Built to Sell Radio

John Maddox co-founded the digital agency Ten Fast Feet in the depths of the financial crisis. Despite his timing, Maddox was able to grow the business to $2.3 million in sales by 2013, when he got a call that would change his life forever.

If you have ever put a label on a sippy cup, chances are Julie Cole’s company, Mabels Labels, produced it. Cole and her three partners built Mabel’s Labels into a $10 million business providing labels for kids’ clothing and accessories before being acquired in early 2016 by C.C.L. Industries, the parent company of Avery Labels. Cole and her partners were able to add hundreds of thousands of dollars to the price they got for their business using a negotiation technique called “normalization” – listen to find out how.

Natalie Susi started Bare Organic Mixers to supply low-cal cocktail mixers to bars and restaurants in southern California. Susi got her product into 300 locations before she decided to sell her company to a strategic acquirer in the organic foods industry. In order to maximize her take from the sale, Susi had to decide whether she was offering an acquirer the chance to buy her company or her product.

Aaron Houghton sold iContact in 2012 for $180 million. The first round of growth was financed by something called convertible debt, which Houghton recommends to any entrepreneur for its simplicity. To hear how Houghton parlayed an initial investment of $250,000 into a $180 million exit.

In eight years Ryan Born built Audio Micro, which began operations in his spare bedroom, into an Inc. 500 company. Born went on to sell his business for more than $20 million in 2014 – a deal that only happened because he had the foresight to put an expiry date on the "no shop” clause on his Letter of Intent.

Jeff Hoffman sold Competitive Technologies, a business intelligence company serving the travel industry, to American Express in a nine-figure exit. After the Letter of Intent (LOI) was signed, American Express proposed paying part of the acquisition in an earn-out, and you’ll never guess what Hoffman did next.

Most financial acquirers will arrive at an offer for your business by calculating the profit they expect you to make and deciding what they are willing to pay today, for your profit stream in the future. Because you are competing with lots of other places that the acquirer could invest their money, multiples are usually in the low to mid-single digits of your pre-tax profit. A strategic acquisition is an entirely different animal. A strategic acquirer will value your company based on how much more of their product they can sell, which is exactly what Business Objects (now SAP) did when they bought Nick Kellet’s business, Next Action Technologies, for more than eight times revenue.

Yvonne Tocquigny built her Austin-based advertising agency up over 35 years working with clients like Jeep, Dell, Hitachi, USAA and Caterpillar. Then in 2015, she got a call from New York wondering if she would consider selling. The problem was that her agency had become part of who she was. She had become something of a local celebrity and an inspiration for young female entrepreneurs in Austin. In selling, Tocquigny feared she would give up part of who she had become.

Trevor McKendrick had created the best-selling Spanish-language Bible app when he was approached about an acquisition offer. Salem’s original offer was 3.5x revenue but Trevor got them up to 5x with a combination of chutzpah and a knack for reading the fine print.

Stephan Spencer went to sell his consulting business in the late 1990s but buyers all wanted him to sign up for a long, painful, and risky earnout. Keen for a clean exit, Spencer took the business off the market and set out to make it less dependent on him personally. In the episode, he details the three unique strategies he pursued for withdrawing from the day-to-day operations of his business. By 2010, Spencer had the business running so independently that at one point he was able to take a six-month sabbatical. That’s when he knew he could sell without such a lengthy earnout. Ultimately, Spencer sold his business to Covario in 2010 for a combination of cash, stock and a six-month earnout—an earnout so short it's almost unheard of for a marketing services business sale.