How our client created value and sold for $60M

How our client created value and sold for $60M

Being a business owner is an exhilarating journey filled with highs and lows, triumphs and challenges. Yet, entrepreneurship’s true essence lies in running a business and creating value daily. One of our clients sold his business for $60M in 2022. When I learned the secret of a successful merger or acquisition transaction, I knew you would want to know the strategy used to sell for top dollars. Ready to learn about our client-created value and how he sold his business for $60M?

As a busy entrepreneur, you’ve likely experienced moments of anticipation and hope when launching new products or services, aiming to generate more revenue and hoping for their success. However, relying solely on the “create-and-pray” method, where one launches offerings and hopes for the best, is akin to leaving success to chance, especially when the need for a consistent paycheck looms overhead.

Your business should not only provide a paycheck; it should be a strategic endeavor to create value and enhance profitability.

While it may be challenging to acknowledge, it’s essential to recognize that all businesses, regardless of their size or industry, will eventually face the reality of being sold, liquidated, or given away. Therefore, the key to sustainable success is actively creating value, as failure to do so ultimately leaves potential revenue on the table.

To achieve this, here is what our client did years before he sold his business for $60M:

1) Creating a unique offer

Your business should boast a unique and compelling offer that differentiates it from competitors. Whether it’s a revolutionary product, innovative service, or distinctive approach to solving a problem, differentiation is key to attracting and retaining customers in a crowded marketplace.

Our client had a specific niche in a specific territory, serving clients in various languages via call centers in another part of the globe. The business that acquired our clients had established that developing this specific market would be more expensive than doing an M&A transaction.

2) Getting profitability after paying yourself and a management team

You can’t not sell a business if you are THE business. If you manage everything (customers, employees, and suppliers), it will be impossible to sell your business.

You need a management team, and you need to pay yourself! Our client, who sold for $60M, had a solid management team in place, and his key employees and himself received salaries higher than the market’s offering.

So remember that true success lies in ensuring that your business remains profitable even after you’ve paid yourself. This signifies financial stability and sustainability, allowing for reinvestment in growth initiatives and personal financial security.

A few years ago, we were approached to sell a family business. That was impossible to sell. WHY? Because the owner and her father worked there full-time without being paid. Since the new owner would want to get a salary and replace the other position (her dad had a strategic role in the business), we had to add both salaries to establish the new business’s value — and we ended up with a negative EBITDA (negative EBITDA = the company’s operating expenses are higher than its revenue, resulting in a negative operating profit).

What to pay yourself may be one of the most controversial issues for business owners. According to Payscale, U.S. small business owners make, on average, $70,300. Many company founders take zero salary in the first years of running a business, while others take so much that they have trouble scaling their business. 

3) Building recurring clients

Cultivating a loyal base of recurring clients is essential for long-term success. By delivering exceptional value and fostering solid relationships, you can retain existing clients and attract new ones through word-of-mouth referrals and positive testimonials.

Here are some questions we have been asked during our client’s due diligence to confirm recurring revenue:

  1. What is the composition of your recurring revenue streams? (e.g., subscription fees, monthly contracts, service agreements)?
  2.  Can you provide historical data on the stability and growth of your recurring revenue over the past five years?
  3.  What percentage of your total revenue comes from recurring sources, and how has this percentage trended over time?
  4.  How do you calculate customer churn or retention rates for your recurring revenue streams?
  5.  Are any contractual obligations or terms associated with your recurring revenue agreements, such as minimum contract lengths or automatic renewal clauses?

4) Running autopilot operations

Implementing systems and processes that enable your business to run on autopilot is crucial for scalability and efficiency. Streamlining operations and reducing manual intervention can free up time and resources to focus on strategic initiatives and growth opportunities.

Are you the one managing customers, employees, and suppliers? If your answer is yes, your business value will decrease.

Remember, success in entrepreneurship is not about leaving things to chance. It’s about taking proactive steps to create value, enhance profitability, and ultimately achieve your endgame goal.

Ready to create a profitable or sellable business? Don’t miss out on our upcoming FREE Masterclasses designed to empower entrepreneurs like you on the path to success. Join us for next week’s The Profit Path Workshop and take the first step towards building a profitable and sellable business! 👇

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