoption database.”  Between 35-37% of people were willing to volunteer an email address at the end of that process.  That was the proof he wanted of customer demand and he started building the platform and app which would become known as AllPaws.

Darrell was familiar with the costs of advertising due to his experience building on the Facebook platform and as such decided to monetize the site that way.  He partnered with a company that had quite a few pet-related businesses but before he could close a media deal with them, they were acquired by PetSmart.  The people that Darrell was speaking with before the sale stayed on and decided to move forward with some ad deals, including with PetSmart itself.  

Darrell wanted to leverage the highly-specific data that his platform provided into great ad deals so he personalized the approaches.  To win Royal Canin’s business, he created a breed-specific landing page that prompted the owner (with coupons) to consider Royal Canin’s type of food for the breed they had just adopted.  He also won PetSmart’s business in a similar fashion, offering a number of coupons as well as a link to the closest locations to the customer.

What these welcome messages were, at a deeper level, was an attempted capture of the customer at the beginning of their pet journey, before habits, patterns, and preferences set in.  This is known in the industry as the “point of market entry.”

People loved the app. 

AllPaws had 1.5 million registered users, 1 million unique website visits a month, and was known as the “Tinder for pet adoption,” ranking in the top 100 for all lifestyle apps in the App Store.  But despite these stats and all the good press, most people assumed that a pet adoption business was a nonprofit, hence there was no real investor interest, which is what Darrell was looking for to get to the next level.

While Darrell and his team had rapidly gotten to $1M in annual revenue, mostly on the backs of advertising, the possibilities for growth plateaued and Darrell decided if the business wasn’t going to get much, much larger, he wanted to move on.

There was no app to help him find a broker, but he wanted one who had some experience with pet businesses.  He found one and made it clear that if he could get at least $3M for the business, he would take the offer.  But to keep his brokers highly engaged, he took the unusual step of offering a higher commission for each level above that $3M number.  The more the sale price ended up being, the larger percentage his brokers would get.

Darrell had cultivated relationships with different writers, particularly one at Forbes who he had consistently pitched stories to before.  The writer hadn’t bit on any of them before, but when he shared the ability to capture a customer at the point of market entry (and that they were already doing this with PetSmart), the writer saw a good angle.  That article actually got acquisition interest from both PetSmart and Petco, but since PetSmart owned the company that Darrell had many advertising deals with, they exercised a right of first refusal among similar companies and went against a food brand that was a holding company for many different brands, not just pet food.  

Both companies gave indications of interest that were north of the $3M range that Darrell was targeting.  Ultimately, PetSmart won with a higher bid.

Darrell was required to be an employee for one year and specifically asked not to have to travel, as he was in New York and PetSmart was in Arizona.  There was a $1M holdback tied to the completion of this term.  Despite this “no travel” clause, Darrell got an email shortly after the sale that asked him to “be in on Monday.”  Darrell knew that the way he responded to this would determine his relationship with the company for the next year, so he called to check in and found out they just wanted him to come down and take a look at the company sometime in the next few weeks.  That was fine with Darrell.  He made plans to do so and averted the crisis.

But Darrell also had to let go of the fact that this free app was just one more weapon in PetSmart’s toolbox.  It wasn’t a priority for them. If something was broken, it wasn’t fixed immediately, the way it would have been when he was the owner.  He had to let go and “not care.”  He ended up finishing his time at PetSmart, receiving the remainder of the sales funds, compensated his investors, and did what he might have done after his first business sale: take a break.

Lessons Learned

As we always do in these case studies, we share some important takeaways:

  • Strike while the iron is hot.  Darrell just came off an acquisition and before he even had an idea he had taken investment money and hired an employee.
  • Take some time off.  While there’s something to be said for Darrell’s approach, there’s also the value that is missed by so many in taking time off.  There was nothing to prevent Darrell from coming up with a great idea while he was on vacation instead of sitting in an office with money and pressure to come up with the next big thing.  Don’t feel pressure to immediately move into a new business.
  • Validate your business idea.  Darrell invested just a bit of money upfront with Facebook ads and landing pages to validate customer interest.  Existing businesses can do this as well for new products or services they are considering.
  • Cultivate relationships with the press.  Darrell’s Forbes relationship led to a story that ended in a sale.  Not bad!
  • Know your number.  When Darrell realized his business had topped out with his resources and connections, he came up with a number for acquisition and used that to guide his process.
  • Bribe your broker.  While we are always focused on getting our clients the best possible number for their transactions, we’re rarely going to turn down even bigger commissions if that’s what they structure into their deals!  All joking aside, Darrell’s idea showed his level of motivation and that’s a big determining factor in getting to a successful transaction.

Are you thinking about buying a business or have you hit that revenue wall that Darrell hit and are considering selling a business?  Give us a call!

Case Study #49: Dream Water, Dream Exit

Dream WaterDavid Lekach knew when he started Dream Water that he wasn’t just building a product, he was building a category.  Thankfully, there was a preexisting product that had blazed a concept and delivery method that everyone understood: 5 Hour Energy’s little bottles were everywhere and people knew what they were used for.  Dream Water wasn’t going to give you more energy, in fact, it was going to help you go to bed, but it was in that same familiar 2 ounce bottle.

The story started with a friend who had developed a 1.0 iteration of what would become Dream Water and a small group of collaborators backed with funds from friends and family.  While the initial investment in Summer 2009 was just around $1,000,000, Dream Water would go on to raise a total of $6,000,000 as they ramped up sales and production: David and his family retained roughly 55% of the equity in the business.


Dream Water is lightly flavored water with three active ingredients:

  • 5-HTP, also known as oxitriptan
  • GABA, which causes calming and sedative effects in the nervous system
  • Melatonin, which increases in the body as it’s exposed to darkness

Product Placement

While it was perfectly natural to get an energy shot at a gas station or convenience store, David figured that if people had trouble sleeping, they would probably go to a pharmacy, so he partnered with a famous New York pharmacy called Duane Reade.  The launch was only three months in when Walgreens announced an acquisition of Duane Reade, and now the team was faced with not just a local or regional rollout, but a possible nationwide rollout.

Interestingly, David figured early on that it wasn’t just about getting Dream Water placed in the right section of the “sleep aids” aisle in a pharmacy, but also about getting in the impulse areas, a place where 5 Hour Energy was dominant.  As he worked with various retailers, he would simply ask to have one of his boxes in the place of the fifth or sixth flavor of Five Hour Energy.  Those retailers gave Dream Water a shot and the sales validated the strategy.

The Wal-Mart Effect

David’s strategy of convincing retailers to allow the product to show in impulse areas worked consistently, and as such he used the small wins he had at various regions of Wal-Mart to give him a shot at national rollout in the impulse areas.  But unfortunately, Dream Water got placed at the very bottom of the rack (instead of at eye level) and didn’t get much traction, and once you’ve been pulled out of the impulse rack after a quarterly review, it’s very tough to get back in.  This caused a big drop in sales and demoralized David for a while.  

But he didn’t feel sorry for himself for too long, because he got an unsolicited term sheet from his Canadian distributor.

Scale Matters

The distributor in Canada wanted to get his COGS down so that he could scale the business but he couldn’t do so without some better deal, possibly a licensing arrangement, with Dream Water.  But the distributor leapfrogged a licensing deal and offered an acquisition instead.  

It was late in the calendar year and David was really focused on growing the company and hadn’t even considered a sale, so he decided to have a very tight deadline in place when the Letter of Intent was signed on December 15th.  He told the distributor that he had 60 days to close the deal and he wanted $200,000 up front, in part to defray the accountants and lawyers he would need to hire help with diligence, but in part to move forward on a licensing deal if the sale couldn’t close.

February 15th arrived and the distributor called asking for more time.  David said that he was okay with the deal not happening and moving onto the licensing track.  The buyer did not want to go that way.  David demanded another $100,000 for a 30 day extension, and said he would charge that every 30 days.  This was not a deposit on a future sale, it was simply a “late fee” of sorts.  It’s an unusual tactic but the buyer accepted it and paid it, and paid it again when the next 30 days elapsed and the deal wasn’t done, and one more time at the beginning of May.  Part of the reason that the deal was taking longer was the fact that the distributor had brought in a much larger partner (a publicly-traded company, it turns out) to help fund the acquisition.

Publicly-Traded Buyer

On May 3rd the buyer was required by law, since it was a publicly-traded entity in Canada, to publicly disclose any acquisitions a month before closing.  With the end of the deal finally in sight, David again charged his $100,000 “fee,” in part now because the buyer sold, among other things, cannabis, and he didn’t know how that would affect his relationships with the US retailers, including family-friendly Wal-Mart.  The acquisition could now have an adverse downstream effect.  But, despite those concerns, the sale closed, at $34.5M CAD (which was around $27M USD at the time) and thankfully, all the retailers stayed on.

Lessons Learned

As always with these case studies, we have a few takeaways:

  • Keep your options open.  David wasn’t looking for a sale, but when an opportunity came, he was willing to develop it.
  • Be willing to walk away.  David said, and believed, that he was happy to move on with a licensing deal.  That attitude only strengthened his negotiating position.
  • Know what the buyer wants.  David knew after the original 60 days had passed that the buyer wasn’t interested in a licensing deal, but really wanted to buy the company, and hence he used that knowledge to his advantage.
  • Don’t be afraid to ask.  We don’t often see sellers simply levying non-offsetting fees on buyers because the deal is taking longer than usual.  But David saw that he was taking a significant amount of time away from Dream Water to work on the deal and he wanted to be compensated for that, as well as to de-risk himself somewhat if the deal ended up not happening.  The worst thing a buyer can do is tell you “no”.

Have you gotten an unsolicited offer for your business?  Don’t trust that you’ll be able to pull off the unusual feat that David did.  Instead call a broker.  We’ll help you navigate the situation.

Case Study #48: Believe in Your Business

Believe in Your BusinessLong before he bought and built, Ryan Daniel Moran was building small online businesses, which was one of many experiences he shared in his Freedom Fast Lane podcast.  One of those businesses led to what should have been an 8-figure exit, but due to his inexperience it became a 7-figure exit instead.

While today you may know about huge businesses being built on the Amazon platform, in 2013, when Ryan and his business partner spent $600 to get started, that world was still developing.  They built a company called Sheer Strength, which provided supplements to the body builder market.  Ryan was the visionary and his partner Matt was the integrator.  Their secret sauce for Sheer Strength was learning and owning keywords in the Amazon algorithm for their product categories.  That sauce paid off: at the time of their sale they were doing $10M in topline revenue annually with EBITDA of $3.2M.

End of the Road

Ryan and Matt felt that they had built the business to the limit of their capabilities, and for the company to get to the next level, they would need to bring in experts who could help scale and grow the company.  They felt that they could get six times their EBITDA and were looking for a company who knew the nutrition and supplementation space and had grown a smaller company before.

Ryan had never sold a business before, so he took the first serious LOI that came his way and entered a diligence period with the potential buyer.  They looked at the numbers and decided that the EBITDA was not $3.2 but $2.9.  Given that represented a $2M swing in the valuation, Ryan says now he should have stepped back and gone back to market.  But he didn’t know what he didn’t know, and worse, he didn’t realize that he had the asset: these were people with a lot of money who wanted to invest in something worthwhile.  Ryan didn’t understand how worthwhile the company he had helped to build was.


Ryan and Matt did end up selling to the buyer they had entered diligence with, even with the lower valuation, and they sold 60% of the business and left the remaining 40% in so that they could stay on and help the company grow.  

But a shift of values happened.  Instead of a focus on service to the customer, they found that the buyers had a focus on profits.  Instead of being nimble, humble, and gritty (the culture that brought them their success), the new company was big, structured, and arrogant.

The big problems were threefold:

  • Clueless management were hired
  • Serious debt was laid onto the company as part of the financing of the purchase
  • The clueless management was found out and fired, but then equally clueless replacements were hired.

Before too long, the new entity that had been created went bankrupt, and even though Ryan and Matt made a very aggressive offer to the bank in order to try to buy back control, the bank went a different direction.  The 40% they had risked to grow the business evaporated.


Ryan puts himself forward as a cautionary tale but is happy to have learned important lessons in this transaction that help guide the way he does business now.

  1. Believe in your business.  You’ve built something great and are now on the verge of a life-changing transaction.  Know your terms and believe in your numbers.
  2. Be willing to walk.  If you’re not happy with the way things are developing, always be mentally ready to walk away from a bad deal.
  3. Find the right buyer.  Don’t just take the offer that comes with a lot of money.  When you want to grow the business, find a buyer who is aligned with your values and management philosophy.

Are you looking for a buyer to work with in order to take your business to the next level?  We know people looking to do just that.  Give us a call today!

Case Study #47: Partner Remorse

Partner Remorse

Tyler Jefcoat was a newly minted MBA when he started Care to Continue, a home healthcare service. He had had two grandparents who went through nursing home experiences that weren’t great, and he wanted to find a better solution. Care to Continue provided hourly in-home care, keeping these elderly clients in familiar surroundings.

Tyler had a passion for the industry, but didn’t have the finances to create a company. So he connected with a better-capitalized partner who was happy to let Tyler gain a 25% ownership share while Tyler ran the business.

Business Model

This type of home care is not usually covered by standard insurance, so customers paid out-of-pocket or out of the legacy LTC plans that did provide for this service. At the time he sold his share of the business the company was charging $22/hour to the patients and paying out $11/hour to his team of certified nursing assistants (CNAs). This particular industry was also undergoing legal questions as to whether the CNAs would be classified as 1099 or W-2. Tyler saw the advantage in using a professional employer organization (PEO) to help him manage these compliance issues and as the company grew, Care to Continue averaged around a 15-20% EBITDA on topline revenue.

Success and Failures

Tyler was dedicated to making sure that his team got paid every Friday, but since he didn’t establish firm (and consistent) guidelines on when clients should pay, at one point he found himself with $150,000 in receivables! He came up with a smart, frictionless solution. All existing clients were told that their rates wouldn’t change as long as there was a method of payment on file, be it an ACH order or a credit card. There was absolutely no churn and the negative cash flow and huge receivables backlog disappeared.

But on the other side, Tyler admits that there was some conflict that he avoided that should have happened with the silent partner. Some debts that the silent partner had put on the balance sheet strained cash flow and made it difficult to grow the company. Tyler’s rationalization at the time: we can scale our way out of these problems. Turns out that’s not a solution.

Seeking a Solution

Tyler had developed a relationship with an investor who had significant home health care experience and went back to his silent partner with an offer from this investor to buy out a significant part of his majority shares at roughly 5X EBITDA. But because Tyler had avoided conflict some years before he had no idea that this was not really about the money for the silent partner, but about the idea of “passive income” that he had nurtured. It was a hard “no.”

Tyler came out of the meeting dispirited and realized an outside investor wasn’t an option. Around the same time, Tyler wanted to fire someone who had become toxic in the organization (turnover had massively increased in her department when she took it over) but the silent partner read this as Tyler trying to leverage the situation: by firing a senior member of staff, Tyler’s bargaining position for a buyout would be better. While this was not Tyler’s intention, it was clear the situation as it was was no longer tenable.

The original operating agreement had made provision for a buyout along the lines of a ten-year note, but Tyler was willing to give up some of the valuation in order to shave that down to a five year note. That negotiation worked and he ended up getting 3.5-4X EBITDA for his 25% share. The silent partner ended up selling the business entirely some time into that agreement so Tyler got a lump sum (and some extra) when the company sold.


While Tyler was ultimately happy to have had an opportunity to build a business without having to put up any capital, he wishes that he had embraced conflict as a way to build a better business and get on the same page as his partner. Other important takeaways:

  • Consider having payment methods on file. More and more people are used to subscription model businesses and seeing regular payments come out of their accounts.
  • Be clear on your balance sheet. When putting together an operating agreement, make sure that partners don’t have an outsized ability to put debt into the business, even if they are the majority shareholders.
  • Talk it out. By talking about the future ahead of time as well as embracing conflict early in the process, Tyler could have saved himself a lot of time (and possibly earned more).

Are you thinking about selling a business but have a partner who doesn’t want to sell? We’ve seen many different ways of dealing with this positively. Give us a call and let us share some with you!

Case Study #46: Simplify and Multiply

Pet BusinessesWhen Lee Richter and her veterinarian husband acquired San Francisco-based Montclair Vet nearly 20 years ago, they weren’t really taking a risk.  That practice had already been around for 40 years and had 3,000 regular clients at the time they bought it.  But by the time they sold it, they had nearly 25,000 clients and got to enjoy the EBITDA rewards that came with a thriving and niched business.

What niche?

There has been a boom in recent years in pet care, especially as more and more people treat pets like family members and opt to have them instead of children in the home.  The Richters understood the strong attachment that many had to their pets but wanted to bring a completely different take on visits to the vet that the customers had always known: more preventative care, and the use of Eastern medicine and practices combined with the newest technology: think chiropractic, acupuncture, and hyperbaric oxygen.

Sound unusual?  The numbers don’t lie.  Even more interesting, by insisting on this level of care for the pets that came in, the Richters began to see the customers end up taking better care of themselves as well.  By encouraging “wellness” instead of just bringing in pets when something was “wrong,” visits happened more frequently, and unsurprisingly, revenue went up to.  

Roll Up

Lee had a business background to complement her husband’s veterinary skills and she referred to him as the “simplifier” and herself as the “multiplier.”  As he imposed these new ideas on the existing practice and trained the growing team (they went from 3 doctors to 10), Lee went about marketing the business and coming up with smart ways to get the word out about the different way that they approached pet care.

This didn’t change when an acquisition possibility came their way as one of 500 practices being targeted for a roll up.  The work she had done with SEO and ownership of relevant URLs partnered with the new level of vet service her husband was offering allowed them to get 10X EBITDA when the industry normally trends around 5X.

Second Bite of the Apple

Not wanting to take all the proceeds from the sale of the practice, the Richters asked if they could “invest” in a future liquidity event by leaving some of the sale proceeds in the deal as skin in the game.  Out of the 500 practices that were rolled up, they were the only ones to ask for this, and the buyers, while surprised, took them up on the deal.  In fact, two years later when the roll up was complete and the new conglomerate sold to an even larger buyer, the $2.5M they had “invested” had doubled.  Unsurprisingly, they’ve asked to be included again, and they’ve put that $5M into the new company to see where it goes.  This gives them a seat at the table for a business way above their level but also puts them in the catbird seat when it comes to new deals and opportunities.

When asked why they wanted to keep letting the money ride, Lee noted that she had been blessed with good business mentors and had taken notes whenever they discussed their acquisitions and what they had done or wished they had done.  This led her to ask for a second (then a third) bite of the apple — staying in fractionally post-acquisition — when none of her colleagues did.


  • Buying is easier than building.  While the Richters were able to build an enormous practice, they didn’t do it from scratch.  They stood on the shoulders of the practice they bought.
  • Focus on your niche.  Not every pet owner is going to be interested in the holistic approach that the Richters championed.  They weren’t worried about that.  Instead they focused on winning new clients.
  • Create recurring revenue.  Rather than be content with just wellness visits and “break/fix” pet scenarios, the Richters implemented a wellness program which led to more frequent visits and hence, more recurring revenue.
  • Be willing to ask for deal points.  As noted, not a single other one of the hospitals involved in the roll-up even asked to leave some money in the transaction to pay forward.  The price of audacity in this case?  Doubling their investment within 24 months.

Interested in buying or selling a veterinary practice?  We’ve got plenty of experience doing both.  Give us a call!

Case Study #45: From the ICU to a Strategic Acquisition

Case Study #45On New Year’s Day 1996, after some time as a freelance writer, Steven Smith and his wife Michele decided to take the plunge and create a content agency, WordSouth. Their background had been in telephone and communications and they used this to help many rural telecom companies tell their stories, market their services, and train their people. They were recently acquired by Pioneer Utility Resources, but that was only because some years before Steven finally started delegating when he found himself in the ICU.

One Week Becomes Seven

In 2014 Steven was diagnosed with a rare neuromuscular disease. It had taken him a year to get a diagnosis in the first place, and when they finally did identify the real problem the doctors recommended surgery which led to greater complications. After the surgery he ended up in the ICU, where he was only expected to stay a week. That turned into seven. But this wasn’t just a health problem for Steven: he had had problems delegating and WordSouth couldn’t really function with him laid up in the hospital.

This meant that the entire team had to take turns coming down to the hospital, where Steven finally delegated responsibilities and processes to members of the team. Not only did the business not suffer, it doubled during this new period, and continued to grow even when Steven was better and could return to the business full-time. It shouldn’t have taken a health crisis to create these systems, but to Steven’s credit, he made the necessary changes that should have been made years before.

A Future Sale

Even before this hospitalization, Steven and his wife had been contemplating a future sale. They had been inspired by observing colleagues that had sold businesses and completely changed their lifestyles: they slowed down, took time off, and started to work on some hobbies and projects that really mattered to them. But in the early days of pondering a sale, Steven was concerned that the business would only net 1 to 1.5X revenue or 3 to 4X EBITDA in a traditional transaction.

With that in mind, Steven began to consider pursuing a strategic buyer. A strategic buyer would be able to add the assets that WordSouth had in place to what they already had to create economies of scale and greater opportunities. With this mindset Steven began having more conversations with the bigger players in his industry.  At conventions and conferences he would ask some of the principals to dinner or coffee and get to know each other better. With the party that would become the eventual buyer, this conversation essentially lasted two years.

Synergy & Unconventional Structure

The company that ended up buying them had a strong presence on the West Coast, but almost none where WordSouth was based, in the South and Southeast.  While that firm shared work in the electrical industry with WordSouth, they were interested in growing in telecommunications, which WordSouth had strategically grown over the years. These considerations made for a good environment for a strategic acquisition, and after NDAs were signed, discussions were able to go deeper.

Because the acquirer was a co-op, the structure of the deal needed sign off from representatives of many different members. The co-op necessarily wanted to spread out both the risk and cash outlay, whereas Steven definitely wanted a commitment of cash upfront instead of a long earnout.  

Steven wanted to be with the company for an extended transition time, and while the terms of his eventual deal were not publicly disclosed, he has said in interviews that what got the deal to the finish line was both sides’ willingness to look at unconventional structures for the final deal.

Key Lessons

Takeaways from this case study:

  • As we’ve talked about before, it’s important to remove yourself from the scaffolding of your business so that your company can survive, and even thrive in your absence.  Have systems in place!
  • Don’t wait until you’re in the ICU to delegate.  Do it now, and be ruthless about it.
  • Sometimes a strategic acquisition will make sense for your business. These things don’t happen overnight. Keep your ear to the ground and build relationships that foster such possibilities.
  • Be willing to be flexible on your deal points. Be open to looking at unconventional ways you and the buyer can get what you both want.

Unfortunately, we’ve seen many a potential listing be lost because the owner ended up in the hospital and was not able to save the business, as Steven did.  If you want to sell your business but don’t know where to start, give us a call!

Case Study #44: Doubling the Deal at the Last Moment

Hand Sign - OkayDavid Jondreau grew up watching his father teach Sign Language classes in their family living room. No one in the Jondreau household was deaf, but David’s father had befriended members of that community and became passionate about teaching ASL. Before too long a legitimate small business sprang up that was part of the highly fragmented industry that was (and is) language interpretation services. If you needed sign language services for government meetings and speeches, or hospitals, or education, the Jondreaus’ American Sign Language was there to help.

A couple decades ago, when most people had no idea what “remote work” was, David began helping his father two time zones away. The business was in NYC but David lived in New Mexico. He helped with administrative tasks and booking classes. But one day David’s father passed away suddenly, and he and his sister inherited the business.

Start With Systems

While David was grieving, he also knew his father would want the business to keep going, so he started to put together the pieces of a real, sustainable business. His father was a selling dynamo and also ran the business completely out of his head. David had to learn sales as well as create written processes where none had previously existed.

Determine Ownership

In a nod to keeping the business in the family, David asked his mom to join as a 2% owner. With David and his sister at 49% each, it meant any big decision where there was disagreement needed to involve his mom. But this also meant the business qualified as “female owned” which really helped with some government contracts that listed that attribute as preferential.

Losing a Contract

All small businesses are challenging in their own way, but of particular stress to David over the years was the renewal of contracts. Not getting a contract renewed could massively affect the outlook for the coming fiscal year, and when David lost a game-changing sized bid for a large New York City school system, he had decided that it might be time to investigate a sale.

Thankfully, he had always beyond clean books: they were audited. He had taken the time to put key people in place, and he had refined the systems he first started putting in place when he read The E-Myth in the early years of the business. He started poking around at large regional conferences of language providers for possible buyers before deciding to hire a broker.

One of the possible buyers the broker introduced was building a conglomerate for a family office. David’s business would add a sign language component to a few other small businesses that would roll up into one entity. David was enjoying 10% margin on $2M of revenue and was looking for 3.5 times seller discretionary earnings (SDE).

When David chatted with the buyer he felt instant rapport and connection and felt comfortable moving forward once the price had been agreed to. Due diligence began and they were roughly two weeks away from closing on the sale.


The contract that David thought he had lost? Hard to believe, but the government had messed up the paperwork and David had actually won that five-year, multi-million dollar contract! Worse, the client demanded that the services start being delivered within a few days, which was when the school year was scheduled to begin. David leaned on that good relationship he had with the buyer and let him know about the development and asked for two weeks to completely focus on fulfilling the contract, after which time he would come back to work on the deal. That good relationship turned out to be rock solid and David was given that time to put everything in place.

But that meant that two weeks later, the value of the business had effectively doubled. What had originally been an 85% cash/15% paid in a one-year note couldn’t work anymore, especially since David would need to help babysit and optimize delivery in the early years of the contract. An earnout was put into place to account for the new revenue.

Unsurprisingly, the school system couldn’t seem to get their act together on paperwork and it was seven months before the first payment on the contract arrived. In the meantime, David maxed out all his personal and business credit and had even gotten some bridge financing from the buyer (again, see the power of openness and transparency in a transaction?). But as the payments started to be made regularly, the deal closed, and David stayed on for a period of transition, then as a consultant for the large contract.


David’s story is filled with key lessons for those who want to sell their business, even if they don’t work with family:

  • Have systems and manuals in place. You never know when something catastrophic might happen (like a worldwide pandemic). Hope is not a strategy.
  • Use a broker. You might predict this, coming from us, but in all seriousness, running a business is a full-time endeavor, and selling a business is at minimum a part-time project, but the stakes are possibly the largest financial transaction of your life. Do you want to be juggling that many balls?
  • Be transparent with the buyer. By developing a relationship early on and communicating at each step of the process, not only did David not lose a sale when he very well could have, but he ended up doubling his take.
  • Don’t give up. Oftentimes the selling process will have obstacles that come out of nowhere, like the late payment that put severe financial strain on David.  Those who accept the obstacles calmly and work through them will get to the finish line.  Those who panic, don’t.

All we do all day is help buyers and sellers come together and get to a mutually satisfactory outcome.  Let us help you!

Case Study #42: Cash From the Cloud

Cash from the CloudWhen Aric Bandy joined Agosto in 2007 the company had already been in the managed services business for seven years. Managed services was a saturated and capital-intensive space, and Aric saw an opportunity in a then-emerging market that we take for granted now: the cloud. While he didn’t know then that a big exit was in his future, he knew there was the possibility of one if he moved with intentionality.


From 2007-2014, Aric only saw demand for cloud services and the support related to them increase, whereas the market lagged to keep up with demand. He knew there was a finite window to expand his firm to fill that gap, and managed to encourage the company not only to divest its managed services division, but to plow the majority of those profits back into the company to expand its cloud offerings.

The “cloud” market has three big players, Google, Amazon, and Microsoft. Even with their large investments in the space, they weren’t equipped to handle individual accounts. They relied on certified and trusted partners to use the infrastructure they provided to cater to individual client needs. As such, Aric often found himself walking into boardrooms of big companies, many in the Fortune 100, side-by-side with a Google representative. He was able to bask in that brand halo and become a trusted vendor for these companies.

Exit Thesis

Unlike many business owners, Aric was obsessed not only with the idea of selling, but with the way to do it right. He wanted to engineer his business to yield a premium valuation.

Key components of this “exit thesis” included:

  1. Audited financial statements. He hired a reputable firm at significant cost to make sure they had squeaky clean financials that would stand an audit.
  2. Assignability. Since he had contracts to manage the cloud services of many firms, he needed to make sure that those contracts could be transferred to a future buyer. In the early days of growing the business, he wasn’t as serious about the wording in the contracts. But in 2016, as he got ready to go to market, he went back to tighten up all those contracts.
  3. Growth possibility. He had developed loyalty with his existing customers and they wanted more services than he could provide. That meant that there was good growth potential with the right partners/acquirers.
  4. Timing. He had to be willing to walk away from offers if he didn’t feel the premium was right. This happened on more than one occasion when they went to market and got offers they weren’t happy with.

Notice that all of these ideas of Aric came from a place of reflection and patience. He wasn’t in a hurry to sell the business, but that didn’t mean he put off thinking about how to do it right.

Blood In the Water

What changed things was the strategic acquisition of a competitor in the cloud space, for 13-14 times EBITDA. Suddenly other players woke up, and the offers that Aric and his team were dissatisfied with before this acquisition suddenly got a lot better. He went exclusive with one buyer in December 2019 and closed in April 2020, in the middle of lockdowns and a global pandemic. At the time of closing, Agosto was providing services to 360 companies, 80 of which were in the Fortune 100.

Key Lessons

  1. Be on the lookout for where your industry is moving and see if you can’t move there first. Aric ditched the comfortable model of managed services and leaped into the opportunity of cloud services.
  2. Have your paperwork and contracts in order. This is probably one of the first three questions we always ask people who come to us to sell: do you have your financial paperwork in order?
  3. Have a plan. Aric didn’t just wait to get tired of running the company. He planned for a future exit for almost 13 years. And he got a corresponding reward for that planning and patience.
  4. Be ready to walk away. If you don’t have to sell, you have the freedom to refuse an offer if you feel you can continue to grow the company and get a better value.

If you need help with any one of these lessons so you can plan for the exit of your dreams, give us a call.

Case Study #41: Tiny Bottles, Huge Exit

Tiny Bottles, Huge ExitLara Morgan spent almost 20 years building a company that started by selling sewing kits to hotels and ended up selling them shampoo, body wash, slippers, laundry bags, and much more. When she finally sold to a private equity firm for 20M pounds sterling, her company, Pacific Direct, was bringing in 3.3M£ of EBITDA annually. But a major reason she had a successful exit was a failed acquisition attempt some years before.

The Business

Ever wonder how those tiny bottles of shampoo get into your hotel? The most upscale hotels are interested in showcasing the best brands with the most attractive branding. Lara and her team would create a license deal in which she paid a fee to use the brand likenesses but was responsible for absolutely everything, from the packaging to the products themselves. At the time of the sale, Pacific Direct had factories in China, Czechia, and Egypt and were delivering goods to hotels in 110 countries.

The Toll

In the last year before she decided to sell the company, Lara spent 220 nights away from home. Her children were 8, 6, and 4, and while she was driven to succeed and create a legacy for them, she was deeply conscious of “losing them” in the present. She knew something had to change. But thankfully, she had already gone through a big challenge in 2004 that prepared her for a successful sale: a failed acquisition.

In 2004, the hotel industry was still dealing with the effects of 9/11 and fewer people traveling. There was a terrorist attack that year that scared off the investment group that was interested in acquiring the company, but even in the process of preparing for the sale Lara was completely dissatisfied with her role in the company. She realized she hadn’t been a good teacher of her team and was more of a benevolent dictator than a competent leader.

She took some time off to reflect. When she came back to work, she went to her brokers and asked, “Where would I have scored poorly if we had made it further in diligence?” Armed with that feedback, she created a permanent data room and incentivized the employee in charge of it with a hefty bonus: a full year of pay if diligence went smoothly on the way to a successful sale.

Going to Market

Lara knew that natural acquirers included her own competitors, but where she was completely clueless and that’s where M&A professionals really helped. When the dust settled, she had three offers from the industry and two from private equity, ranging from 14.5M to 27.5M pounds sterling.

This is something we encourage here at Apex: cultivating multiple offers and not just jumping at the “highest offer.”

If you look closely, there is often a catch. In this case, it looked like Lara would need to be bolted to her desk for years as part of the deal for the highest offer. In the end, she took a private equity offer in which she took 14M upfront, left 6M in the company, some of which was at a 12% note during a time in which nobody was paying a lot for capital, and got to cash out again when the private equity firm sold the company.

One of the “non-negotiables” that Lara included as part of the acquisition was bonus payouts to all her employees, weighted towards those who were most senior. As part of her data room strategy, she had aligned senior management with incentives for a successful exit. This ended up being at least 8% of the total payout. She knew she wouldn’t have gotten to the successful transaction without her team, and she let her actions speak louder than her words.

Key takeaways:

  • Know when to say when: Lara was more successful than she had ever been, but she decided to stop planning for the future and start living in the present with her young family.
  • Fool me once: Lara wasn’t crushed by the first failed acquisition. She learned from the experience and made sure her weaknesses would be strengths the next time around.
  • Align your team: By targeting a future acquisition and making sure her senior management was on board with financial incentives, Lara ensured everyone would be pulling in the same direction.

Whatever your reason for selling, we’re here to help. Give us a call!