Sue Bryce had always dreamed of selling her photography education membership website, so when she received an inquiry offer from a private equity group doing a rollup in her industry, Bryce was excited.
Along with the website, Bryce’s company had several other revenue sources, including conferences, awards, and accreditations for photographers. All told, they were doing almost $7 million in revenue, and Bryce figured she had a shot at hitting her number.
The private equity group offered Bryce and her partners $8 million ($6 million in cash and $2 million in equity) for her business. After some deliberation, Bryce and her partners agreed to the deal, and a period of diligence began.
The acquirers didn’t like what they found.
Bryce’s sales had plateaued, and the partners had recently invested in a number of pet projects, which had reduced the company’s historic profitability. As a result of what they discovered in diligence, the private equity group dropped their offer to $5 million, with signs that it might go lower as diligence continued.
Bryce and her team decided to call off negotiations and focus on building the value of their company. They specifically took four steps to jack up their value:
- Assign a CEO
Bryce and her three partners agreed they needed to align their management team, so instead of four partners hashing out every idea, they assigned one partner the responsibility of being the CEO and day-to-day operator of the business.
- No New Projects
The partners agreed to get good at saying no. They realized they had wandered off into a variety of pet projects, which had sucked cash and attention out of the core business. Instead, Bryce and her partners decided to say no to all new ideas.
- Professionalize Sales and Marketing
Bryce has a magnetic personality, and her name has instant cache with photographers. As a result, her Facebook account produced a steady flow of leads, but it was too dependent on Bryce herself. The team realized how dependent they were on Bryce for filling the top of their sales funnel, so they made some key hires in the areas of sales and marketing and built a sales process that no longer required Bryce’s involvement.
- Create a New Voice
The team decided to launch a new podcast featuring success stories of photographers in their community. Given her profile in the industry, Bryce was the natural choice to host the show, but the team knew that would undermine the value of their company, so they decided to invite Sue’s protege, Nikki Closser, to be the new voice of the business.
The changes worked. Two years after turning down the reduced $5 million offer, Bryce and her partners accepted an 8-figure acquisition offer.
