Case Study #54: Exit on Your Terms

Exit on Your TermsSaud Juman started PolicyMedical in his mother’s basement.  He took the mundane tasks that every hospital needed to accomplish, like the steps in disinfecting a scalpel after surgery or the proper way to mop a floor so that nobody slips and falls, and automated them using software.  From these humble beginnings Saud eventually grew the company to an exit worth over 7 times revenue.

Work the Phones

Saud had a partner early on in the business.  That partner worked on the technical side of things and Saud handled sales.  Back in the late 1990s, before the revolution the Internet would bring to every aspect of our lives, the main option available to him was smiling and dialing.  The Yellow Pages equivalent for hospitals listed every executive for each hospital.  Saud remembers 150+ call days.

The hospitals had regulatory compliance they needed to be aligned with, and once Saud was able to explain how PolicyMedical would make things easier for them, they often said yes. 

Change of Pace

About seven years after the founding, Saud’s partner wanted to move on to different opportunities.  The company was doing roughly $500k in annual revenue and they managed to negotiate an amicable buyout.  But Saud realized that with a new technical hire to replace his former co-founder, he was stuck at a lifestyle business level.  This wasn’t a bad thing, but it didn’t line up with what had inspired him to originally begin the business.  He wanted to make a significant impact in millions of patients’ lives every day, and he couldn’t do that unless he was building a high-growth, high-impact company.

The problem was, he didn’t know how to do that.  So he did the next best thing: find someone who did and asked for mentorship.

Leveling Up

Saud made a list of people in tech, healthcare specifically, who had built companies of at least $150M annual revenue.  There were only three people on the list, and he hoped that one might come to a rather casual regular networking event one weeknight in Silicon Valley (he had done research to find out that this person was often at these events).  Saud flew down there from Toronto for the event, hoping to meet him, or if not, someone who might help make an introduction to him.  His risk was rewarded when that gentleman came to the event.

While he was at first taken aback by Saud’s story, he tried to beg off, telling Saud that if he were local, he could give Saud some time.  Saud immediately responded that he would fly down any time that this person was available.  Even though this possible mentor had just sold a company and had planned to take a couple years off (and had told everyone so), Saud’s earnestness impressed him and a week later they were spending a couple days together, laying out the groundwork for the future of PolicyMedical.

In these many hours of conversation Saud found a partner, not a mentor, and after making him a formal offer of equity, they were off to the races, rebuilding the software from the ground up, and doing it in the cloud, many years before anyone knew what that was.  He also had to convince his current customer base to move to the new trend in software, which was no longer a one-time large payment followed by much smaller “maintenance” fees every year, but forever monthly payments.  

Once again Saud’s sales skills were put to use, as he had to explain that even though many of the customers would see a 3X increase in their pricing, they were still being grandfathered in at a lower rate than what was being offered in the marketplace, and if they chose to go elsewhere they were going to pay a lot more.  

Closing Time

After a successful relaunch of the software with a new partner, Saud found he had been at the helm for a total of 15 years and wasn’t having fun anymore.  We find that many people exit at this time, but Saud did something quite rare: he stayed, using sheer will power, for another three years, to get the company ready to sell or ready to hire his replacement.

In that time he:

  • Built a data room with all the reports and paperwork a buyer could dream of
  • Reviewed the status of all existing clients
  • Reaffirmed all existing contracts
  • Got audited financials

He was so prepared, in fact, that he didn’t pay his investment banker the regular retainer that is paid in order to prep the business for sale.  The business was sale-ready, and the proof was the 37 offers to buy that he received.  Many of them were far below what Saud had wanted, which was an eight or nine figure exit, equivalent to more than 7X revenue.  But instead of moping about the “low” offers, he picked the top two offers, which were close to 4X and played them off each other.

He wrote down three dealbreakers to help guide him as the process moved towards a possible final buyer:

  1. All cash (there would be no earnouts or holdbacks)
  2. Fast transition (he would be gone in under six months)
  3. Keep the engineering team (most had relocated from Brazil and were in the naturalization process, and he wanted a guarantee that would not be interrupted)

By sticking to his guns, Saud got the deal that he wanted.


There are so many great lessons from this case study, but we will focus on three:

  • Be in touch with what it is you want from a sale.  Saud knew that it was time to go, but he also knew he wouldn’t be happy with the sale of the company as it was, so he was willing to put in the work to get to the next level.  Have the self-awareness to know whether you can keep going or whether you have to sell now.
  • Ask for help.  Saud took seeking mentorship to a whole new level by being willing to fly from Toronto to Silicon Valley to find an industry-specific mentor.  While he ended up finding a partner instead of a mentor, the process still worked.  If you don’t know how to get to the next level, find someone who does and ask for help.
  • Have a desirable offering.  37 offers should tell you everything you need to know about how great Saud’s company was.  While those offers weren’t all at the price he wanted, the fact that so many companies were interested meant that Saud had done his homework, and if you do the same, you will have the luxury and price premium that comes with multiple buyers chasing a desirable business.

Do you think it might be time to step down from your business?  We can help you evaluate the best time and way to do that.  Give us a call!

Case Study #53: Hustling Through a Pandemic

Storage SquadIn 2011 Nick Huber was a junior at Cornell University.  He was one of the captains of the track team and ended up becoming an All-American in the decathlon.  But the summer after his junior year, he was just trying to offset some of his expenses.  He had overlapping leases on his apartments and since he planned to be out of Ithaca during the summer, he hoped to sublease at least one of the rooms in those properties.

Unfortunately, no one bit on a sublease but one parent called and asked if Nick would be willing to take $150 to store some of his son’s stuff over the summer.  After picking those items up, Nick realized he would need to get a lot more “customers” in order to help cover these leases.  He got email lists, made flyers, contacted fraternities and sororities, and even wrote in chalk on the ground.  He managed to fill up a couple rooms and the following year he brought on one of his fellow student athletes, Dan, as a business partner.  That partner happened to have a house with a basement and they filled up all the rooms and the basement and when all was said and done they had about $8000 for a few weeks of work.  Storage Squad was born.

A Different Path

Parents who send their kids to Ivy League schools, like Cornell, expect Ivy League outcomes, which is not usually expressed as, “Dad, I want to start a business of moving boxes around twice a year.”  But thankfully Nick’s father didn’t oppose Nick’s desire to build a business and was willing to let it play out.  Nick and Dan ended up buying a couple of cargo vans and expanding into other states.  In 2012 they did $300k in topline revenue, followed by $750k in 2013.  In 2014 they did $2.2M in topline revenue and had tripled their profitability.

Learn by Doing

But given that Nick and Dan had started this business while they were still in college, they had no “experience” from either running a business or from working in corporate America.  They learned the way many entrepreneurs do: taking risks and making mistakes.  

One thing they learned early on was that their business did really well with small prestigious schools that had a lot of out-of-town and international students.  The big state schools had 80% of their student population from in-state, so they could just as easily have family come haul that stuff home at the end of a semester.

They also found that employees really did well with structure rather than autonomy.  When they first started the business, their drivers were their main employees and had 28 different tasks they had to complete, including billing the clients!  Obviously it made more sense to systematize and specialize and before too long drivers only had 5 tasks, not 28.  They had a card with contact information to give to clients if there were any billing or customer service questions and those drivers could say, “I’m just here to pick this up for you and bring it back to the warehouse.”

Seasons Offer Reflection

Storage Squad was a seasonal business.  This was great for two reasons: 

  1. Cash flow was great – a lot of money came in at one point during the year (May).
  2. There was down time to reflect, tweak, and improve for the coming year.

It was during those down times that Nick and Dan were able to reflect on how they were running their business and what was next.  What seemed a natural fit was real estate.

Because they had spent so much time and energy leasing storage spaces to house their clients’ goods (they weren’t using basements anymore!) they realized that there was a future in building a separate real estate business that specialized in storage facilities.  In 2016 they built their first storage facility from the ground up.  After they felt comfortable with how that was running, they got outside investment and acquired many others.  At the time of this article they have 24 facilities spanning 500,000 square feet under management.

They knew their future was in this real estate business, and Nick was managing that full-time while Dan was running the Storage Squad business, and in late 2019 they had put a lot of changes in place that made them feel 2020 was going to be their best year ever, after which, they could put the business on the market.


In March 2020 many schools sent their students home for the semester.  Storage Squad was in the midst of its regular build-up to May in which they went from their 6 full-time employees to an additional 300 seasonal workers.  But some schools had sent their students on Spring Break and told them not to come back.  Nick and Dan got on the phones with these universities looking to come up with a solution for all the students’ stuff in the dorms.  The hustle paid off and their workers used FaceTime and other technologies to work with the students to pack their stuff remotely.

Storage Squad ended up having their best year ever due to this hustle, but also because they got large institutional checks from the schools, as opposed to the smaller transactions they had with the students, which always came with the 3% credit card fees (Storage Squad had never accepted cash or checks from day 1, keeping that part of their bookkeeping very simple).

While they had wanted 2X EBITDA originally, because they had such a great year AND because it was clearly a one-off type of year, the acquirer, 1-800-PACK-RAT, ended up offering them 1X.  They came back to them in late 2020 after having had conversations with them in late 2019.  The deal was fairly straightforward and closed in 45 days.


There are some wonderful lessons that Nick (who’s very active on Twitter) shared about this acquisition:

  • Treasure key personnel.  The operations manager for Storage Squad was very talented and they didn’t want to lose him as the business grew.  They offered him shadow equity and when the time came for the business to sell the acquirer also offered a bonus for that employee to stay on for a certain amount of time.
  • Boring is profitable.  Nick has famously said that you can make a killing in any business that has a lot of profit and still uses fax machines.  He exploited the weaknesses of traditional storage firms that still used physical contracts and didn’t answer the phone after 5pm to dominate the storage market in his locations.
  • Have strong opinions, loosely held.  By “learning on the go,” Nick and Dan had no sacred beliefs they had to get rid of as they built their business.  They were willing to take risks and try different ideas in order to grow.
  • Look where the puck is going.  By studying how to improve the business they were already running, they saw an opportunity to build a business with perfect synergy that had a better path to scale into the future.

Are you interested in buying a “boring” profitable business or in selling one of your own?  We know just how to help!  Give us a call.

Case Study #52: When You Want to Get to The Next Level

High Level MarketingWes Mathews started High Level Marketing (HLM) to focus on small to medium-sized businesses. Back in 2009, social media was in its infancy and businesses were trying to figure out how to deal with this new frontier in digital marketing. Almost a dozen years later, HLM was at the top of its game, and merged with another company to start playing a new game at a higher level.

Digital Marketing

Digital marketing in 2009 is quite similar to digital marketing today. Businesses need help with website design and upkeep and organic and paid SEO. But because the platforms have been constantly developing, Wes learned how to deliver leads “on the job” with his customers. By 2020, the firm was doing $6.5M in real annual revenue (not counting the advertising spends of its clients) on the back of four key pillars:

  • Recurring revenue: This $500,000 monthly income stream meant that they weren’t worried about how to pay their bills month to month
  • Process: Wes is a big believer in the Entrepreneurial Operating System (EOS) which continuously updates processes across various team members rather than making it a burden on one or two individuals 
  • People: HLM focused on hiring A-players and keeping them
  • Proprietary CMS: Most businesses know about WordPress and Squarespace.  Those are content management systems.  Well there are others out there too, including MYCE (Manage Your Content Easily) which is owned by HLM. They didn’t like the solutions out there so they scratched their own itch. Their customers loved the ease of use and so it was one more way to keep customers attached

Level Up

Level UpWes never had a real plan for how he was going to get to the next level in his business. He was the sales and revenue guy, his full partner in the business was the CTO and was heads-down on the software and tech side of the business. His hustle and drive had gotten HLM this far.  But how could they go from a 7 figure business to an 8 or 9 figure business?

Seth Godin has famously said that if you want to make that kind of leap you have to hand your business off to someone else, then be an understudy with someone with the kind of business you want for 1-2 years. Then you can return and transform your business. But Wes never considered that. In fact, in Summer 2020, after the first wave of Covid-19, he felt himself slowing down: he wasn’t feeling the same fire he used to.

Call from a Broker

Any broker will tell you that at least once a week we are on the phone to a prospect, either warm or cold, who we would like to work with.  Wes had gotten plenty of these calls before and wasn’t really interested, but after he had felt himself begin to slow down that summer, he decided to have a longer conversation.

It turns out that Todd was helping a company look for suitable merger candidates, and the last deal that they had been working on fell apart.  Wes said, “Why not?” and before too long he was on the phone with first the CEO and then the COO of Bell Media. They really got along and Todd saw puzzle pieces coming together. He saw himself as a revenue guy and his partner was a CTO. Bell Media had neither proprietary tech nor someone entirely focused on growing revenue. This could be a great marriage.

Gap in Pricing

When the first LOI came in there was a pretty big gap between what Wes wanted and what Bell offered. He felt strongly that the company merited a 6-12X EBITDA pricing and his internal “deal breaker” in that range was 8X. The original LOI came in at roughly half that.

That low number allowed Wes to focus in on his deal points:

  • He wanted no fiduciary responsibility in the new company – he just wanted to stay in his lane and sell
  • He wanted to be able to take a second bite of the apple – he wanted to reinvest some of the sale proceeds and become a shareholder of the new company
  • He wanted a guaranteed 3 year contract as a new employee

While Wes didn’t have total clarity on all these points initially, they developed, and after 3-4 LOI exchanges they finally got over the finish line and started moving towards closing.

The New Company

Even though HLM ended up being the seller in this transaction, the new company kept the HLM name, which was a real point of pride for Wes. He and his partner were each 10% partners in the new company, and freed from trying to be a CEO that might take his company to a $100M valuation. Wes knows he’s part of a team that will get there in 3-5 years, and he’ll get to be part of that transaction too.

Because both companies had already been working remotely at various times of 2020 due to Covid-19, the merger was much less painful, with nobody having to relocate.


Key lessons you can take from Wes and HLM:

  1. Know what the value drivers of your company are and how to lean into them
  2. Know when you’re “done” and seek an exit that will make sense for everyone
  3. Stick to your guns on your deal points and valuation – but take your time to think through those before you get started in a transaction
  4. Know what your personal limits are and have the humility to ask for help

Are you looking for a merger with a company that can help take you to the next level?  We’d love to help you find that company.  Give us a call!

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

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

Build a Better Mousetrap

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

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

Game Change

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

This led to three obsessions that changed everything:

  • Marketing
  • Customer Service
  • Billing Immediately

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

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

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


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


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

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

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

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

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

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

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

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

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

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

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

People loved the app. 

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

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

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

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

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

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

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

Lessons Learned

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

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

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

Case Study #49: Dream Water, Dream Exit

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

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


Dream Water is lightly flavored water with three active ingredients:

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

Product Placement

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

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

The Wal-Mart Effect

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

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

Scale Matters

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

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

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

Publicly-Traded Buyer

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

Lessons Learned

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

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

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

Case Study #48: Believe in Your Business

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

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

End of the Road

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

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


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

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

The big problems were threefold:

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

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


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

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

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

Case Study #47: Partner Remorse

Partner Remorse

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

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

Business Model

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

Success and Failures

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

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

Seeking a Solution

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

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

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


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

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

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

Case Study #46: Simplify and Multiply

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

What niche?

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

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

Roll Up

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

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

Second Bite of the Apple

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

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


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

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

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

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

One Week Becomes Seven

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

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

A Future Sale

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

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

Synergy & Unconventional Structure

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

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

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

Key Lessons

Takeaways from this case study:

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

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