Case Study #43: From Painting Stripes to a Ten Figure Exit

Sir Lines A LotWhen Lee Gregory first started Sir Lines A Lot, it was as a part-time business.  He had a regular job and spent his nights drawing the lines in the parking lots of banks and fast food restaurants.  He had to stand out in a crowded field and did so with great customer service.  That meant when he started bidding for larger city and state contracts, he had developed a competitive advantage.  That advantage took him all the way to a ten figure exit.

Getting Creative with Capital Needs

You may not realize it, but one of those trucks that puts yellow and white lines down onto the road costs $700,000 new.  Lee didn’t have those kinds of funds, but he did have a crew that had some mechanical skills.  So he went around the country buying used trucks.  Most municipalities who owned them would normally sell them after 10-15 years.  Lee and his team put a lot of sweat into reconditioning these trucks and making them last longer.  Average cost of these used trucks?  $70,000.  With some elbow grease and creativity, Lee and the Sir Lines A Lot team essentially paid 10 cents on the dollar for these assets.  Cost of capital isn’t always a barrier, it turns out.

Differentiating with Governmental Bids

When Lee started bidding for jobs at the city and state level, he went from the dozens of competitors he faced when servicing small retail businesses to roughly three.  Lee always wanted to build his business with integrity so he wasn’t interested in backdoor deals with government officials.  He wanted to earn the business fair and square.  Turns out his competition wasn’t doing a good job, as simply showing up and doing what he said he was going to do on time earned him a great reputation among municipalities.  

Once he had that reputation, he started suggesting to those who were in charge of putting together bids to consider putting stipulations into the bids.  These stipulations simply revolved around follow up and customer service that he knew he offered but that his competitors didn’t.  Those working in government saw those features as valuable additions for no additional price to the taxpayer, and soon Lee was winning some of those big jobs.

This didn’t guarantee he would always get the job: the law stipulated that the bid always had to be awarded to the least expensive bidder, and Lee recounts that he once lost a $4,000,000 job by $50.  “I’d rather lose a bid fair and square than cheat to win one,” he noted.

Mindset Shift

Due to the seasonal nature of the business, especially in Minnesota where the company was based, Lee (and his team) was able to count on 3-4 months off every year, and he was making a comfortable living, with the business throwing off between 20-40% margin of EBITDA.  But one day he was at a meeting with some colleagues in business and some basic questions led to a broker sharing the thought that Lee could be looking at a ten figure exit.  

While Lee knew the assets of the business alone were worth $4-5M, he had no idea the business could command such a premium.  He had also started to realize the stress of running the company, particularly the HR issues which he didn’t care for.  Maybe it was time to look at a sale.

As he did, he realized that his value wasn’t in fire fighting and dealing with the HR issues, it was, as we often discuss in these case studies, removing himself from the scaffolding.  He worked hard to make the company an attractive turnkey asset to buy but still with plenty of growth upside.

Better Books

As he prepared his business for sale, Lee realized that he had been lazy with books.  He didn’t actually know the average margin he made on any given job.  As he painstakingly went back through all the numbers and the cost of every can of paint, he realized that the work he was doing would not only offer potential buyers a much better look at the state of the company at present, but could also offer insight into growth opportunities that he hadn’t considered simply because he was comfortably cruising with the business as it was.  The marginal extra revenue in investing in a new truck here or a new process there wasn’t worth it to him, but it could easily be worth it to a new owner with fresh eyes and plenty of energy.

When his books were better Lee went back and engaged with the broker who had first shared the possibility of a big exit with him.  He ended up with four genuine offers and closed with the first one, though there were parts of the diligence that were challenging enough that he almost gave up.  But he saw his way to the finish line and the ten figure exit he was chasing.


Lee’s story offers some important lessons for those building a business to sell:

  • When you’re in a crowded marketplace, find a way to stand out with customers
  • If capital is an issue, find a creative solution
  • Beware complacency: this can lead to businesses plateauing in value
  • Keep better than average books: if you don’t you’ll have to spend a lot of time getting them ready when you do want to sell
  • Keep focused during diligence and don’t let its difficulties keep you from getting to the finish line

Have you been thinking about getting a valuation or selling your business?  Give us a call.  We’d love to help!

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!

Case Study #40: A Covid and Due Diligence Casualty

Case Study #40: A Covid and Due Diligence CasualtyAna Chaud started Garden Bar some years ago in Portland as a fast casual restaurant which featured salads only. While such chains as Chopped and Sweetgreen existed on the East Coast, nothing comparable existed in Portland, and Ana pioneered the market.

While Ana had some background in nutrition, she had no restaurant experience. She partnered with someone who had fine dining experience and in the first year they did well. They brought in $500,000 in top line revenue, doubling that in the second year. They had a “clustering” strategy similar to Starbucks, in which a commissary location supplied all the produce for a group of stores.


The very first store was completely self-funded by Anna, and the second store was covered by a small SBA loan and some funds from friends and family. This type of business needed to scale to really make great margins (not just to achieve economics of scale in purchasing, but in sales). To add four more stores, Anna took $500,000 in funding from eight investors, yielding them 20% in equity.

To add more stores and inject more working capital, Ana went to another set of angel investors and raised $1.1M in the form of a convertible note. At this point, Ana made a mistake in her due diligence. She allowed one of the investors to draw up the note and didn’t hire someone to represent her interests. If she had, she might have seen one of the terms that would have given her pause: if the company was acquired prior to the note converting, the investors would get a 2.5X return on the original investment.

The Acquisition Clause Became Important

As Ana grew Garden Bar, it became a very attractive acquisition opportunity for a company who had a similar concept in Seattle. And they were looking to become a regional player in the Pacific Northwest. She wasn’t aware of this prior to getting an extension on the convertible note, with no change to the return clause she had missed. Three months after that acquisition, she was looking at an LOI.

While the note holders had liquidation preference in a sale, the preferred shareholders, the original investors that funded stores 3-6, had to approve the increased payout to the convertible note holders. You might guess they were not too keen to do so. That said, everyone who had invested in Ana and Garden Bar up to that point were angel investors, people generally more interested in helping entrepreneurs get up and running, rather than a high rate of return. Everyone put their heads together to negotiate, and Anna gave up all her immediate upside to make sure that all the investors were at least made whole. And then they would profit via an earnout mechanism over a couple years.

It might have been an improbable happy ending if it weren’t for the arrival of COVID-19. In Portland, this meant an extreme lockdown. While the first part of the transaction had closed and her investors had been mostly made whole, Ana’s earnout is now at best in jeopardy, and in the worst case, completely gone. Only time will tell.

Key Takeaways:

  • Get help with due diligence.  If you’re going to need investors, get representation. Have a professional with your interests in mind look over any document that gives away equity or indebts you or the company.
  • Accept risk. At one point, Ana had personally guaranteed almost all the leases for the stores, simply because she was still considered “risky” for the banks, despite being able to show strong cash flow.
  • Remember that earnouts are never a sure thing. While we’ve discussed the risks of an earnout in ordinary situations, COVID-19 has added one more possibility into the mix.

Case Study #39: E&J Gallo Acquire Barefoot Cellars

Case Study #39: E&J Gallo Acquire Barefoot CellarsMany years ago, Bonnie Harvey and Michael Houlihan were a couple working as business consultants in Sonoma County. One of Bonnie’s clients, a farmer, hadn’t been paid for his grapes for over three years. The total debt? $300,000. Michael went over to the vendor to see what could be done to satisfy the bill. The morning he arrived, the vendor had just declared bankruptcy. The debt was looking to be worth about 3.5 cents per dollar. As Michael looked around the property, and the work in progress at the vineyard, he negotiated to take $300,000 in bottled wine that hadn’t been labeled. Neither he nor Bonnie were wine drinkers, nor did they know anything about the industry. But they were about to start an adventure that would end prosperously.

The Power of What You Don’t Know

After doing research for six months about wine and the industry, Bonnie and Michael offered to buy the debt at 100 cents on the dollar but with no additional interest and good repayment terms.  The client agreed.

Precisely because they didn’t know anything about the industry, they asked friends who did and packaged the wine at the right price and in the right varietals. When they showed up to the big distributors, they were asked, “What are you going to spend for advertising?” Bonnie and Michael were broke and answered, “Nothing!” The response? “Then we won’t carry it, and neither will any other distributor until you do.”  This left them with Plan B and a much longer timeline: visiting individual mom and pop stores throughout California to build a following. That took years, but that’s precisely what they did.  

After two years, one particular small retailer took a shine to them and when they launched nationally outside of California, they took Barefoot Cellars, Bonnie and Michael’s brand, with them. The name of that retailer? Trader Joe’s.


As they sold through the initial $300,000 of inventory, Bonnie and Michael didn’t keep any of the earnings. They plowed it back into the company and a wine brand that had no vineyards, no bottling lines, and no facilities to maintain. They created departments for sales, accounting, and quality control. They did have a winemaker, but that winemaker would simply rent the facilities of other vineyards on days and weeks when Barefoot needed to do a production run.  

They also took advantage of lines of credit based on their accounts receivable, and they were able to do this because they developed a relationship with their banker (something we recommend often).  

They also made sure to spend time with the distributors and retailers in a customer-facing way. This allowed them to learn what people wanted and how to improve their product. By the time Barefoot got acquired, they were selling 600,000 cases of wine a year (for the wine novices, 12 bottles are in a case, so that equates to 7.2 million bottles a year). But growth alone wasn’t going to get them the sale they wanted.

Broker Education

Remember Bonnie and Michael had never owned a wine company, so they certainly hadn’t sold one before, either. They decided to take a broker out to lunch and ask questions about the metrics in such a sale so they could use those metrics to optimize their business (as an aside, you don’t have to take us to lunch to get some of these insider facts, but we aren’t likely to refuse if you offer!) They learned about valuation (anywhere between 2x and 10x gross sales, depending on both the wine market and the stock market in any given year), growth rate, and position in the market, key factors that the bigger players looked at when considering an acquisition of a smaller player.

Bonnie and Michael also wanted to target an acquirer and get in their sights. When doing their research, they found that E&J Gallo wines were the only ones selling faster than theirs, and this was due in part to a strong presence that their sales team had with distributors on the ground. Barefoot then focused their energies on the largest distributorships of Gallo, trying to get Gallo’s attention by performing well as a competitor.

They also found a broker who had not only done a lot of transactions in the wine space, but had recently completed an acquisition deal for Gallo. Another lunch later, Bonnie and Michael had the list of due diligence items that Gallo required from any acquisition target. They went about getting all of that lined up and Gallo was impressed to get such a fast reply to their due diligence requests (little did they know that the couple had been working on their homework proactively!)

The terms of the transaction were undisclosed, but it’s fair to say that Bonnie and Michael definitely turned that original speculative $300,000 bottles of unlabeled wine into a fortune.

What can we take away from this story?

  • Don’t be intimidated by your lack of knowledge in a business. Do your research, ask the experts, and then be willing to put in the elbow grease and financial sacrifice to make it happen.
  • Play the long game. Wine, like most businesses, is not a “get rich quick” scheme. When the big guys told them “no” early on, they didn’t give up, but started cold calling on each and every wine retailer in the Golden State.
  • Buy lunch for your broker. Okay, so this is a bit self-serving, but you probably get the point: we’ve done thousands of transactions and have knowledge we can share; all you have to do is ask.
  • Don’t be afraid to call your shot. Bonnie and Michael knew who they wanted to be acquired by and reverse-engineered it. That’s not always going to be possible. But the lesson of “have your due diligence ready before you’re asked” is something we all can accomplish. We have to be willing to set aside the time to prepare for the future.

Case Study #38: Removing Yourself from the Scaffolding

Removing Yourself from the ScaffoldingBryan Clayton started building PeachTree, Inc. as a high school student. He eventually grew it to 150 employees and 8 figures in annual revenue. He spent his first years at college telling himself he didn’t want to cut grass for the rest of his life… as the income continued to roll in. Bryan realized that he would probably never earn as much in the job market as he was already doing in his business. When he graduated, he went all in on “cutting grass.”

Learn the Lay of the Land

Bryan really had no background for how to build a business and stayed curious about how to do things the right way. One of the things he did early on was visit large landscaping companies whenever he traveled for conferences. They often allowed tours of their facility on request, and Bryan used those tours as an opportunity to observe and take notes. What were they doing that he wasn’t? What systems did they have that he could put in place as well?

Residential income had been the startup engine of his business. As Bryan began chasing commercial accounts to diversify,  he learned that they paid on 90 day terms. This meant that signing a six figure contract to do work for an apartment complex or a set of bank branches required a certain amount of working capital. It was the only way to deal with such a long delay in payment. These kinds of lessons continued to shape how he built the company.

Differentiate Yourself

Once Bryan felt that he was executing the basics well, he developed a culture that differentiated him from his competitors in landscaping (of which there were many). He saw himself as a true partner with his clients. For example, many drive-thru restaurants often have cigarette butts in the drive-thru lane. They’re unsightly. When people lean out to order or to pick up their food, it’s unappetizing to say the least.

Bryan picked up on that situation and pointed this out to restaurants. He went on to pick up all those cigarette butts as part of his landscaping service. He (correctly) surmised that cleaner driveways might lead to better sales, and the restaurants noted this sort of care and thoughtfulness. The word spread.

Bryan also deployed the same thoughtfulness at apartment complexes. He asked where the model apartment was and what the standard closing rate was after a tour. His goal was to increase that closing rate by improving the appearance around the model apartment by adding touches of landscaping at no extra charge. Bryan wanted to drive home the point that he wasn’t just cutting grass, he was trying to make sure his clients did well financially.

Time to Sell

As time went on and Bryan continued to grow his company, he came across books like Built to Sell and The Four Hour Work Week. He realized that while he had put some systems in place, he felt as if the entire company was just scaffolding that he’d built around himself. He was worried that his absence could cause the company to collapse. “I didn’t realize that the life of a business owner could be something other than rushing around all day putting fires out.” While he did manage to put some systems into place to make the company an attractive acquisition, he wasn’t able to hide the fact that he was “done” and didn’t really want to go back to running the business if a sale wasn’t completed.

An Important Lesson

His acquirer, a large operation who had done many acquisitions, could “smell” this fear on him, and that’s the first lesson Bryan would give to up and coming business owners:

Prepare for a sale when things are going well. This will take some time to put together, sometimes years, so don’t do it when you’ve run out of gas. Do it when you’re doing well, or your buyer might take advantage of your mindset of being “done.”

He adds, “Don’t get hung up on what YOU think the business is worth.” His acquirer was not interested in the 80 paid-for trucks that were part of his fleet (in fact, they sold them all the day after the sale closed and unsurprisingly, brought in their own equipment). The buyer was only interested in revenues and made an offer (which happened to be the best one) with no consideration for the equipment. It doesn’t matter what YOU think the business is worth. It matters what the market, and ultimately, the buyer who has done due diligence thinks.

It’s always possible to differentiate yourself, even in a red ocean like landscaping. Start with the basics of having the proper business systems in place. Then ensure that you have a culture that stands out… not just to your staff, but to your clients. Their delight and word of mouth will carry you the rest of the way.

We’ve represented buyers and sellers for landscaping and other outdoor businesses for decades.
If you have questions, give us a call.

Case Study #37: Built for Communities, Acquired by Cracker Barrel

BiscuitsEarly on his journey of building Maple Street Biscuit Company, Scott Moore had to offer a personal guarantee for some of the restaurants that put his home at risk. But he had confidence in the brand, his team, and himself to add to the willingness of a spouse to be exposed to that risk, and less than a decade later that confidence and willingness to take risk was vindicated in a $36M acquisition by Cracker Barrel.

Comfort Food…with an Opinion

Maple Street bakes their biscuits fresh every day with flour and real butter.

On top of that base they have a sausage or shiitake gravy (again, made fresh in house), all-natural never frozen chicken, and house made jams and jellies. While those sound like typical ingredients, their dishes are anything but.

Their “Squawking Goat” got featured on the food network: fried goat cheese and pepper jelly on top of that chicken and in a biscuit. Scott noted that he knew the flavors were familiar but he wanted people to say, “I’ve had those flavors before, but never like that” and that would make Maple Street a destination, not just another diner.


At the core of Maple Street’s hospitality is what they call “gracious service.”

This is a value that flows from Moore’s top level philosophy that a business has a right to do good in the community and gracious service is a way to “earn” that right to do good in the community every day. This isn’t a formula in which someone introduces themselves by name and comes to the table to check on you (Maple Street is a fast casual concept anyway, so you need to bus your own table when finished) but rather a level of care for the food and the customer that shines through.

This even comes through in the words that are used. Locations are not called “restaurants” or “storefronts” but rather “community stores” which are led by “community leaders,” not managers. The community helped give Maple Street its name and even helped name its dishes (like the aforementioned Squawking Goat) so this is another value the company lives and doesn’t just parrot.


When Moore was putting together the concept, he worked off three different P&L projections. One was simply “average” for the industry. One was premised on doing really well. The last was half of the average.

His idea was that as long as they could at least hit that last projection, the “half of average” one, they could get the business going. He focused on a lean team and profitability from the beginning, and they leveraged an interesting system to grow the concept quickly, using a joint venture vehicle in which someone would put up $150,000 and then enter into a 49/51% partnership with Maple Street for that location. With Moore’s focus on Lean principles and responsible growth, Maple Street had 28 company-owned and 5 franchise-owned locations in 7 states at the time of acquisition.

What’s an important part of understanding how compelling Maple Street’s business was to Cracker Barrel was the fact that they already had a biscuit restaurant concept called Holler and Dash in their portfolio. This acquisition is another example of “if you can’t beat ‘em, join ‘em” and the power of “build it and they will come.”

Key Takeaways

  • Culture truly matters – it’s not just hooey that people give speeches or write books about. It’s what the best companies always have under the hood.
  • Grow responsibly – While Scott had his own skin in the game by personally guaranteeing the first loans of the company, he also made sure that strategic partners who built out restaurants did the same. By staying lean he made sure the money could be invested in growth instead of expense accounts.
  • Stand out – the “comfort food with an opinion” angle hit big and in the first weeks of the first restaurant opening and he saw an hour long line snaking out the door Scott knew his hunch had been right.

Case Study #36: Airline Software and the Value of a Patent

Case Study #36: Airline Software and the Value of a PatentTimothy O’Neil-Dunne has been an aviation and travel insider for years and his most recent business, Air Black Box, was acquired by 777 Partners in early 2019. Along with his fellow co-founders, Timothy was able to create a way for airlines to sell more seats by using new software to access very old technology which is the domain of just a few companies.

Why “Black Box”?

It turns out that airlines are not really interested in hearing about the technology behind innovative software, nor are they interested in the larger philosophical discussions about how they can still make money when their flights connect with airlines that stand outside the big three (SkyTeam, OneWorld, and Star Alliance) airline alliances. So rather than force these ideas on the airlines, they leaned into this lack of desire to understand technology and just called it “Black Box.”

They also conformed to the way that airlines and airports prefer to see proposals: as a per transaction cost. What does it take to get a passenger on that jet bridge waiting to board the plane? That’s what they understand and that’s how they built all of their projects. One of which was creating a new airline alliance, the Value Alliance, which mostly includes low-cost carriers.

What many of us who use online websites to do bookings don’t realize is that the slick and shiny software we use is connected to very old legacy software and technology. While these software operators still benefit from being able to sell tickets to people like us who want to buy them, airlines really still lack the ability to drive more revenue by airlines networking and cross-selling with each other. That’s where what Air Black Box was doing really made a difference that went straight into the bottom line for its clients.

Invest in People

Early in the process, Timothy and his co-founders made the decision to make sure that his employees had a stake in the future of the business by giving them some ownership shares. One third of the company was then allocated in such a way that if there was a future transaction, his employees would get a guaranteed amount. Whereas any speculative part of the deal that required more work would be his risk (but also his reward). When asked why, Timothy responded that his staff were loyal and went above and beyond. They were the type that if you called in the middle of the night they would do their best to try to figure out how to solve a problem.

Ask for Help

While he did bootstrap the company with his own funds, Timothy was also happy to partner with the government to get some matching grant funds. They approached Innovate UK and made the case for how their UK firm could obtain some significant international business if they could get some seed funding at a crucial stage. That funding was important early on when Air Black Box only had one customer, Changi Airport.

Invest in Technology

Part of the value of Intellectual Property (IP) in a future sale is the competitive advantage you have over others because of your technology. The other part is the ability to gain from adversarial lawsuits. The patents obtained by Airline Black Box combined with their transaction revenues made them an attractive target for 777 Partners, which has a collection of companies in its portfolio that it helps to scale to a high level of success.

There are many important and valuable businesses that exist all around us. But they are invisible because we don’t know they play a role in our everyday lives. We deal with a lot of these off-the-beaten-track businesses here at Apex. Give us a call if you’d like to learn more.

Case Study #35: Jazz Guitar Lessons and $250k Annual Revenues

Jazz GuitarFor some years, Marc-Andre Seguin was the typical struggling artist, specifically, of the musical variety. But unwilling to face the fate of so many before him, he decided to create a blog about his music, and almost a decade later, that site pulls in a cool $250,000 a year in revenues. How did he get there and where is headed? Let’s take a closer look!


Marc-Andre first started by simply providing some content about jazz guitar pieces and improvisation. He would link to Google Adsense and Amazon Affiliates, earning revenues from the growing number of visitors to his blog. Some of these clicks would earn him 15 cents, others 30 cents. He also began to charge for PDF versions that could be downloaded and also allowed people to book private lessons with him via Skype. These strategies got him from the early months of $30/month in revenue to $700-800/month.


One of Marc-Andre’s students happened to be experienced in email marketing and convinced him to start creating infoproducts, be they e-books or private “classes” that could be sold via email marketing. This was also a success, and started to bring in significant revenues, but that also meant time putting together an infoproduct for each email launch as well as the right combination of marketing and wording to make the offer compelling. Revenues were now into four figures a month for Marc-Andre, but he grew tired of having to come up with each new promotion for the email push, and decided to take a look at another model…

Then, Subscriptions

While there is a universe of “guitar lessons” available on the Internet, Marc-Andre discovered that he was part of a very small cadre offering anything relating to jazz guitar, and so he decided to pursue that niche with all of his focus. But instead of the overwhelming all you can eat Netflix model, he offered something more course-oriented. He created a “start here” engine that guided people through the lessons, starting at whatever level they were comfortable at (and eliminating those who were too advanced for what he was offering). Then, as more and more content was being created, the users would then be an infinite loop of learning.

His current churn rate is around 10%, which is standard for an infoproduct business. As of late 2019, Marc-Andre’s brings in roughly $20k/month.

Key Lessons

  • Niche: in the era of the internet, embracing a specialized niche for an infoproduct business is not just smart business, it’s absolutely necessary.
  • Subscription Model: Software as a Service (SaaS) has prepared many customers for a recurring monthly charge rather than a one-time payment. Leverage that shift in mindset for your own benefit.
  • Embrace the Pivot: Several times in his business journey Marc-Andre found himself at an inflection point. At each juncture he embraced more work to get to more income, but he also did it while creating systems to make that work easier over time.
  • Begin with the End in Mind: As of the publishing of this article, Marc-Andre has not exited the business, because his goal is to hit 1,500 subscribers who are paying $39/month. With the multiple that accompanies solid subscription businesses, he’s come a long way from struggling artist. But he’s also demonstrated that you don’t need to reach a lot of people to build a million dollar business.

Case Study #34: Printing Profits

Case Study #34: Printing ProfitsJohn MacInnes started Print Audit in 1999. He aimed his software at anyone who would normally charge people for printing costs, like law firms or schools. Those businesses were often very aware of photocopy costs, but not of direct printing costs, and the software Print Audit provided allowed those individual prints to be properly assigned and then billed to clients.

As time went on, Print Audit also put software in place to monitor ink and toner levels so that those companies with copier leases would experience less friction with service and refill calls. Instead of having to call up the service provider telling them that the machine was malfunctioning or that toner needed to be refilled, the software proactively notified dealers so that service interactions were enhanced and a lot of time and money was saved, by both the dealers and their customers.

Too Many Eggs in One Basket

The company was growing well, but a latent problem in their customer distribution forced them to make some drastic changes. One of their customers, Ricoh, was responsible for 70% of overall revenues, which was roughly $600,000 a month. Ricoh made a strategic acquisition and lost focus on this particular component (software helping to manage service calls) of their business. John noted that some of the people who were added to Ricoh during the acquisition were tasked to Print Audit, but they didn’t really know the company and in the meantime the $600,000 a month had plummeted to nearly $60,000 a month.

John had two insights: focus on the individual dealers rather than the corporate office, and switch to a subscription model. He did just that, not just making a better version of the software but making it a subscription service, and adding a number of key peripheral services that created a larger base of clients worldwide.

Focus on Retention

He also did something unexpected for a tech business: work on winning the retention game. As we discussed in an article about recurring revenue businesses, retention is a big part of success. John and his team made sure they were spending 80% of their time satisfying existing customers while spending the remaining 20% of time on adding features that would lure in new customers. At the time of acquisition, Print Audit had a 99.5% retention rate, so John figured if he wasn’t going to sell Print Audit, he might have another company in the stable: one that helped other companies improve their retention rates!

As it was, John had been building Print Audit for 20 years, originally on bootstrapped friend and family funds of $75,000. He saw that the industry was in consolidation mode, that there wasn’t room for too much more growth over time. Even though he had restructured the company in the aftermath of the decline of the Ricoh account, people were simply not printing as much as they used to… not simply because of the number of ways that paper was being saved digitally, but because of growing pressure for large companies to be more environmentally responsible, and printing on paper was one of those targeted areas.

Software as a Service

Interestingly, because he had transformed the company into a SaaS (software as a service) recurring revenue model, he became a smart strategic purchase for a large firm. While he says he wasn’t excited about the 2,000 items that he was assigned by the buyers for due diligence, he had a lot of support from his broker and banker to keep him on task and positively oriented towards a fruitful conclusion.

Key Lessons:

  • Never be lopsided.  While John was alert and talented enough to pivot his company while it was in the midst of a revenue free fall, he should never have allowed one customer to be 70% of revenues.  Anytime any customer is more than 15% of revenues, you should be concerned and take the opportunity to diversify.
  • Innovate in your space.  While the copier and print industry was probably slow to change because of its high capital costs, John invested in improving his software when it already was an industry leader.  That allowed him to grab even more uncontested market space.
  • Don’t be afraid to own a category that isn’t a core competency.  Customer retention of a subscription product wasn’t a core competency of Print Audit…until it was.  John made it a priority, invested the people and resources in that direction, and the numbers say it all: 99.5% retention rate.