Case Study #34: Printing Profits

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

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

Too Many Eggs in One Basket

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

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

Focus on Retention

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

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

Software as a Service

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

Key Lessons:

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

Case Study #33: The Acquirer Gets Acquired

Long before the general public knew what Amazon Web Services was, and that it provided the backbone for entities ranging from Netflix to the CIA, Glenn Grant was building G2 Tech Group.

G2 Tech Group was leading the industry in migrating services to the cloud, where Amazon Web Services lives. While it’s true that many times pioneers get slaughtered and later settlers prosper, if the pioneer seeks an exit at the right time, he/she can enjoy the fruits of all that hard labor.

Managed Service Provider

While Glenn had started the firm as a traditional break/fix IT firm, over time it became a managed service provider (MSP). His MSP offered managed devops (maintaining tools for developers) and got ahead of the industry in two ways:

  • Introducing Amazon Web Services to clients long before it was standard practice.
  • Creating a subscription model of recurring revenue. The services he offered gave clients an insurance policy “just in case” but also was proactive in offering assistance and tutelage in using these tools.

At one point Glenn was directly and indirectly managing thirty employees. He wanted to use his market position to start acquiring smaller firms and take a more powerful role in the industry. But as he started to do his own research into a possible exit, he saw that there was actually a chance for a strategic acquisition, not just a financial one. Potential buyers were discussing multiples of revenue instead of EBITDA. With money out there chasing a functioning business like his, he decided to pivot from acquiring smaller firms to being acquired himself.

Selling Sooner Rather than Later

Acquirer Gets AcquiredHe was ahead of the curve and was well-built, so he could have easily coasted for a few years and banked the profits. But Glenn knew that while business moves fast, tech businesses move even faster. Worse, if he didn’t sell, one of his competitors might, and then instead of the competitor he knew, he’d be dealing with an 800 pound gorilla that might be able to simply outspend him.

When the time came for Letters of Intent, all three of them came from Private Equity Groups.

While Glenn had heard horror stories of what PEGs can sometimes do with Mid Market businesses, he did his own homework. He took the time to get to know the partners of the PEGs who were competing for a deal with him. And he asked to speak to fellow entrepreneurs in the portfolios of those firms. They could tell him first hand how the transaction went and whether promises were kept after acquisition.

Second Bite of the Apple

Because Glenn had started working with Amazon so early, the firm was a “trusted partner” with Amazon. This gave G2 Tech Group even more leverage in a potential sale.

Glenn saw the value of these first acquisitions in his space defining what the industry would look like in future. So he didn’t want to just ride off into the sunset, but wanted to have an impact in the evolution of his company. As such, in the transaction he was able to take a significant amount of money off the table, but he also was given the chance to invest some funds into the new entity (enough to keep it “interesting,” he noted). He was now in a position to give it a push while he was at the height of his subject matter expertise (and since he still had the desire to push on). He stayed on for two more years with the new company and did indeed enjoy a “second bite of the apple” with a subsequent exit from that firm.

There are as many ways to structure business exits as there are businesses. If you possess the drive and energy of someone like Glenn, we can help you structure your exit to be something similar. Give us a call today.

Case Study #32: Health Scare, Quick Sale

Health ScareThere are many occasions we’ve seen a quick sale over the years. One of the two factors that can often lead to one is having an exit strategy. The other? A health scare. While sometimes the health scare is genetic and unrelated to the business, very often conditions in the business manifest in some health condition, and this causes a re-evaluation of priorities, and often, a sale.


Jim Remsite was one of two partners that started a custom software company called Adorable. In an industry dominated by robotic and functional logos and names, Jim and his partner decided to zag with a sort of pink coral decor: “We wanted customers to love their software.” And they did. Jim and his partner started the company in 2014 and by the end of 2015 they were looking at $1.5M in topline revenue.

But towards the end of 2015, Jim’s partner decided that he wanted to move on to another project he was more interested in, and because they had a buyout agreement in place, they had a good starting point for discussions. Since this other project would take longer to start providing a salary, and because the buyout agreement was set for five years, they negotiated to get a lower total amount in exchange for it coming at an accelerated rate.

Losing a Partner

With the challenge of losing a partner, Jim decided to push himself hard. This was due in part, he confessed later, because he was trying to prove to himself and everyone else that he “didn’t need a partner.” And while the company did grow to $3M in topline revenue in 2016. By 2017 it had returned to its previous level, $1.5M, and Jim had to lay off almost half of the company.

It turns out that while Jim obviously didn’t “need a partner” to go out and sell, he needed someone to balance him out, and he also needed an easier path to going from managing 11 people to managing 23. People weren’t properly managed, the sales pipeline wasn’t properly cultivated, and bad results ensued.

The Headache

A short time after these layoffs Jim was at a conference and was struggling with a very bad headache. He thought that it might be due to the conference being held at altitude, but when resting in his room didn’t work he checked in with the paramedics and they found that he had unusually high blood pressure. He went to the hospital where they monitored him for the rest of the day. The next morning he was fine and brushed it off as just a possible fluke.

But a couple of months later it dawned on him that this might be symptomatic of how things had become unbalanced, and he decided to become proactive and look for a possible acquirer. While there were three suitors, he ended up selling to the company that was much much larger than his (around ten times larger in revenue) because he knew that the problems which had created the imbalance in the company would be rectified: he would get support staff for his sales efforts, and he’d be given a c-suite – a seat at the table without having the entire burden for running the company falling on him.

Don’t wait for a health scare to consider a business sale or transition. Give us a call today so that we can take a look and see what we can do to help.

Case Study #31: Skunky Business, Sweet Sale

Hemp LeafWhile it’s still an issue of tension between state and federal governments, cannabis is the base of a booming nationwide industry. That means we’re already starting to see transactions in that space. While we can’t say we are experts in this space, we are watching it with interest and wanted to share a case study with you that will illustrate it isn’t as simple a road as any might lead you to believe.

Brandon Ruth and his wife had spent some years abroad after college. They used that time as an opportunity to explore the world but also to become debt-free by living way below their means. But some time after they returned to the US, Brandon’s mother-in-law was diagnosed with cancer, and part of her treatment involved the medicinal use of marijuana. Brandon and his wife were intrigued by its positive effects and really began to learn about the product.

Regulation, regulation, regulation

When Washington state opened up the possibility of marijuana for recreational use, they were the third person to submit a completed application to become a licensed producer/processor. That’s the first stifling regulation of many throughout this story – the state won’t permit vertical integration, so you could apply to operate a storefront or you could apply to grow and process. You weren’t permitted to do both.

Now, because the state regulated the number of producer/processors and the number of storefronts they didn’t realize (or didn’t care) about the market effects.  Because there were so few store licenses issued, and so much grower capacity, by contrast, a major supply/demand disparity was created. With so many growers, the stores could dictate prices to the producer/processors.

The regulation didn’t stop there. Growers had to pay $1,000 per month for software that ensured compliance with the state, apart from mandatory insurance. Oh, and if you violated any growing conditions you would be fined per occurrence. Growers were also not permitted to have a website or buy billboard space.

No deductions

As if these conditions weren’t enough, federal law classifies marijuana businesses as operating in an illegal market, and as such, standard business deductions are not permitted, which meant that the 20% before tax income that Brandon was netting from $1M in topline revenue was essentially subject to a 75% shadow tax in the form of losing those deductions. Worse, he hadn’t paid himself or his other business partners a salary.

This was not an isolated story. In fact, the location that Brandon cultivated his product was home to many other growers as well. While many may think of large indoor warehouses when they think of marijuana cultivation, smaller operations, like Brandon’s, often operate in a hybrid outdoor/greenhouse model, growing some of the product outdoors as regular plants while keeping some varieties in a greenhouse. These other smaller growers were feeling the squeeze and after a couple years of frustration, they decided to have a big meeting. Almost 40 growers were present.


As they talked through the issues they realized that consolidation made the most sense. If there was a roll-up of existing sellers, then the current supply/demand problem could be “corrected.” Meaning, if there were only five growers in the whole state, then the stores would suddenly be in the position of having only a few choices, and would no longer be able to dictate pricing, but would probably have pricing dictated to them. One of those 40 growers had the financial backing to execute the roll-up, and before long, there were 39 deals in progress.

Now, interestingly, because of the state of affairs, the value of the business wasn’t in inventory, employees, or traditional assets. The value was the license from the state, which were no longer being issued. It was the equivalent of a taxi medallion: a license to make money, under certain conditions. The value of the “medallion” in this circumstance was being somewhat dictated by all the other deals in progress.

Thankfully Brandon stayed diligent. In an industry not usually populated by those who had studied business, Brandon stayed persistent with the buyer, pointing out the crop timeline and the importance of closing a deal by a certain date so the buyer would be certain to be able to pay for the cost of the sale by harvesting that crop instead of having to wait another year. While state regulation doesn’t allow him to disclose the terms of the sale (are you surprised by yet another regulation?) he did manage to, after clearing the business debts, make a little profit on his original investment.

And now you know that while marijuana as a plant grows very easily, business conditions are currently such as to make the business of cultivating it pretty hard.

Case Study #30: Disrupted, then Acquired

airbnbToday, everyone knows about Airbnb, but not that long ago, a little company called Homeaway, based out of Austin, was actually the pioneer in the home sharing space.

Airbnb has larger market space in cities, but Homeaway still to this day has the largest inventory of vacation homes in the world. They did this by acquiring 25 other firms, like VRBO domestically and the top 1-2 services in several key countries around the world. This allowed them to raise half a billion dollars in capital, go public, then eventually sell to Expedia for $3.9B. Not bad for helping to list vacation homes.

The Industry

The original business model put forward by Homeaway and VRBO was a subscription model: you paid to be part of the platform annually, and got to keep all the income you generated as a result. But Airbnb drove change here, as they entered the market using a transactional model, meaning neither the owner nor the renter needed a “membership” in order to rent.

This led to rapid adoption, and rather than let Airbnb gobble up the market, Homeaway (and all its acquired companies) added the transactional model as an option for those who wished to use the platform. Many owners continued to use the subscription model, as it was much more beneficial for them financially, especially in high volume areas.

While Homeaway dealt with Airbnb as a direct competitor, it also dealt with the Online Travel Agencies (OTAs) like Expedia, Travelocity, and Hotwire who saw homes as a natural complement to their platforms that already booked flights, rented cars, and offered hotel rooms.

Why not go full spectrum and add vacation homes too? For a while, they tried to compete against a company which had as its sole focus homes. Then they gave up and decided to go into a bidding war to buy out Homeaway. As we noted above, Expedia came out on top.


Ross Buhrdorf, Homeaway’s founder, noted that he didn’t really care which of the OTAs acquired Homeaway, as the Homeaway team didn’t see a significant brand difference among them. He knew that the strategy would be the same: consolidate the back offices, keep all the separate platforms mostly as they were, and add built-in functionality to the OTA platform itself.

Most of the Homeaway executive team would be jettisoned from those positions, as an OTA wouldn’t need them. So they wanted to make sure that the payout was good, and it certainly was.


  • Ross didn’t resent Airbnb’s entrance into the space he and his team had pioneered. In fact, when Airbnb showed the transactional model to be more successful, he adopted it as an option for his clients, both old and new, while keeping the subscription model that had worked over time. Never be too proud to take lessons from your competitors.
  • Ross didn’t just face direct competition. Companies with much larger financial resources and profit motive tried to replicate what he was doing. But singular focus often trumps financial resources, especially if those financial resources don’t match the singular focus. In this case, Homeaway’s focus on vacation homes beat out the better-monied OTAs who didn’t have Homeaway’s secret sauce or existing customer base.
  • Once you’ve beaten them, they can pay you. The acquisition by someone who had tried to take him down, in a way, must have been particularly satisfying for Ross and his team. Keep your head up when the competitors come at you. Focus on your company DNA and culture, keep your customers happy, and you might get a premium payout for your hard work.

Case Study #29: Replacing Yourself

Replacing YourselfSome years ago, Jim Brown started a software company called TerrAlign. This Sales Territory Management Software designed the best possible territories for sales representatives. They started in pharmaceuticals, but quickly entered into the consumer goods and medical products sectors as well. They would eventually be acquired by a fellow software company, but that couldn’t have happened if Jim hadn’t started the process of replacing himself.

Enter Ken

Ken Kramer had helped design some of the earliest versions of TerrAlign’s software and kept having good interactions with them as a vendor. So when the opportunity came for him to join the company, he took it, and started in partnerships and marketing. He was soon promoted to sales and marketing, and not long after that, was one of three employees that Jim chose to replace his functions as an owner/operator.

This is, of course, the best case scenario: promotion from within of those who have risen through the ranks on merit. They’ve had a chance to build relationships across the company which will only make taking on the new responsibilities easier.

Creative Tension

But, while an owner may be willing to delegate tasks, he might not be willing to let go of profits and cash flow. Ken wanted to use profits to invest and grow the company, while Jim focused on maintaining profitability. Ken had negotiated shadow equity as part of his promotion into the job of president, so while he was frustrated with Jim’s desire to keep things status quo, he knew that circumstances could always change.

Soon enough the ground started to shift. A competitor was acquired after it had been taken private by a VC some time prior. This changed the competitive landscape and led to MapAnything making an acquisition offer. MapAnything was also a software company, but focused on route optimization, so it was a sensible companion product for TerrAlign’s core competencies.


Ken led the transaction team, though he says if he had to do it all over he would have brought in help (like a banker or broker) to cut his learning cycle down and help him make better decisions. It also (naturally) took away his time from helping to run the business. In the end, his focus was on making sure the TerrAlign team all kept their jobs or had opportunities for new positions post-sale. The terms of the sale weren’t made public, but 1-3X revenue is a normal multiplier for slow-growth software companies.

What Ken couldn’t expect or predict was Salesforce acquiring MapAnything just a few months later. Most of the team was surprised, but given that it wasn’t their company anymore, they could hardly do anything other than try to continue on with Salesforce, which many of them chose to do.

Key Takeaways

  • As we’ve said before, apart from having a solid manual in place of how to run the business, demonstrating that the company can run without you by having a president in place makes it very easy for an acquirer to make an offer.
  • Even if you’ve had the foresight to plan for your own succession, you also have to plan for an acquisition. Jim had brought in Ken to do the former, but stifled him as he tried to do the latter, by growing the company aggressively.
  • Consider getting a broker (we’re a bit biased). As we saw with Ken, we help make the process easier, more educational, and often  more profitable.

Case Study #28: Paying the Idiot Tax

Before Uber Eats and DoorDash became the VC-backed juggernauts in the food delivery space, Kenan Hopkins had already taken his 7 figure exit from this new space with lean margins. At the time of sale his company, Valet Gourmet, was doing $4M in annual revenue and employed 50 staff in Asheville, North Carolina, and Knoxville, Tennessee.

Revenue Model

In 2011, the concept of home delivery of anything other than pizza seemed like magic. Customers loved the idea, and restaurants loved adding marginal additional revenue. The restaurants could make money they weren’t otherwise going to make (these customers didn’t want to leave their house, for whatever reason) and hence utilize unused bandwidth in their kitchens, and customers loved the idea of upgrading from *the* deliver-at-home option, pizza. Restaurants paid up to 30% of the total ticket before delivery, and the delivery drivers/riders got to keep the delivery fee plus any gratuity. Both customer and restaurant were willing to pay something to make this happen, and many companies were born out of the process.

The Idiot TaxIdiot Tax

Among the things Kenan says he would have changed would have been stopping the “idiot tax” sooner. Drivers of said tax included:

  • Having no management skills (and not urgently acquiring them)
  • Having no strategic plan (and not being more intentional about building one)
  • Using credit card debt to bootstrap the business (and not restructuring that debt sooner)
  • Having no company culture in place (and as a result having high turnover)

This all changed when Kenan read Tony Hsieh’s Delivering Happiness, about the founding of Zappos.

He realized that the company desperately needed reform from the inside out and he went to work, focusing on branding, core values, and aligning hiring practices with values like “Exceed Expectations Through Service.” Kenan particularly liked this value as it wasn’t customer service but just service which allowed the team to focus on kindness both inside and outside the company.

Accidents and a Text Message

A number of things happened nearly simultaneously which were stressful for Kenan and led him to say “enough.”

Two driver accidents happened and one driver got stabbed. Insurance covered all these situations and no one was permanently injured, but after 7 years of building, Kenan wondered, “what if” and sent a text message to a competitor in the industry:

“Would you buy Valet Gourmet for 50% of projected revenue over the next 12 months?”

The text received a positive reception, and before too long, a 50% cash, 25% stock, and 25% earn-out deal was negotiated. Kenan has learned to read his business growth really well and despite the fact that his previous year was $3.3M he felt confident he could hit $4 in that 12 month window. And he did.

Money isn’t enough

While Kenan says that he wishes he had asked to stay more involved in the business in some way, as a board member, for example, his biggest regret was not planning for having a big pile of money and no purpose. He lost himself in the lifestyle and became, in his own words, a massive jerk. It’s a theme we have discussed before, that planning for what comes after the sale is almost as important as working on the due diligence during the sale.

That’s perhaps the first lesson of many we can take from Kenan’s experience selling Valet Gourmet: Purpose matters.

While he used the exercise of adding company values and a clearer vision which drove better culture for his business, he could have taken some time to identify a core purpose within himself, which would have aligned with his business and given him some kind of roadmap for when that business went away.

The second lesson is closely connected: pay as little idiot tax as necessary.

Identify where you are weak and hire those weaknesses, either in employees, contractors, or advisors. As Ben Franklin once said, “Experience is an expensive school, but fools will learn in no other.” Learn from the experience of others rather than pay to learn yourself.

Finally, network within your industry.

Because Kenan was friends with the competition, he was able to start a sale negotiation with a text message. We can say we don’t often see such a move, but even if you don’t end up selling to the competition, being on friendly terms can often help you share important information, build a better business, and help with hiring.  Lead with kindness, but don’t let it be mistaken for weakness.

Have you been paying the idiot tax longer than you should have been?  We have access to many resources that can help you drive down and eliminate that tax altogether! Give us a call.

Case Study #27: From Side Hustle to Millions

Dog WashingAnthony Amos started playing professional rugby right out of school in Australia. But he knew he couldn’t do that forever, and anxious to build something for himself, he decided to start a dog grooming business with his brother – and not just an ordinary one – but a mobile one called HydroDog. He put an ad in the local paper on a Friday, and on Saturday morning he had nine bookings at $10 per dog. He knew he was on to something, and he and his brother excitedly went to their first appointments, accidentally bringing dishwasher detergent instead of the dog shampoo for those first nine dogs.


Anthony had never planned on washing dogs forever, but he stayed in that technical role for a long time, relatively speaking. The first six years in the business he and his brother worked “on the front lines” washing dogs while also signing up franchisees. Anthony notes that many franchisees were really edified and inspired to see the franchisors still very much “in the tools.” The business grew and Anthony and his brother soon hit 100 franchisees. “That’s fine for me,” Anthony noted, “I want to sell.”

But then he learned about master franchising, from the gentleman who had helped him set up the HydroDog franchises. He could sell territories – in the case of Australia, five states and two territories – and have master franchisors that reported to him. Within 18 months, he had sold all of Australia and hit another ceiling. He wanted to sell again.

Diligence Tests Relationships

The acquirer that Anthony found was looking for any reason to pay less than market price and used the due diligence portion of the process to do just that. This kept Anthony and his team buried in obtaining affidavits to cover documents that were missing but both parties agreed had existed. Anthony had made a practice of really getting to become friends (“mates” as Australians say) with the franchisees and master franchisees, and as a result, when this extra paperwork was needed for a sale, they were willing to do the extra work.

He couldn’t let the entire organization know, because, like telling employees before a sale is finalized, great instability could be caused. In the end, both parties got what they wanted. The acquirer got his due diligence “discount,” and Anthony got the sale that he wanted.

Not quite the end

Anthony took all the earnings he had and put them into Australian property development in 2007. The developer was US-based. You can guess what happened next. Anthony lost all that money and got lured to start HydroDog in America. He did, with the help of some financial partners. But they wanted to corporatize while he wanted to franchise and this led to his being bought out. Anthony ended up being right about the model and was able to buy back the business for pennies on the dollar when they went into liquidation.

He’s now continuing to build HydroDog, but in a new country, a little wiser but with the same hustle and passion.


Anthony, like many Aussies, is very no-nonsense, and it was his instinctive, “time to sell,” feeling that drove each of the liquidity events that he experienced. What was important to him was being true to himself, especially when he hit a ceiling that he didn’t think he could grow beyond personally or professionally, whether that was 100 franchisees or 7 master franchisees.

He also learned a lesson we’ve seen in many of these case studies: success in one field does not necessarily translate into success in others. He had grown a franchise to 100 franchisees and sold it at the top of the market, but also managed to invest in real estate development, something he knew nothing about, just before the market bottomed out.

But in another recurring theme, he didn’t feel sorry for himself and wallow in self-pity. He got right back up and went after where he had been successful before, and where he carries on today.

Apex is actively searching for top quality candidates to join our team of Advisors. If you’re interested in a career helping people buy or sell a business, think you have relevant experience, and want to find out more, please call Doug Hubler, President of Apex, at (913) 433-2303.

Case Study #26: When Ego Costs you Money

Mala BeadsAfter law school, Diana House took some time off in Bali, Indonesia, where she discovered that people were fascinated with Mala beads – meditation beads used by serious practitioners of yoga. Sensing a blue ocean opportunity, she built a website and in the very first month of business she had paid for the website and had money in the bank.

The Process

Diana used local Indonesian artisans, as well as factories in China and India to create what she characterized as “luxury yoga jewelry.” Not only was she first to market, but she really pushed the gas, using Facebook organic marketing, email marketing, and influencer marketing long before it was a common practice. She would give the jewelry to well-known yoga teachers in exchange for their sharing it with their communities.

She quickly hit seven figures in revenue and after the first year she wanted to sell. Diana is a serial entrepreneur and personally she was becoming less interested in yoga and wasn’t wearing the jewelry. A sale she pursued fell apart and she didn’t look to sell again for five years.

The Problem

Diana had too many irons in the fire, trying to run multiple businesses while also trying to organize a wedding for herself, and at one point when she asked her accountant when she should sell Tiny Devotions, this yoga jewelry company, he told her, “a year ago.” The revenue was starting to flat-line, and while it hadn’t yet started to decline, all signs pointed to complacency from the founder.

Diana knew that she was mentally checked out of the business, and in a small business, the staff feed off the energy of the leadership team. Diana had been out of operations for years and so without her attention it was simply running on autopilot. In the meantime, literally thousands of competitors had moved into the space and were competing well and driving her once 80% margins way down.

The Failed Sales

E-commerce businesses sell on average for three times normalized EBITDA. Diana used this number in early conversations with potential buyers and started three planned months of diligence with a strategic buyer that had given her a great offer. Despite having a law background, and despite seeing that there was no deposit required at time of the LOI, Diana chose to hold back on stopping things to push this deal point. She was also the one driving the due diligence process: a huge red flag. Unsurprisingly, 2.5 months into the three planned months, the “acquirer” decided to sell his company instead of acquiring hers.

At this point, revenue had started to decline and she thought she was being too smart for her own good trying to sell the business on her own. She hired business brokers to try to sell the business, but kept running into roadblocks like lack of financing, unreasonable requests during the diligence period, and even one fight between spouses about the deposit amount that killed a deal right at the start.


DespairDiana’s lack of engagement turned into despair about the business, and she started to see that her ego was goading her to sell the business because she didn’t want to be one of “those people” who shut down a business because she couldn’t find a buyer. But she realized that the mental anguish she was going through in being tied to something she no longer cared about was much worse, and she set a deadline of “sell or close down” by the end of August. It was August 1st when she made that decision, and on a whim, emailed her customer list letting them know she was planning to sell, but would have very tough deadlines to meet in order to close on time.

The last offer she got, she told the buyer that she needed a deposit that evening, due diligence to complete in 48 hours, and the deal to close in 9 days.  As crazy as those terms may seem, we have seen such deals go through on more than one occasion, and in this case, it happened for Diana, but not without a few bruises, bumps, and lessons learned.


It’s refreshing to hear people who can put their ego aside and point out things they did wrong in order to make sure others don’t do the same.

  • Sell when you’re no longer engaged. Diana did try to sell early on, but she notes she should have simply tried again, probably with a broker.
  • Sell when you’re in a good market position. Diana waited too long, when competitors became entrenched and were bringing great skills to the game.
  • Use a deadline to drive a sale. This isn’t just something you set with an acquirer, but a mental one for yourself, to drive momentum.
  • Get out of your own head. Don’t force a sale for prestige for yourself.  A sale has to be for the right reasons, not just to satisfy your own ego.

Apex is actively searching for top quality candidates to join our team of Advisors. If you’re interested in a career helping people buy or sell a business, think you have relevant experience, and want to find out more, please call Doug Hubler, President of Apex, at (913) 433-2303.

Case Study #25: Leaving Money on the Table

Leaving Money on the TableNathaniel Broughton started Spread Effect in 2010 and sold it in 2014.  Spread Effect was a content middleman. In an era in which content is increasingly king – be it video, audio, or text, Spread Effect helped companies and agencies who wanted content placed or produced do so by working with an extensive network of publishers, featuring everything from travel, to sites about entrepreneurship, to the classic “mommy blog.”

The Business Model

By the time he sold it, he had grown the company to $4M in annual revenues.  The margins were between 18-25%, and while the operations were lean, they were generally intense.  There was maintaining the database, which involved keeping up with software and usability between the different publishing sites that Spread Effect had access to.  There was also the team of representatives who not only maintained relationships with publishers but did outreach to gain new ones.  Most importantly, there was the writing and producing of content itself, which was the most expensive part of the business, especially since the company framed itself as featuring premium content, not the type that you can get on Fiverr or Upwork.

Next Steps…

Nathaniel was happy that he had a functioning business model, but it began to dawn on him that the margins were fairly fixed, and while he was operating in software, the business couldn’t scale like software.  This was because there was really a lot of human grunt work involved that couldn’t be automated or turned over to AI. There was also the limited number of publishers. Even if he should want to scale up the team to handle more work, it would mean the need to find a significant number of new publishers, and there is a limit, even on today’s seemingly infinite internet, of quality websites producing quality content.

Nathaniel realized that if he ever wanted to sell, he would have to find someone who was interested in buying the company in its present state as a lifestyle business, or an entity who wanted to use the database (and his team) as part of something bigger that they were already doing.

Already Moved On

While he was coming to this realization, Nathaniel was already consulting with a private equity firm and was helping to do acquisitions.  In his heart he had already moved on, and as such, lost any desire to hold out for a potentially long sales process.  He priced the business “cheap” (in his words) at only one times net income, when he could easily have gotten 1.5 or maybe 2 times, because he was focused on something else.  The company sold right away, and some who learned about the sale later on told Nathaniel they would have easily paid more, if only they had even known about the opportunity.


  • When you choose to sell a business quickly, you often necessarily sell it cheaply, and leave money on the table that you could otherwise have kept.
  • As such, make sure that you have an exit strategy that doesn’t rely on you as a single point of failure or decision so that you can get more money when you exit.
  • While there are some people who manage multiple companies, and do so well, many of us lose focus (and profitability) when splitting energy.  Sometimes, like Nathaniel, we have to make a decision that causes short-term pain but may have long-term benefits. If you constantly begin with the end in mind and continue to refine that end as you build your business, you won’t be caught off guard by a loss in focus or energy, in whatever businesses you are building.