Archive for category: Case Studies

When Dr. Joseph Marchell started Old Brown Dog Veterinary Partners he was a broke, in-debt recent college graduate. But he took six months working at a private equity firm, observed what was going on in the marketplace, made moves, and bet big. In the end, he achieved a 28X EBITDA exit for the entity he helped to build.

Inefficient Markets

Joseph is the son of two veterinarian parents so he very much believes in helping animals, but he also has a real eye for business, and his first job out of school was not understudying with one of his parent’s practices, but rather working in private equity, helping to identify veterinary practices that could be bought and packed up into a larger entity with more value after operations had been streamlined and professionalized.

Indeed, because many vets are focused on animals and not spreadsheets, they end up functioning like solopreneurs and hence there are lots of inefficiencies that PE can improve, including that lowest-hanging of fruit, underpricing.

One More Leap of Faith

As Joseph continued to see skyrocketing values for veterinary practices he was evaluating for purchase at his PE firm, he brought his work home and had a conversation with his parents, talking about the value they currently had and how much more their business could be worth if it was part of a tactical roll-up. They were cautiously optimistic and before too long, Joseph created Old Brown Dog as the entity for this project.

While that entity was originally going to get funding to go out and get deals, Joseph had his hands full creating efficiencies with the three practices the entity acquired (his parents’ practices and another). Because he took the time to bring in a professional operations manager and someone fully in charge of HR, Old Brown Dog started seeing more profitability right away, leading to an even better possible multiple of EBITDA.

Further, Joseph was ultimately de-risking all these practices by putting people in place that reduced the key man burden on the practicing vet. Indeed, once all those functions had been hired, even the vet himself could leave and the practice could continue on with a new doctor. The mom-and-pop one-off practices were becoming part of a well-oiled machine.

22 NDAs, 8 LOIs

Joseph was working as a vet in these practices as well as working on the business so he knew he couldn’t also take it to market. At least…he realized that after he tried it first. When he realized he was in over his head he brought in an M&A advisor who took the business off the market and cut all lines of communication off with interested parties so that the adjustments to EBITDA were crystal clear and so that Old Brown Dog could craft the narrative for selling.

Once it went back out into the market, 22 NDAs led to 8 LOIs. Joseph took the three best and asked them to come back with their best and final offer. When the dust settled, he had sold the business for a value far beyond his parents’ wildest dreams, and right in the zone he had hoped for.

Key Lessons

This case study offers three helpful lessons:

• Control the narrative: when asked why he was selling the business, Joseph was able to point to his limitations which were opportunities for a buyer, namely capital investment in buying other practices and hiring investment in getting HR and operations people in place as the roll-up continued. This allowed buyers to see where they could add value (and what that value could add up to). 
• When the market moves, so should you: even though he had only been working in PE for six months, Joseph saw an opportunity for arbitrage and value creation by bringing efficiencies to what he had seen since his childhood: an inefficient market of veterinary practices. He didn’t wait to get more experience. He pounced, and was handsomely rewarded.
• Savings are everywhere: even when you have an eye to sharpening pencils and cutting costs, there are always cost savings to be had. Even if you don’t plan a roll-up or plan to be part of one, there is a direct relationship between cost savings and the valuation of your business.

Considering a roll-up in your industry? We’ve helped others put those together before. Give us a call.

When Jaclyn Johnson had a $40M all-cash deal for her events company, Create & Cultivate, implode at the 11th hour, she didn’t fall apart. She took the lessons she learned to get an 8-figure exit just a couple years later.

Side Project Becomes the Main Project

When Jaclyn created Create & Cultivate, she already had a marketing agency that kept her busy most of the time. What she was looking for was not in the marketplace: a community specifically for female entrepreneurs. It was a side project but also functioned as a development tool for her agency. The project wasn’t making money, but it wasn’t losing it either. Jaclyn partnered with corporate sponsors and charged a minimum fee in order to focus on building a community rather than an income stream.

When her agency was acquired by a strategic buyer, she was on the hook to consult with the new owners for a year, but in the meantime she also brought in a strategic co-founder for Create & Cultivate and together they decided to take this fun project and really go for it. Soon they were co-branding events with companies like Marriott (who were excited about bringing a lot of women to their newly redesigned properties). These events served as feeders for larger conferences run by the C&C team.

The Deal Blows Up

Jaclyn’s co-founder was going through a transaction for her own company and told Jaclyn it might be a good time to exit from C&C also. Everything was on track until signing day, when the deal fell apart. Keep in mind that Jaclyn had given up the lease on her office space and told senior team members about the sale. The big problem? Jaclyn was too involved in the day-to-day operations and hadn’t removed herself from the scaffolding. The buyers were (understandably) worried about what would happen if she disappeared. The $40M all-cash offer, which represented a strategic valuation of 20X EBITDA and which would make her the head of a publicly-traded company evaporated in an instant.

 

Jaclyn went right back to work. She built a C-suite, got ambitious about having a big exit (for real this time), and focused on recurring revenue, one of the most important value drivers of any business. In the case of C&C, that recurring revenue came in the form of a digital membership that gave access to gated content and members-only events.

The World Blows Up

Six days before an event at SXSW in Austin in 2020, the city holds a press conference to say the event will not be happening. At first Jaclyn was in denial. The cancellation of an event this late was going to represent a financial bloodbath for the company. As she was working through the process she was talking about scaling back events a few months out, but gearing back up for summer 2020. But her team members brought her to the new reality: those sorts of events weren’t coming back for a while, maybe even for years.

Just as she did with the failed first acquisition, Jaclyn got to work instead of feeling sorry for herself. In May 2020, she launched a digital event, with over 10,000 attendees who sent over 50,000 messages in the Slack for the event. By pivoting quickly to digital events, Jaclyn and her team helped lead the way in this relatively new space and by the end of the year the company was on the same EBITDA despite being on lower revenue.

Second Attempt at a Sale

Having been fortified with a blown-up deal and a formerly blown-up business model, Jaclyn was prepared to go to market again. She ended up with a $22M cash-heavy deal which bought out her partners completely and allowed her to roll a portion of her proceeds towards equity in the new company. She also took a portion of the proceeds in a performance-based earnout. Sure, it wasn’t the original offer she got years back, but a valuation only matters if a deal closes, and part of why that deal didn’t was because Jaclyn didn’t have the right value proposition in place. The next time around, she got 22 million validations for putting in the hard work.

Lessons

Some great takeaways from Jaclyn’s story include:

• Don’t mourn, pivot — instead of crying about the once-in-a-generation impact of Covid to an events company, Jaclyn went to another medium in the same business and capitalized on people’s hunger to continue to learn and connect despite lockdowns.
• Built systems — when the seller is deeply involved in the day-to-day operations, it means the buyer is buying a job, not a business, and that’s a smaller buying pool with smaller numbers.
• Be genuine and see what develops — all this came about because Jaclyn was interested in solving a genuine problem — more forums for female entrepreneurs to connect — and built a sturdy foundation for that. Because she did that work, it became easy to monetize it later on.

Are you concerned you’re a bit too involved in day-to-day operations to offer a credible sale to a buyer? We can help you change that narrative. Give us a call.

When Ron started Two Maids and a Mop (now Two Maids), he was focused on finding an industry that was broken but still presented an opportunity for a company to sustain itself and grow. Many years later, in part due to a chance conversation with Fred DeLuca of Subway fame and a random sighting of a yacht at Key West, he was able to get an exit he could be proud of.

Recurring Revenue

In the early 2000s an industry that looked broken to Ron was residential cleaning. He saw a fragmented landscape with lots of mom and pop operators and not a whole lot of efficiency. But he knew that if he could gain clients, he could latch onto a dream for many business owners, recurring revenue that over time can grow like compound interest. A $150 house cleaning in that frame isn’t one-off revenue, but one that can repeat twelve or in some cases 52 times a year.

Influenced by Seth Godin’s Purple Cow, which emphasized standing out among other businesses, Ron started with a business model that allowed people to pay based on how satisfied they were with the cleaning. As he told this story to potential customers, as well as his goal to spread this sort of satisfaction-based cleaning to other parts of the country, people listened and hired him. While some gamed the system, and Ron eventually transitioned to a standard pricing model, the “purple cow” method definitely helped him get traction early on.

SEO

Back in 2003, most people and businesses had no idea what SEO, Search Engine Optimization, was. It was possible to create content that was locally relevant and within days you would be ranking well within Google and other search engines. Since most businesses didn’t know about SEO, neither did cleaning companies, and this SEO strategy was key to getting Ron’s second and third stores up and running before he saw franchising as a way to grow the company, using areas with the least SEO presence as opportunities for the biggest land grabs.

Mentorship

While Ron wasn’t entirely thrilled with franchising, he did want to learn how to do it better, which landed him at a conference. He took a break during one of the sessions and met a man sitting outside who struck up a friendly conversation with him. Soon enough, he had introduced himself as Fred Deluca, whose Subway chain had 42,000 franchises at that time. Suffice it to say Fred learned more in that conversation than he did at the conference!

One of the lessons Fred shared with him later (they would go on to have more conversations in the months and years that followed) was the importance of balancing franchisee requests with company profitability. In essence, franchisees would often come with great ideas that would often help make their lives easier, but didn’t necessarily make them or the franchisor more money. Fred warned Ron against being bogged down in dealing with these ideas instead of the larger strategic work he could do running the company.

Exit

Thanks to Fred’s mentorship and hard work from his team, Two Maids and a Mop continued to grow, and by 2021 had 91 locations nationwide. Around this time Ron’s mother-in-law had a really negative experience with a moving company and as Ron searched around the Internet he found that her complaints correlated with those of many in different markets. As he googled around, he found that same excitement at the opportunity Two Maids and a Mop had offered him so long ago: a chance to make a difference (and a profit) in a broken industry. That original excitement for home cleaning had fallen into routine for him and he realized it was probably time to make an exit.

Around the same time he had taken a trip down to Key West and had seen a particularly beautiful yacht that had so interested him that he went down an Internet rabbit hole trying to find out its owner. It turned out to be owned by a company that bought businesses like Ron’s, those involved around home services. While he wanted to go hat in hand to try to offer Two Maids and a Mop as an acquisition to this company, his business broker (wisely) suggested he take it to market and allow other people a chance to buy it.

Home Franchise Concepts (the owner of the yacht) ended up being one of the three finalists looking to acquire Ron’s company and when one of the rivals for the bid gave Ron an amazing offer with a ticking clock, Ron went to Home Franchise Concepts and told them that he would rather sell to them, as they were more aligned with values and would likely treat the company the way he wanted it to be treated. Home Franchise Concepts did what they needed to in order to counter the offer and Ron ended up selling to them, not so he could rest on his laurels, but so that he could go on to found Pink Zebra Moving, paying homage to Seth Godin for the ideas he gave him so long ago.

Lessons

Three key lessons Ron shared with us:

1. Be willing to be a purple cow. Ron saw that there were many players in the home cleaning space and he wanted to differentiate himself. His unusual pricing strategy caught fire and allowed him to develop a customer base.
2. Seek mentors. Ron’s attendance at a franchising conference allowed him to make a valuable connection that had a significant impact on how Two Maids and a Mop developed.
3. Always take your business to market first. Even if you have a preferred buyer (and you end up selling to that preferred buyer), you’re never going to regret taking your business to market so that you can validate the value and create an atmosphere of demand and desirability.

Are you looking to create a purple cow effect in your own industry? We’d love to brainstorm with you on how to do that. Give us a call.

Jason Bagley sold his South-African-based cold email lead generation company, Firing Squad, to an American marketing agency but lived to regret the deal when he realized that the contract he signed didn’t give him what he expected.

Cold Emails

Most people don’t like writing cold emails. They know that it can work, but the stress and pain involved in writing them is enough to discourage them from pursuing it.

That’s where Jason and his team came in. Originally oriented as a web design firm, Firing Squad simply didn’t have enough recurring revenue and to dig them out of this hole Jason looked at his top recurring client and saw that it was an email newsletter business. He decided to pursue emails a bit more narrowly and almost in prophecy, wrote a number of cold emails to offer businesses help with a cold email service.

“How do we know this is going to work?” Many of the business owners unironically asked Jason when they had their appointment.

“You’re sitting here based on a cold email, right?”

Fair enough.

Secret Sauce

Jason was the top writer of these cold emails, but he knew that he had to pass on his knowledge to team members in order to scale. He did this through Looms or live video chats in which he would explain why something needed to be changed. An example he shared of a change he would frequently push was closing with a question.

Emails might end with “Let’s have a chat.”

“That’s not a question leading to action,” opines Jason. Go for a close, like “Can we chat?”

Little tweaks like these led to better success rates for his emails.

Apart from writing, Firing Squad’s secret sauce included how many emails to send and who should be targeted.

Challenges and Scaling

While Jason and his team were experiencing success, they still felt like they were on the same revenue treadmill that they were on when solely working on web design.

In the best cases, they created so much new business that the companies that hired them turned off the service because they couldn’t handle any more new leads.

In the worst cases, they only were able to get a few leads for the clients, making it not worth the client’s money or the team’s time.

Jason thought expanding into the US market might help him find a balance between these two types of clients and started having conversations with US-based businesses around referral partnerships. One of those conversations took a turn towards acquisition.

Jason knew that given how much he was still involved in writing the emails, he didn’t really have a business to sell as much as he could offer himself as a kind of acquisition. 

Looking for Upside

So Jason offered Firing Squad lock, stock, and barrel, in exchange for some base pay and some equity in the acquirer. After some negotiations, they agreed, but one of the deal points included significant price increases for the South-African-based clients. By significant, that meant tripling the prices.

Jason played the “we got acquired and the acquirer has forced us to do this” and after some grousing, a lot of the existing clients came along — which also offered an unexpected insight into how underpriced those services had been.

Jason was fine with working for the acquirer as long as he knew that at some point when he chose to leave he would be able to cash out what he had helped grow. Except that’s not the deal he signed.

Read the Fine Print

Jason had wanted actual equity, not shadow equity that evaporated when he left the company. The problem is that he got the latter and his lawyer hadn’t told him that he hadn’t received the former because he never clearly explained what he wanted to his lawyer.

Worse, the agreement was subject to US laws and Jason didn’t want to fly to the US to fight a court case. He chalked up the mistake to inexperience — avoidable inexperience — and went on to found another company.

Lessons

Three key takeaways here:

1. Clearly communicate with your lawyer. He/she is paid to review paperwork, but can only offer you good advice if you are crystal clear on the outcome you want.
2. End prospecting emails with a clear question with a bias towards action, rather than a lukewarm suggestion.
3. Recurring revenue is king. 

Need someone to help you read the fine print? We know good lawyers who can help. Give us a call.

When Mike Winnet quit his job to start a new business, he really didn’t know what field he would be going into. He started searching for jobs and noticed that 90% of them were asking for effective time management, clear communication, and great team work. But there weren’t certifications for these skills. He thought about what he would do if he was looking to acquire a particular skill: look on YouTube. When he started to research the e-learning space he wasn’t too impressed. So, E-Learning Heroes was born.

Taking Down Your Own Industry

If you ask Mike about what was wrong with e-learning when he started building his company, he won’t be shy. He said that the big players were creating courses that were:

• Too long 
• Too boring
• Designed by nerds for nerds
• Expensive

Worse, a lot of these companies pitched e-learning as a be-all and end-all. But Mike and his partners disagreed. Real learning is experience, in the field, shadowing, etc. What e-learning could do very well is prepare people for experience or recap experiences. It could not possibly substitute for experience.

So not only did E-Learning Heroes seek to counter all these problems, they also engaged in digital marketing that actively made fun of these issues, leading with videos like “Here’s what’s wrong with e-learning.” Understandably, these videos got a lot of attention from potential customers and a lot of bad will with competitors, though they would eventually come around in their own way.

So, E-Learning made their videos:

• Shorter. Instead of 1-2 hours, a “course” could easily be 5-6 minutes
• Interesting. Instead of trying to cover a lot, often a course focused on 1-2 things.
• Fun to watch. Instead of having nerds in a lab come up with courses, they really looked for compelling instructors.
• Inexpensive. Instead of selling “per head,” which Mike reasoned would punish companies for growing, he charged per course.

In addition, he didn’t make companies sign lengthy contracts that were difficult to get rid of. His cheaper pricing also allowed companies that were unhappy with their current solutions to give E-Learning Heroes a “test drive” while finishing up an existing contract and that test drive often resulted in a company switching over to E-Learning Heroes completely when their contract was complete.

Being Intentional

Before Mike sold, he was doing $140k in Monthly Recurring Revenue (MRR) and an annual profit of $400,000. He didn’t have a particular passion for e-learning (he had just seen a hole in the marketplace), he didn’t want to create an ongoing brand in the e-learning space (he was happy to let others do that), and most importantly, he felt that if he was able to build such a business with no experience and no real financial resources, it would only be a matter of time before one of the big players came in. So, he was always open to an acquisition.

Turns out it would come from one of the partners that E-Learning Heroes developed along the way. As part of his intentionality, Mike made sure his courses were compatible with the platforms of existing big players so that a potential future acquisition would be easier. When partners demanded exclusivity Mike would always give the same answer: “Buy us.” It turns out that some of those partners did take him seriously and he ended up selling. The company eventually sold for roughly $10M just under three years from when Mike started it.

And those competitors that Mike made fun of in the early days? They changed their pricing and course models to emulate the path E-Learning Heroes paved.

Lesson

Mike’s got such an awesome story: he helps remind us that there are businesses and ideas just waiting to be created. Here are three takeaways:

1. When Mike first packaged his courses, he was aiming at job-seekers. He thought these skills would help them land jobs. Priced at around $50, he managed to sell zero. But when he took the exact same courses and pitched them to HR professionals and other similar decision-makers at companies, he sold 340…at $10,000 each. He had the right product, but was pitching the wrong people at the wrong price. Pivot and win.
2. Mike loves guerilla marketing and one of the ways he got the attention of some of the top companies in the UK (where E-Learning Heroes was based) was sending a personalized animated video to each of them. Because it was such an unusual approach, and because he had taken the time to do something fun, Mike got a 50% close rate on this initial outreach.
3. Another aspect of guerilla marketing was Mike’s time efficiency (he was living his courses!). He would make a list of the questions he was answering in sales calls and then do videos answering those questions. He’d then post them on LinkedIn and other relevant platforms. He did what so many business owners dream of doing but fail to do: multiply themselves.

We don’t have any e-learning courses for you yet, but will a podcast do? Check them out here.