The Implosion of Crumbl Cookies

The Implosion of Crumbl CookiesSearching for a franchise to purchase can be a very stressful time. Common sense would tell you to buy a franchise that is already well-established and a proven success. The problem with purchasing a top-performing franchise is that it comes with top-priced fees.

These companies have done the legwork for you and have ingrained themselves into American culture. They think you should pay for that privilege.

The other approach is to buy into a franchise that is newly started but has a rising rate too exciting to ignore. Get in on the ground level and enjoy the natural growth.

Unfortunately, these types of companies have a higher risk of failure because they are not yet proven in the market. They look great on paper and social media but their track record is still too short to be confident in.

A risk-taker loves these sorts of opportunities. They see them as their method to get back more than what they put in, which is what all investors aim to realize. The risk-averse are less likely to seize the opportunity when it is present and may miss out on an amazing opportunity because of that fear.

That is why a Crumbl Cookies franchise is a risk. They sell what the public wants, yet they have an alarming rise in franchisees looking to sell and get out.

What is causing this rush to get out of a franchise that is one of the more popular niche businesses in the marketplace?

Too Big, Too Fast

Looking at Crumbl’s rise to fame, it is easy to get caught up in the excitement and noise around the business. The business was started in 2017 in one state, by two cousins, while one of them was attending college.

Six years and one pandemic later, they have grown to over 900 locations stretching across two countries.

To say that Crumbl underwent a meteoric rise is an understatement.

When a franchise starts to grow at such a rate, it can tend to outgrow the market demand. Being a young franchise, it is understandable that this could be a misstep by the founders.

Is it something that Crumbl cannot recover from?

Time will tell.

Too Sweet for Their Own Good

While it may not appear that personal health is a focus amongst the American populace, there has been an increase in the number of people looking to get their own health in check, especially their weight.

When Crumbl came along, they offered unbelievably delicious cookies that were tested to dial in their optimal appeal to the palettes of the populace. They steadily expanded their reach and increased their offerings and choices to capture everyone’s taste buds and had lines forming around the block for new locations.

However, when the excitement wore off and the sugar rush cleared, people started realizing that a 12-pack of cookies maximized to appeal to every aspect of someone’s taste profile, is not a good idea to eat regularly. To say nothing of the fact that those dozen cookies would set you back at least $50.

And that isn’t Crumbl’s fault. They didn’t ask people to gorge themselves on the cookies they created. But as people start to look at their waistlines, as well as the ingredient facts in a decadent dessert the size of a toddler’s head, the rush to stand in line has turned into a less frequent indulgence for most people.

People Are Fickle

While the deliciousness of their cookies is a selling point on its own, one of the factors that has grown the reach of Crumbl so quickly is the use of social media to incite a buzz with their target audience. Their marketing agency found the pulse of their customers. Having the sort of social media success that Crumbl has seen is a major plus for any prospective franchisee.

However, when a business’s success depends too much on what they post online, it can be a recipe for disaster. One misread of the pulse of their followers and a company buoyed by their social media outreach can quickly find themselves drowning in a sea of complaints.

Crumbl focuses heavily on Gen Z customers, who range from ages 11 to 26. They are particularly big adopters of short-form media such as TikTok and short video formats on Facebook, YouTube, Instagram, and Snapchat.

By focusing on such a young demographic, members who are most attracted to short-form media and who may not be the breadwinners making the actual purchases, Crumbl is taking a risk. It is a risk of short-term engagement versus long-term growth. The franchisors selling their access for seven-figure fees are definitely more experienced with long-term growth.

Perhaps the recent surplus of Crumbl stores for sale on sites such as BizBuySell is a simple case of the marketplace regulating itself. Any business growing as much as Crumbl has in such a short time has captured an audience willing to support and promote the brand.

The only question is if that audience will be there for the long term, or just until the next start-up franchise of the year gets going.

Hopefully, the franchisees who bought into the hype won’t be left with a bitter taste.

If you are looking to skip the start-up and buy into a business that has already proven itself, give us a call. It’s what we do.

Case Study #84: Selling a Small Consultancy Firm to One of the World’s Largest Airport Operators

Case Study #84: Selling a Small Consultancy Firm to One of the World's Largest Airport OperatorsIt’s often said that entrepreneurs and founders start companies to prove somebody else wrong, and Kiran Merchant is no exception. He spent decades as a consultant to the aviation industry, and when his boss refused to give him a $8,000 raise, he decided to leave and start his own firm.

18 months later — yes, less than two years — Kiran sold Merchant Aviation (MAV) to Aéroports de Paris (Groupe ADP), one of the world’s largest aviation companies, for a high single-digit multiple of EBITA.

Begin with the End in Mind

As author of The 7 Habits of Highly Effective People Stephen Covey once said, “Begin with the end in mind.”

When Kiran started MAV, he did just that. He had no idea what kind of company he wanted to start, but what he did know was that he wanted to sell it eventually. He always had a dream of becoming a filmmaker, and so wanted to be able to pursue that after selling MAV.

He built the company from the ground up, first working on his own as a consultant on airport infrastructure development. He soon realized that he needed help and recruited some old coworkers to join him. They made up a team of 12 employees at the time of the sale.

For Kiran, the idea of selling wasn’t to become rich or make a ton of money. It was to pursue a higher purpose in life that would make him happy and give him the freedom to do whatever he wanted to do. The thought of this type of future is what propelled him to approach the deal with Groupe ADP so fiercely — he couldn’t stop thinking of that “end” he had been dreaming of.

Keep Things Personal — or Not

When Kiran created the company, he initially didn’t give much thought to including his surname in its name – he simply thought it had a nice ring to it.

Groupe ADP expressed their concerns — the company was so intrinsically tied to his goodwill and reputation, and they were worried about how it was going to survive without him.

What’s more, Kiran did not want an earnout. He was very clear in that he wanted to agree on a price, and the buyers were to pay it 100% upfront. There was a fear on ADP’s side that if Kiran wasn’t in the picture — as well as his personal relationships, his personal way of doing things, and his personal knowledge — then the business would fall apart.

So they struck a deal: if Kiran could get them $30 million in revenue for the next 30 months, he would get a hefty bonus. It gave him an incentive to stick around and gave the buyers a sense of confidence. He says the deal worked like magic. They started looking at the growth potential instead of the potential of losing business.

After weeks of deliberations, Kiran was finally close to getting the “yes” he was hoping for.

Sticking to His Guns

When Kiran decided he wanted to sell MAV for 10 times EBITA, everyone looked at him like he had two heads. An engineering architectural consultancy firm had never gone for that much. A friend stepped in to help. He urged him to stop talking about what the company was currently doing. Rather, he had to start talking about what it could become.

As such Kiran shifted the conversation away from what MAV does year after year and toward how it could open doors for a potential buyer to get into a very lucrative market. And that’s exactly how he finally sold Groupe ADP on MAV. They’re one of the world’s largest airport operators, yet somehow didn’t have an “in” to the US yet.

After some more discussions, they decided to partner with MAV to see what Kiran was all about. Within three months of working together, they approached him with a Letter of Intent. The initial offer was the industry standard: two times the EBITA, with 50% up front and the other 50% as an earnout. Kiran was clear, again. He didn’t want an earnout. So he had a private conversation with the owners and explained his point of view. Somewhat miraculously, over dinner, they said yes.

Key Lessons

  • Start with a clear vision: From day one, Kiran knew he wanted to sell his company to pursue his passion for filmmaking. By keeping this goal at the forefront of his mind, he was able to shape his company’s growth strategy and navigate the path to a successful exit.
  • Stand your ground: Despite facing skepticism from others in the industry, Kiran remained firm in his belief in MAV’s potential value and refused to settle for less than what he deemed fair. This determination ultimately paid off in securing a favorable deal with Groupe ADP.
  • Focus on future potential: Kiran’s ability to shift the conversation from current performance to future potential played a pivotal role in convincing Groupe ADP of his company’s value. This serves as an important lesson in emphasizing future growth prospects when positioning your company for acquisition.

MAV sold for what Kiran hoped (a high single-digit multiple of EBITA), and he still works for the company as the Vice Chairman of the Board. He only had a two-year contract after the acquisition, but he decided to stay because he still cares about his team and his clients.

He isn’t sure when he’ll step down, and for now, is busy working toward that dream of becoming a filmmaker.

If you have an end (and an exit) in mind that you need help pursuing, we can help. Give us a call today to talk about your options.

Case Study #83: How One Founder Sold His Business for 65x Revenue

Case Study #83: How One Founder Sold His Business for 65x RevenueSelling a business is often portrayed as the culmination of an entrepreneur’s dreams — a big achievement that signifies success. However, the reality is that the experience is often full of complexities and challenges.

Michia Rohrssen, founder of Prodigy (now owned by Upstart), knows firsthand what an emotional rollercoaster selling a business can be. He initially viewed it as a straightforward process — little did he know the intricate web of negotiations, investor dynamics, and personal reflections that awaited him.

The Initial Offer

Michia founded Prodigy with friend Marty Hu to create a platform that would allow consumers to purchase a car all from the comfort of their own homes. The software was used by some of the largest auto groups in the world, and at the height of its success consistently processed billions of dollars in car sales.

Michia wasn’t planning on selling when he was approached with an initial offer of $110 million from Upstart. He faced a pivotal moment: as excited as he was, he realized the importance of maintaining a balance. Sharing this news with his team and ensuring a smooth transition required strategic planning. The delicate nature of handling investor dynamics was a lesson that played a crucial role in what happened next.

Handling Investor Dynamics

During the negotiation phase with Upstart, Michia and his team were also in the delicate process of closing a substantial funding round led by prominent investors, including a notable venture capital firm.

The stakes were high, and momentum was crucial. So when an investor who had previously injected $25,000 into Prodigy decided to demand a return on his investment, Michia was in trouble. They were on the brink of finalizing a $5 million round, a significant milestone for the startup and this investor’s sudden change of heart, seeking the return of a relatively small amount in the grand scheme, posed a threat to the entire process.

At this point, it wasn’t only about the money. Rather, it was about the potential disruptions to the larger funding round which could raise concerns about the stability of the company.

Michia decided to gather the other investors and emphasize the critical nature of the ongoing negotiations with Upstart. They needed unanimous support to address the lone investor’s claim and secure the future of the deal.

Ultimately, his team’s resilience and the swift (and positive) response from his other investors played a pivotal role and prevented a potential derailment.

The Earnout Dilema

While joining Upstart and achieving his lifelong dreams was exciting, Michia knew the earnout specifics were equally important. Mentors had warned him about the importance of advocating for a shorter earnout — beyond monetary concerns, they urged him to think about his future interests and whether or not they align with the acquiring company’s plans.

The earnout dilemma demands a delicate negotiation, balancing immediate gains with long-term commitments. The emotional high of sealing the deal can make it easy to overlook details, but this part of the discussion requires careful thought.

Looking back, a more assertive discussion about the earnout terms could have added a substantial $4 million to the deal. It’s a lesson Michia learned the hard way, and now shares as a cautionary tale for other entrepreneurs who are navigating acquisitions.

Ultimately, Michia accepted Upstart’s initial offer of $110 million. After the sale, he and his wife moved abroad and now travel frequently, enjoying the break from the hustle and bustle of Silicon Valley.

Key Lessons

  • Keep your poker face: Michia’s ability to stay cool, calm, and collected during the sale process was crucial. The uncertainty inherent in negotiations can be emotionally taxing, and entrepreneurs need to remain resilient and prepare for the possibility of deals falling through while staying focused on the business’s core strengths.
  • Investor relationships sometimes come with challenges: Founders should build healthy relationships with investors, making sure both sides have the same long-term goals. If conflicts arise, quick and smart moves might be necessary to resolve issues and keep the company stable, especially during important negotiations.
  • Earnout terms require careful consideration: Remember to carefully consider the terms of earnouts, balancing short-term gains with long-term goals. Michia’s story serves as a valuable lesson for future entrepreneurs hoping to sell their businesses.

From handling investor dynamics to navigating the earnout dilemma and embracing post-sale emotions, Michia’s story is a testament to the multifaceted nature of creating, building, and selling a business. Beyond the financial gains, the decision to sell involves a delicate dance of negotiations, self-reflection, and ultimately, choosing a path aligned with your values.

If you need help along this journey, we’re here for you. Give us a call today.

Case Study #82: Letting Go — and Finding Purpose

Case Study #82: Letting Go — and Finding PurposeFor entrepreneur and former hotel magnate Chip Conley, the decision to sell the second-largest hotel chain (called Joie de Vivre) he built over 24 years marked a profound shift in his life. But, after a near-death experience, he realized he wanted out. He then went on to become Airbnb’s Head of Global Hospitality and Strategy, where he mentored the co-founder Brian Chesky. Today, he is the founder and CEO of the Modern Elder Academy (MEA), the world’s first school dedicated to career and life transitions.

Chip is an incredible entrepreneur and had an outstanding exit from Joie de Vivre. He has since gone on to reinvent himself after that sale. Chip has a lot of insight into selling, finding a new purpose, and the transformative power of owning wisdom.

The Exit

When Chip was 47 years old a broken ankle quickly deteriorated into a bad case of septic leg. He was taking antibiotics but they weren’t working well — he flatlined after giving a book talk and had to be rushed to a hospital. He says that this near-death experience caused him to question what he was doing with his life. Chip quickly came to the realization that he didn’t want to be in the hotel business anymore.

He knew he had to be strategic to make the most out of his exit, so he decided to sell the brand and management company but retain ownership of the real estate.

Although the market wasn’t at its peak during the sale, the proceeds were substantial enough to sustain him for a lifetime. The real game-changer was the appreciation in the value of the retained real estate over the following years.

The unique dual income streams, combining the upfront sale with an escalating buyout over time, sweetened the deal. Surprisingly, the 44% he retained eventually outpaced the 56% he initially sold. Additionally, owning a significant portion of the real estate, including nine of the 22 or 24 hotels, strengthened his financial portfolio even further.

The Next Steps

After selling, Chip found himself at a crossroads: what to do next?

A few years after the sale, he was approached by Brian Chesky, the 31-year-old CEO of a then-small tech startup called Airbnb. Brian’s reputation for humility and a deep desire to learn set him apart from the typical Silicon Valley tech CEOs, which interested Chip.

Despite his initial limited knowledge of Airbnb, a four-hour meeting with Brian left him intrigued. Brian’s proposition to “democratize hospitality” struck a chord with Chip, leading to a consultancy arrangement that soon evolved into a full-time commitment that was very lucrative.

For the next four years, Chip served as Airbnb’s in-house mentor, overseeing global hospitality and strategy. The founders affectionately called him the “modern elder,” a term he would go on to use when he created MEA.

As he navigated the unique world of tech startups, he realized that there was an enormous gap in the market: the need for midlife “wisdom” schools, a place where individuals in their 40s, 50s, and 60s could reimagine and repurpose their lives. And so MEA was born. At the time of writing, the academy has hosted over 4,000 participants from 44 countries, providing a platform for navigating life transitions.

Key Lessons

Chip’s story is full of valuable lessons for entrepreneurs who are navigating transitions and seeking purpose in their lives. Here are a few of note:

  • Timing matters, but it’s not everything: Chip sold the Joie de Vivre brand and management company during a challenging market. Although the sale wasn’t as lucrative as it could have been, he notes that the sale set him up for a lifetime. Sometimes, a well-timed exit provides enough, and waiting longer might bring more significant returns…or it might not.
  • Don’t be afraid to create empty space: Selling his hotel company allowed Chip the freedom and time to explore new opportunities like Airbnb. Recognizing when to step back and create room for unexpected possibilities can be a transformative strategy for entrepreneurs.
  • Mentorship can be very fulfilling: Chip never knew how much becoming a mentor would add purpose to his life. Not only was he able to help a budding entrepreneur create his dream business, but he was also able to learn from his mentee.

From selling his hotel business to the surprising success at Airbnb, Chip’s experiences are proof that success often comes from creating space, taking smart risks, and embracing unexpected opportunities.

If you’re ready to create more space in your life, we can help you sell. Give us a call today.

Case Study #81: If At First You Don’t Succeed, Try Again (x4)

Case Study #81: If At First You Don't Succeed, Try Again (x4)You’ve most likely heard the expression, “You learn more from your failures than your successes.” Entrepreneur Josh Anhalt is living proof of that statement. He recently sold his business GreenPath Energy, but not before three failed attempts.

His company played a crucial role in the oil and gas sector, but industry changes prompted Josh to consider selling. With political uncertainties on the rise and technological advances reshaping market dynamics, he knew he had to figure out what to do next.

Recognizing the need to adapt, Josh decided that it was time to let go of the business. He didn’t get it right the first time (or the two times after that), and there are several lessons to learn from his failures.

Understanding the Oil and Gas Industry

To understand Josh’s decision to sell, it’s crucial to understand the challenges within the oil and gas industry. Politics and technology play a massive role in deciding what GreenPath could and could not do.

In 2016, market forces and political headwinds created a demand for a shift in strategy. Josh realized that scaling the business required consolidation. He needed to focus on high gross margins and assemble a team of highly technical professionals if he wanted to make it work.

Despite facing difficulties, Josh maintained a profitable business. He generated $8.2 million in revenue with a remarkable return on investment before ultimately deciding it was time to sell.

The Three Failed Attempts

Josh’s eventual success was followed only by three previous failures.

  • Attempt 1: The first deal saw Josh signing a letter of intent (LOI) without legal review which led to a flawed agreement. The deal collapsed due to issues with definitions and disparities in the interpretation of “cash-free, debt-free.”
  • Attempt 2: In the second attempt, engaging with another company revealed challenges in the earnout structure. The proposal jeopardized employees’ positions, and the acquirer’s reluctance to enter the US market further strained negotiations. It was a reminder of how much his people meant to him. Josh prioritized the well-being of his employees and rejected the deal.
  • Attempt 3: Private equity’s involvement in the third attempt brought promises of an equity roll, but caution on their part derailed the deal. Reps and warranties in the share purchase agreement proved to be contentious, which highlighted the conservative approach often taken by private equity firms.

Fourth Time’s a Charm

Josh decided on a different approach this time.

Thorough due diligence preparation — including the creation of a “data room” that held all of the necessary documents — proved crucial. The deal structure involved 90% cash upfront, 10% stock, and no earnout, which demonstrated the acquirer’s confidence in the business’s future potential. In talks, Josh replaced backward-looking scrutiny with forward-looking evaluation. He emphasizes the value of future opportunities and revenue and it worked. GreenPath was officially sold.

Key Lessons

Although the sale of GreenPath wasn’t as straightforward as Josh may have liked, it was worth it in the end. He sold his company for seven times its EBITDA figure. He also learned a lot along the way:

  • It pays to say no (sometimes): Josh built his company with one thing in mind — to make money. As such, he found it very painful when he had to reject the large sum of money in his first attempt to sell. However, the cons well outweighed the pros in that deal, so it was worth it in the end.
  • Thorough preparation is key: Josh emphasizes the importance of meticulous preparation in the business sale process. Creating a data room with all essential documents, financials, and agreements readily available streamlines the due diligence process and builds trust with potential acquirers.
  • People matter: The emotional impact of selling a business is significant, especially when it comes to the relationships built with employees and colleagues. Understanding the personal and emotional aspects of the process is crucial, and considering the impact on people is an integral part of successful deal-making.

From the importance of defining terms early and adapting to industry changes to the emotional impact on personal connections, Josh’s story is a testament to resilience, strategic thinking, and the significance of preparation in the intricate world of business transactions.

Need help preparing for your own sale but aren’t sure where to start? We can help you with that — and it won’t take us four times to get it right. Give us a call today.

Case Study #80: A Bootstrapped 8-Figure Exit

Case Study #80: A Bootstrapped 8-Figure ExitAs a refugee during the Gulf War, entrepreneur Lloyed Lobo has faced challenges that shaped his perspective on community and support. The values instilled by his family and early life experiences left a lasting impression on his approach to both business and life.

Lloyed cofounded a software application called Boast AI that’s designed to simplify the process of applying for R&D tax credits. After bootstrapping their first few years, Lloyed and his partner sold the majority of the business for a cool $23 million.

The journey from bootstrapping to an eight-figure exit was filled with the highs and lows familiar to every startup founder. Let’s take a closer look.

The Power of Growth Equity

For Lloyed and his co-founder, taking the leap with growth equity meant making a commitment to the company’s future. With this decision, they moved forward on a path to grow and expand while taking on the associated risks.

Growth equity is a crucial factor in scaling any startup. It provides the necessary capital and support to accelerate growth. This phase often involves investors taking a significant stake in the company, which can lead to a shift in the dynamics of decision-making and company culture.

The Turning Point

As more time went on, Lloyed realized that he was no longer aligned with the company’s direction. As the business shifted towards a more structured approach — and grew from a bootstrapped startup to a full-fledged corporation — he grappled with the challenges of adjusting to this new dynamic.

The toll on his mental health during this period was significant. Stress, pressure, and internal conflict pushed him quite close to the brink, and he began to reevaluate his priorities.

Lloyed ultimately decided to move his family to Dubai. Many other Gulf War refugees had moved there and he knew they would be welcomed. The massive change in environment proved to be transformative, and was just the breath of fresh air he needed.

When in Dubai, Lloyed had to make a hard decision. Although it was difficult to walk away from a company that he helped build from the ground up, it was time. The business simply didn’t align with his values anymore. After many talks with the board and his co-founder, the pair decided to sell their shares.

Surrounded by his friends and family, he rediscovered what truly mattered: community.

Reconnecting with the Importance of Community

Lloyed’s time in Dubai led him to realize the profound role that community plays in our lives. He recognized that it had been a constant thread throughout his journey, from his refugee experience to the challenges of entrepreneurship and his battle with mental health.

Today, Lloyed has taken on a new role: author. His debut, From Grassroots to Greatness: 13 Rules for Building Iconic Brands through Community-Led Growth, provides insights and practical advice for those who wish to harness the power of community.

Key Lessons

While Lloyed’s exit isn’t as traditional as some others, there remain some key lessons to learn from:

  • Reevaluate, refine, and edit: When Lloyed realized that his company no longer aligned with his values, he did something about it. It’s a reminder to constantly reflect on where you are in life and in business. If you’re unhappy, make a change.
  • Community is crucial: When the going got tough, Lloyed was able to lean on his friends and family for support. Strive to do the same and surround yourself with people willing to cheer you on — and bring you back down to reality when needed.
  • Give without expecting to get: Over the course of his entrepreneurial journey, Lloyed realized that giving without expecting anything in return can lead to great things. Selfless giving has become a central theme in his life and it’s worked out in his favor.

Through his work, Lloyed continues to pay it forward, providing a valuable resource for others in search of mentorship and insights.

Interested in exiting your own bootstrapped company? We can help. Give us a call today.

Case Study #79: Yes, You Can Sell a Service Business without an Earnout

Case Study #79: Yes, You Can Sell a Service Business without an EarnoutWhen it comes to building a successful service-based business, few entrepreneurs can match the journey of Brandon Lazar. Over the course of 15 years, he transformed a simple window cleaning operation into a thriving business that served his community. But what happens when it’s time to move on and sell that business? Well, for starters, Brandon wasn’t interested in an earnout, which meant that he had to be particular about his buyer.

The Path to Selling a Bootstrapped Business

Brandon’s story begins with the humble origins of A+ Gutter & Window Cleaning. He turned a one-man show into a thriving operation through hard work, dedication, and a relentless focus on providing top-notch service to his customers. 

An intriguing aspect of Brandon’s business is his approach to financing it. He bootstrapped his way to the top, relying only on his cash flow to fund his growth. Unlike many business owners who constantly monitor valuation multiples, Brandon decided to concentrate on steady growth and exceptional service. 

His path to success raises the question: Should valuation multiples be at the forefront of an entrepreneur’s mind during the growth phase? 

Brandon says that honestly, he wasn’t thinking about valuation because he was fully invested in growing and scaling his company on a day-to-day level. With that mindset, he grew his business to seven figures before deciding to sell. It’s something to note for all of you valuation-obsessed owners out there.

Initial Approach and Negotiations = No Deal?

It’s all about who you know, or at least it was in Brandon’s case. After a tough hiring cycle, he was approached by a potential buyer within his network. This initial conversation led to negotiations about the sale of his business. 

Brandon was upfront about his expectations, being sure to emphasize the financial terms that would make the deal worthwhile to him. The lesson here is clear: transparent communication is key during the negotiation process. 

Or, one would think. While Brandon was very clear on his end, the buyer? Not so much. He eventually requested audited financial statements, which added complexity and ultimately dragged out the process. Another lesson to note here is the importance of setting clear deadlines and managing your own expectations throughout the process.

Despite progress made throughout the negotiation and due diligence stages of the sale, the deal ultimately fell apart during a Zoom call. It goes to show how unpredictable business transactions can be. 

A New Buyer Emerges

As one door closed, another one opened for Brandon. Someone else in his network expressed interest in buying A+ Gutter & Window Cleaning. He decided to go all in on this second chance, and dove into the new negotiations. 

Now that there was a new potential buyer on the horizon, Brandon revisited the valuation of his business. He successfully negotiated a sale without an earnout clause. The deal’s structure itself, including vendor take-back financing, was carefully created to align with Brandon’s specific goals. 

Key Lessons

Brandon’s story offers three key lessons:

  • Focus on growth, not valuation multiples. Brandon’s success story highlights the importance of prioritizing growth and exceptional service over constant valuation concerns during the business’s growth phase. Instead of fixating on valuation multiples, entrepreneurs should invest their energy in scaling their companies and delivering outstanding services to their customers. 
  • Transparent communication in negotiations. Being upfront about your expectations and financial terms is essential to ensure a smooth negotiation process. Clear communication helps prevent misunderstandings and aligns both parties’ interests.
  • Be flexible when structuring a deal. Explore various deal structures to align with your specific goals to ensure a favorable outcome. Brandon’s ability to adapt and shape the deal to his liking, including negotiating the absence of an earnout clause, showcases the importance of flexibility.

We help business owners create their own ideal exit, whether you’re interested in an earnout or not. Give us a call today.

Case Study #78: When Capital One Comes Calling

Case Study #78: When Capital One Comes CallingWhen Alex Macdonald first created a product that would become Velocity Black, he was simply looking to find wonderful (and exclusive) restaurants and make them easier to find and book. By the time he helped sell his company for just under $300M, he had taken that initial idea and refined it into a 24/7/365 AI-assisted private concierge service, which is something Capital One wanted to have for its products and services.

How Did the AI Help?

Velocity Black guaranteed a one-minute response time for all requests. They were able to do this by building a strong personalized profile of the customer and then allowing the AI to cross-reference that profile when building a request (e.g. customer loves Thai food and when the customer asks to find an excellent restaurant in a given city, the AI might then suggest, among other options, a Thai restaurant). A human would then take the AI suggestions and begin interacting directly with the customer.

Customer Acquisition

At the time that Velocity Black was sold, there were two different divisions of the company. The customer-facing product had a $2000 annual subscription fee as well as revenue-sharing on every request a customer would make. Those requests could be anything imaginable, but frequent requests included:

  • Booking a reservation at a very popular restaurant
  • Buying and delivering a special gift
  • Finding something exclusive to do at a particular destination
  • Booking private charters or difficult-to-find flights

Since Velocity Black controlled all payments, they would take those revenues upfront, which in addition to their annual subscriptions, made them a capital efficient business. 

The team didn’t sit on their laurels, however. They experienced 60-100% revenue growth year-on-year until acquisition and they reinvested most of that to keep growing the platform.

Where do you meet the sorts of customers who want to make a call and get something exclusive? At exclusive events, of course! Think of signature sporting events, like the F1 race in Monaco or the Super Bowl. They would always have a presence at the Oscars or Coachella. They would normally have a private event with some top tier talent performing which underlined the sort of exclusive experience they could offer their customers. In fact, when asked, customers often said that they used the service primarily to be able to deliver a special memory to friends and family.

Companies caught on to this as well, and there was also an enterprise division of the business that worked with large companies who wanted to ensure their employees felt special and looked after. This division was doing well and Alex knew it was simply a matter of time before a bank or credit card company came calling.

Closing the Deal

The acquisition by Capital One started as a partnership. Capital One wanted to launch a new credit card with some special features and they tapped Velocity Black as a partner to help them do that. That launch went well and Capital One asked if Velocity Black was looking for investment. Alex had already done a friends-and-family round as well as an additional seed round so the company was well-capitalized. He politely declined an investment. Capital One wasn’t deterred, and came back with a question about openness to acquisition.

Alex said he was open to it and went back to his co-founder and board, who were also open to exploring it. They hired a bank to manage the deal and accepted a second offer from Capital One which was around 10% higher than the original one.

Key Lessons

The story of Velocity Black offers some simple lessons for all businesses:

  • High tech + high touch: use technology to assist, not entirely replace, humans, particularly for elite customers that value a personal touch. Don’t be “too cool” to use AI and other such technology.
  • Go where your customers are: people who love great experiences are, unsurprisingly, at special places already having great experiences. When you take the time to create a customer avatar, you’ll know where the avatar hangs out. Go there.
  • Play it cool: when a big fish like Capital One comes calling, performing well in a partnership is precisely the sort of audition that leads to potential investment or purchase. See such partnerships for what they are and overdeliver when given a chance.

We can’t claim to be available 24/7/365 via an app, but we’re around during reasonable hours (even unreasonable ones, sometimes!) to help you with all you need for buying or selling a business. Give us a call today.

Case Study #77: A Hole-in-One 20 Years in the Making

Case Study #77: A Hole-in-One 20 Years in the MakingIf you ask Ian Fraser, co-founder of Tour Experience Golf (TXG) how he prepared to run his company, he would tell you that he spent 15-18 years being underpaid. He used that time to invest in himself and learn everything about his industry, golf club fitting, as well as the basics of business. It would pay off years later in a handsome exit.

Ian does have a Scottish accent, which doesn’t hurt in the world of golf, but he notes that while an accent may get you in the door, it’s the hard work and reputation that can keep you going. That reputation got him noticed by an investment group who made him an offer but it was clear that Ian’s ambition didn’t match the investors’ risk profile and Ian ended up partnering with a 50/50 partner with the caveat that until all the original investment had been paid back, the other partner could hold on to 30% of Ian’s 50% equity position.

Golf Club Fitting

If you’re not a golfer, you might not realize that there’s an entire universe of custom-fit golf clubs. Anyone who has experienced the difference between “off the shelf” clubs and custom ones will tell you that custom ones help you play better and enjoy the game more. Ian built a reputation for fitting and had people flying in from all over the world to work with him.

But he knew to build a business, he needed to scale himself. There were three tools he used to hire the right people:

  • Hire for EQ instead of IQ. Ian felt he could always teach the technical side of things, but being empathetic to the customer and his/her needs? That was something you wanted right away in a team member.
  • Choose the customer over the company. In the interview process Ian would offer scenarios in which the business, not the client, would win in a given scenario. Tied back to the point with EQ, Ian selected those who would choose the customer first. That was the ethos of TXG: serving customers first, profit comes as a result of that great service.
  • Consult in an open space. By using an open space instead of a closed room, Ian was able to have his trainees on either side of him, working with their own customers, and they could learn from and feed off each other on every consultation.


Another winning strategy Ian deployed was YouTube. The channel has well over 200,000 subscribers, and because Ian spent every Sunday and Monday filming for 2 years, including a Live Q&A every Monday, he built an online reputation and customer funnel that was unstoppable. While most people spend money on marketing, Ian was actually getting paid for his marketing, as it was responsible for $30,000 in revenue per month in addition to doing what great marketing is supposed to do: bring in clients.

Before too long, TXG was at $5M annually, with a waiting list of 1,500 to get in for a fitting.


The original acquisition offer wasn’t respectful for the sort of hard work Ian had put in and the acquirer implied that they were going into the marketplace “with or without” Ian but they discovered, as many had before, that you can’t just throw money at YouTube and you can’t just buy reputation. Ian had won in the video space because he had been consistent and the other better funded companies didn’t seem to include consistency in their channel rollouts.

As the acquirer realized it would be much harder to build what Ian had already done over so many years, they decided to buy that sweat instead of trying to do it themselves.


Ian intentionally built his business over many years. Three takeaways for those looking to exit well:

  • Duplicate yourself — by duplicating not just his technical knowledge, but his approach to customers, Ian was able to scale his company beyond his efforts.
  • Deliver content — Ian knew that YouTube rewards quality and consistency. He delivered both and got paid for his marketing efforts instead of having to spend for them.
  • Know your worth — when the acquirers tried to lowball TXG, Ian stood firm. As those acquirers started to get a better sense of the real value of the company, which would take a lot of time to duplicate, they realized their number was wrong.

We definitely have some golfers in the office, maybe even some with custom clubs! But even our non-golfing brokers can help you sell a business you’ve spent many years building. Give us a call.

Case Study #76: Veterinary Mini Roll-Up

Case Study #76: Veterinary Mini Roll-UpWhen Dr. Joseph Marchell started Old Brown Dog Veterinary Partners he was a broke, in-debt recent college graduate. But he took six months working at a private equity firm, observed what was going on in the marketplace, made moves, and bet big. In the end, he achieved a 28X EBITDA exit for the entity he helped to build.

Inefficient Markets

Joseph is the son of two veterinarian parents so he very much believes in helping animals, but he also has a real eye for business, and his first job out of school was not understudying with one of his parent’s practices, but rather working in private equity, helping to identify veterinary practices that could be bought and packed up into a larger entity with more value after operations had been streamlined and professionalized.

Indeed, because many vets are focused on animals and not spreadsheets, they end up functioning like solopreneurs and hence there are lots of inefficiencies that PE can improve, including that lowest-hanging of fruit, underpricing.

One More Leap of Faith

As Joseph continued to see skyrocketing values for veterinary practices he was evaluating for purchase at his PE firm, he brought his work home and had a conversation with his parents, talking about the value they currently had and how much more their business could be worth if it was part of a tactical roll-up. They were cautiously optimistic and before too long, Joseph created Old Brown Dog as the entity for this project.

While that entity was originally going to get funding to go out and get deals, Joseph had his hands full creating efficiencies with the three practices the entity acquired (his parents’ practices and another). Because he took the time to bring in a professional operations manager and someone fully in charge of HR, Old Brown Dog started seeing more profitability right away, leading to an even better possible multiple of EBITDA.

Further, Joseph was ultimately de-risking all these practices by putting people in place that reduced the key man burden on the practicing vet. Indeed, once all those functions had been hired, even the vet himself could leave and the practice could continue on with a new doctor. The mom-and-pop one-off practices were becoming part of a well-oiled machine.

22 NDAs, 8 LOIs

Joseph was working as a vet in these practices as well as working on the business so he knew he couldn’t also take it to market. At least…he realized that after he tried it first. When he realized he was in over his head he brought in an M&A advisor who took the business off the market and cut all lines of communication off with interested parties so that the adjustments to EBITDA were crystal clear and so that Old Brown Dog could craft the narrative for selling.

Once it went back out into the market, 22 NDAs led to 8 LOIs. Joseph took the three best and asked them to come back with their best and final offer. When the dust settled, he had sold the business for a value far beyond his parents’ wildest dreams, and right in the zone he had hoped for.

Key Lessons

This case study offers three helpful lessons:

  • Control the narrative: when asked why he was selling the business, Joseph was able to point to his limitations which were opportunities for a buyer, namely capital investment in buying other practices and hiring investment in getting HR and operations people in place as the roll-up continued. This allowed buyers to see where they could add value (and what that value could add up to). 
  • When the market moves, so should you: even though he had only been working in PE for six months, Joseph saw an opportunity for arbitrage and value creation by bringing efficiencies to what he had seen since his childhood: an inefficient market of veterinary practices. He didn’t wait to get more experience. He pounced, and was handsomely rewarded.
  • Savings are everywhere: even when you have an eye to sharpening pencils and cutting costs, there are always cost savings to be had. Even if you don’t plan a roll-up or plan to be part of one, there is a direct relationship between cost savings and the valuation of your business.

Considering a roll-up in your industry? We’ve helped others put those together before. Give us a call.