Case Study #21: Confidentiality Rules

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

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

Building to Sell

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

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

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

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

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

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

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

Third Time’s the Charm?

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

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

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

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

Telling Employees (Don’t)

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

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

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

Key Takeaways

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

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

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

Trust the professionals: we’re speaking from experience.

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

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

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

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

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

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

Out of the Blue

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

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

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

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

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

Ball was already rolling

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

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

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

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

The Deal

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

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

Key Lessons

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

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

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

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

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

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

Case Study #19: Happy to Take Your Call

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

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

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

The Subscription-based Model

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

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

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

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

EBITDA vs Revenue

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

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

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

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

Maybe, maybe

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

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

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

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

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


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

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

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

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

Case Study #18: Coming Back from Failure

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

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

That field? Electronics recycling.  

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

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

Easy Money

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

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

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

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

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

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

Bad Press

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

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

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

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

Reverse Merger

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

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

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

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

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

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

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

But, very little could be done.

The comeback

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

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

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

Time to sell

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

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

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

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

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

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

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

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

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

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

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

Case Study #17: When an Earnout Wins for Everyone

winwinIn 2004 Dan Green was a mortgage officer. He started blogging about important trends in the industry, focusing on giving timely, relevant, non-biased advice.  

He thought it would be a smart way to stay in touch with existing clients, as well as reach out to new ones.

The strategy worked…a little too well. He started to get leads from states he wasn’t licensed in and rather than let those leads go to waste, he started to sell them.

The blog and these partnership agreements eventually led to a company called The Mortgage Reports.

Differentiated from the beginning

With the traffic he was garnering Dan could easily have gone for the quick monetization path and sold advertising.

But he felt he couldn’t be unbiased if he had ads, so instead he built forms around themes.

For example, at the bottom of an article on a “low down payment mortgage,” there would be a link with the text, “Would you like to know more?” and if you clicked through and filled out your information, you could get a call from one of the partner companies within seconds.

Dan’s partners got highly qualified leads (the forms asked key questions) and Dan’s readers got help from sources they wanted.

So why sell?

The cash flow was good, and the overhead was insignificant: hosting fees, the occasional tech fix for the website, and the cost of writing articles, which Dan was doing by himself from his wealth of knowledge and experience in the industry.  

But the reality is that there’s a lot of regulation in that industry, as well as administrative work, which Dan didn’t love, so he started to think through exit possibilities.

One of his friends, an M&A professional, recommended doubling down and building out his infrastructure so as to sell for 10X or more, but Dan didn’t feel the energy to do that. He didn’t believe that he was the right guy to take the company to the next level.

Internal buyers

Why not ask the partners who are already buying our leads? Dan thought.  

After taking his books and turning them into a slide deck with projections into the future, he approached six of the partners already buying his leads.  

Three of them wanted a deeper conversation and Dan flew out to see all of them and make his presentation. He wanted to sell his vision for where the company could be and share his excitement for growth.

There were two challenges. At the time he was exploring an acquisition, the mortgage market seemed tenuous…everyone was waiting for some disaster. Secondly, the economic climate, in general, seemed gloomy. With those issues in mind, none of the potential buyers were willing to give Dan the upfront cash deal he wanted.

Believe your own hype

Dan really knew the industry and felt that his projections, while bullish, took into account all possibilities, and as such, he thought to offer an earnout to one of the three buyers who was best equipped to carry out a long-term vision for his company.  

He structured the earnout such that if the projections he made were accurate, that not only would he end up getting paid, but the buyer would do very well too.

The happy ending? The amount of the earnout ended up being 3-4X the amount of the original all-cash deal that Dan proffered.

Why did the earnout work in this case?

In a lot of the case studies we offer here at APEX we note that earnouts aren’t ideal. When asked why he thought this earnout wasn’t just successful, but spectacularly so, Dan responded by saying that he thought the buyer had put in genuine effort into not just buying the business, but growing it.  

Furthermore, the confidence and faith in his numbers and the actual state of the market, not just what the pundits projected, was rock solid.

Finally, Dan was willing to put his money where his mouth was. He didn’t offer the projections as “hope” but as pretty much facts!  

In the end, those three factors led to a win/win for everyone involved.

Whether you’re a buyer considering a business offering an earnout as part of the purchase or you’re a seller who doesn’t think he can sell in the traditional way, we’re here to help. We’ve dealt with hundreds of similar situations over the years and would love to put that expertise to work for you. Give us a call today at 913-383-2671!

Case Study #16: Doubling Down on the Value of You

Doubling downIn 2011 Dan Bradbury was building a company called Business Growth Systems that taught marketing to small business owners.

They would hold seminars explaining how to build infrastructure to create and track demand for products and services. 

Often those seminars served as funnels into individual client work, in which he and his staff served as a hybrid agency, helping these businesses create that infrastructure hands-on.  

He was creating a profitable company and experiencing great growth when he had a serious biking accident. The seven months he spent in rehabilitation included re-learning how to use a computer, among many things.

But with all that time he’d spent in traction, he realized two things:

  1. The company was too dependent upon him.
  2. He never wanted to put his family in this kind of position again.

So, he set about finding a way to rectify this.


Dan asked a friend who had experience in M&A to take a look at his business to see how sellable it was. The answer, after a cursory examination, was “no chance.” The business was entirely dependent upon Dan and Dan’s friend advised him to acquire a similar competitor and then replace himself. Then the business would be sellable.


Dan started making the rounds, and many knew that he and his business were “wounded” because of his accident and injury, but he found a fellow owner who was willing to go in on an “option” type deal. Dan would guarantee that upon a sale, this owner would receive at least X. It wasn’t a conventional type of deal, and it very much set the tone for the type of deal they would get in the end.

Leaning in

Dan and his new partner saw that they both had a good income stream relating to an emailing software platform and really started to develop that stream. At the same time, Dan remembered that there was a company that offered a competing platform.

This company had often tried to recruit Dan to leave his business and move to America with his family. In addition, they had been in an aggressive growth phase in the US but didn’t seem to make any headway in the UK (where Dan was based).

While all this time Dan had been working on making his business not reliant on him, at this moment he chose to make a possible deal all about him and the contingent possibilities. He reached out to the US company and basically said, “You can have me and my company. You’ll have an entree into the UK market, and I and my team will help you grow it.” The acquisition was framed less as a financial one and more of a strategic one.

Closing the deal

As the men in suits started doing the math, it became clear that they were interested in how quickly Dan and his team could reconfigure and start selling their software.  

If that downtime was low, the acquisition could be accretive, and hence, pay for itself. While Dan assured them this downtime would be low, they wanted to de-risk the deal as well, and the offer was ⅓ cash, ⅓ stock, and ⅓ earnout.  The earnout was tied to the number of new customers acquired for their software (and was uncapped).

Dan hesitated. He knew about all the stories around failed earnouts but his WHY? was powerful and at this point, he had no real BATNA (best alternative to a negotiated agreement) and hence didn’t have a strong negotiating position. Alas, with the finish line simply pushed back a bit further, he took the deal.

The story ends happily. Not only did Dan deliver the original amount promised to Nick, his business partner, but Nick made 80% more than that number. They both did have to work harder in order to do that, but that’s always what earnouts are aimed to do…to squeeze that last possible drop of motivation from an owner who very well may be mentally “done.”


Never wait for an accident to make your company less dependent on you. Taking the time to do this will benefit you, your family and friends, your employees, and your bottom line.

If a traumatic life event causes you to reconsider everything, remember that going in with an attitude of “I have to sell” weakens your negotiating position, and may force you to take the first offer that comes by (which may not be the best one).

Finally, don’t be afraid to dangle yourself as a possible asset in the sale. Sometimes, given the right alignment of goals, that’s exactly what a buyer might want to hear.

Remember to speak with an Apex Business Advisor for assistance in preparing your business for sale. We know the right people to help you systematize and add even more value to what you’re already doing.

Case Study #15: Beware of Shares and Options

bewareIn 1992 Doug Chapiewsky started CenterPoint Solutions, Inc. He’d spent time at Bell Labs helping to develop what would become the call center model.

But back then it was simply a single number that would then fork out to different people answering the phone.  

He saw an opportunity in a space that the big legacy players considered too insignificant to work on.

Together, with some other savvy technologists, he created software that would integrate with the calls and build systems for those running call centers (and answering the phone).


Doug grew the company to 60 employees and realized that he didn’t have the funds (or the desire) to grow the company to 300. He was in a no man’s land in the industry between 30 and 300 employees and he decided to scale back instead. By embracing a software licensing model with his 30 employees, he had $5M in annual topline revenue with 60-65% net margins.

But there was a problem.  

Doug’s marriage had been paying the price in the early years of growth and he felt he was really in a “your marriage or your business” scenario. He opted to try to save his marriage and started getting the company ready for sale.


Doug began to (in his words) “dress up the company.” He got a great general manager in position, let some toxic people go, and made sure that all the financials were tight and in order.  

It was the year 2000 and lots of M&A in tech was being done in stock swaps and other such transactions. Doug, like many, didn’t really see the crash coming and accepted an offer which only gave 10% of the valuation in cash, with the rest in stock and options.


On the day of the acquisition by an Israeli-based telecommunications firm, the stock price of that publicly traded company went from $75/share to $100/share, and Doug felt pretty good about things.  

But, before too long, that company, like many, started restating their earnings and the stock priced tanked…falling all the way to $12/share before being delisted. Worse, they’d failed to get Doug properly certified securities in time which he could have liquidated to at least recoup some of the value. Both the shares and options were worthless and Doug entered a 2-year litigation against (the ironically named) Nice Systems.

In the end, Doug’s lawyer went to rehab and Doug took a settlement, choosing to start his entrepreneurial life over. He now runs HDS, LLC, which provides housing management software to Native American housing entities and US public housing authorities.


We’ve said this before in previous articles, but put first things first. No business is worth losing close personal friendships, or worse, your marriage. Never let your excitement for building a company eclipse one of the reasons you’re ostensibly building it.

Beware of taking any part of your offer in shares or options. Much like an earnout, the outcome often isn’t entirely dependent upon your personal efforts.

Finally, if there’s not a good offer available, be patient and willing to wait. As you can see from his story, Doug would’ve done far better to pass on this offer, potentially ride out the dot-com fallout, and pivot, if needed, to something else.  

Unlike the of that era, he was actually providing proven value for a necessary product, and if he could’ve found a good manager, he might have been able to keep both his relationship and his business until the right time.

Questions? Remember to speak with an Apex Business Advisor for assistance in preparing your business for sale.

Case Study #14: Even When You’re Early, You Can Sell

you can sellIn 2006 when Claude Theoret began building elements of the company which would later become Nexalogy, the term “big data” didn’t even exist. It was just called data mining.  

Today we’re familiar with the term and easily recognize big players like Amazon, Facebook, and Netflix not only using big data to improve their own businesses, but selling portions of that data in the marketplace.

Big data is growing and is only poised to get bigger.

But, like MySpace, which predated Facebook but was later wiped out by it, it’s often true that “Pioneers get slaughtered and settlers prosper.”

Claude and his team were probably caught somewhere in the middle.

His company analyzed big data within various market segments to help companies identify and mitigate hidden or previously unnoticed risks.

He also had to do a great deal of customer education in 2010-2014 when he was growing his company, as there was still a great deal of ignorance among his potential and actual clients about how big data worked or could be utilized.

Why sell?

There were a number of factors working against Claude.  

  • He needed cash to grow the company, but his ask for VCs was too small. He wanted $1.6M but most VCs cut minimum checks of $5M, which was far more than he needed and would have diluted his ownership beyond his comfort level.
  • He didn’t have enough secondary services to sell his clients after the initial projects, another aspect that would have excited VCs.
  • U.S. VCs (Claude’s company was based in Canada) required a move to a major hub like NYC or Austin, and with a young family, that was a no-go for him.

After a number of presentations, Claude realized that VC money wouldn’t happen, and that acquisition would be their best path forward.

But by this time his burn rate had taken the company to a tough place financially. His wife helped saved the business by draining her retirement account to bridge the company until a government grant came through. 

How to value?

Companies in this space now often sell for anywhere between 4-8 times topline revenue. At the time that Claude decided to sell in 2015, his company was doing $1.7M in revenue, nearly double the revenue from the year before.  

They hired a firm to put together a dynamic financial model that not only included financial statements updated in real-time, but projections for how the company could perform across various growth rates.  

It also included plans to deploy the now-abandoned-raise of $1.6M. He hired an M&A firm and soon Datametrix AI Limited expressed serious interest.  

So serious, in fact, that the negotiators canceled their flights back after an initial visit, and went to a nearby hotel to hammer out the LOI details with Claude.  


While it’s true that firms like Claude’s now sell for much much more than he sold for, it was a combination of factors that led to a successful exit. He had help from both his wife and his government in bridging through a tough period.  

He engaged with a serious buyer and knew the number he wanted. But most importantly, he was running a revenue-generating business that just needed a bit of help – somewhere north of angel investing and somewhere just south of VC money.  

Being proactive with getting acquired was the difference between banking $5.7M in cash and stock (distributed 50/50 – the stock has more than doubled since the acquisition), which he eventually did, and being another startup carcass left on the side of the road.  

Case Study #13: Bought by the Competition

competitionMark Carlson bought Minnesota Mailing Solutions in 1998 for around $1M and grew the business over 10 years, eventually selling it for $4.5M.

It was his ability to stay unemotional and focused on business fundamentals that ensured he walked away with the best offer possible.

In 1998 there was still a very large market for what Minnesota Mailing Solutions was offering: products that supported large-scale automated mailings for companies (think folding and inserting machines, with giant meters at the end of the assembly line).

Mark took the 6 employees and the inventory the business came with and went about growing the business.

In 2008 Mark saw two developments which triggered a desire to sell. The first was consolidation within the postage meter industry.

A merger shrunk a field of four USPS-sanctioned players to three. The second was a major and ongoing decline in the volume of first-class postage and sale of equipment.  

This led the three remaining players to look for profits as growth slowed. That’s when the idea of opening their own corporate stores that would compete with their own dealers (like Mark) became attractive. Indeed, they were able to track from an entire history of numbers just how well certain markets could do.

Mark decided to bring in a broker to help him navigate the sale unemotionally and thoughtfully. When the broker first solicited offers, both buyers lowballed, trying to get the most for the least. After declining both of the offers (around $3M), Mark and the broker went back to the fundamentals. How was the business being valued?  

Mark was using the same reasoning as when he originally bought the company: around 1X annual EBITDA plus inventory. He was doing around $4.5 million in annual revenue and had a small inventory and that was what he wanted. They went back to the buyers with the reasoning and the buyers also had realized now that they were bidding against each other.  

The smaller player between the two had been Mark’s dealer for 10 years, and their fatal mistake was in thinking this was an emotional play. At one point, the remark was made to Mark’s broker, “Mark is loyal to us; he’ll never sell to them.”  Them, in this case, was the biggest player in the industry and had been Mark’s direct competition for years.

Despite his broker dropping numerous hints that the bigger player had come in higher, that company didn’t increase their bid, and Mark took the better offer, which was greater by a magnitude of $500,000.  

He got a 98% payout with 2% contingent on the inventory holding up in an audit, which it did, and three months after the deal closed he got that 2% as well. He also stuck around for three years on salary, transitioning the company into the new products and the buyers’ way of doing business.

An unfortunate epilogue to this otherwise happy ending for Mark, who had built great value in a business that traditionally featured 15% net margins, was a frivolous lawsuit from the buyer who had lost out on the deal.  

Like a spurned lover, they reacted emotionally (precisely what Mark had avoided) and accused Mark of taking trade secrets, etc. After about a year of depositions and $100k in legal costs, the case was (unsurprisingly) dropped after the tantrum ran its course. But it’s a good thing to note that even if you’re able to remain unemotional, others may not.

Key takeaways:

  1. Know your numbers. The reason Mark was able to get even more money after receiving offers for 3X what he paid for the company was because he truly understood how his business worked, even in a declining market.
  2. Watch for signals. Mark saw the writing on the wall and rather than panic or avoid action, he moved and capitalized.
  3. Know your values. Everyone will approach the “loyalty” question in this story differently, but Mark didn’t decide his values during the transaction. He knew ahead of time, and they guided him to a successful conclusion.

Case Study #12: The Right Multiple

handshakeIn 1993 Dennis Hart founded Apex Media Sales (what a great name!). Apex focused on long-form direct response television advertising, in the specific categories of religious and infomercial advertising.

Dennis enjoyed the structure of the company. It was a cash-in-advance business. While the television and cable networks demanded payment upfront, he was also able to demand that same payment from his clients.  

He didn’t have a warehouse or equipment he needed to buy or maintain. All he needed was hard drives to store the “inventory” from his clients. In the early 1990s there were very few players in this space and Dennis took advantage of being one of the first to market and generated $750,000,000 in revenue over the lifetime of the company.

The right timing…for once

Dennis had learned from previous experience in the stock market that he had the ability to pick winners. Unfortunately, he simply had bad timing. He would wait too long and those winners would become losers. When he started Apex he wanted to grow the company to a specific size and then sell…with no regrets.  

By 2007 he felt that he’d grown the company to a size that was the limit of his experience and desire. The company needed someone with more of both to go to the next level, and this realization dovetailed with interest from VCs, one in particular that was pursuing a roll-up strategy in this space.  


Apex would be the first company in this roll-up and 7 times EBITDA was the agreed-to deal point. But the acquirers did start to go over some of the owner benefits, which in Dennis’ estimation weren’t shameless tax avoidances but true business expenses around acquiring and romancing potential clients. Dennis was a tough negotiator, and on more than one occasion he was prepared to walk away. In the end, he obtained 95% of the purchase price up front and 5% to be released after one year.

A Family Affair

Dennis’ daughter Carrie had a similar vision to Dennis. She wanted to bring others into the company to take the firm to the next level. On more than one occasion, as Dennis threatened to walk away from the deal, she was the honest broker that kept everyone talking.

Dennis stayed on with the acquiring firm (and is still with them) and continues to work in the space. Dennis’ takeaways from the transaction should be similar to our own:

  • Begin with the end in mind. Think about what your exit strategy is and what your Why’s are.
  • Know your numbers and have clean financials. They will always make a sale easier.
  • Know what you want and be willing to walk. Instead of sabotaging your deal, you’ll often find that this impresses buyers because it indicates confidence in what you already have.

Got questions? Be sure you speak with your Apex Business Advisor to understand more of the ins and outs of the selling process.