Jim Fitzgerald did everything the conventional wisdom told him to do. He bootstrapped Taradel from a spare bedroom into a $30 million direct mail company, made the Inc. 5000 twelve years running, and plowed every spare dollar back into growth because, as everyone kept telling him, buyers pay for growth. Then his banker took the business to 100 potential acquirers, and the five who bothered to make offers all came back at roughly 4x EBITDA. Half of what Jim thought his company was worth, and one buyer wanted to pay for half of it in shares of its own privately held company.
Jim said no thanks and went back to work. He started treating profit as seriously as growth, took cash off the table so he couldn’t keep reinvesting it, and built a team that could run the business without him. The second time around, nine buyers lined up, and he sold for a low eight-figure sum, all cash. In this episode of Built to Sell Radio, Jim explains what changed, and you discover how to:
- Stop sacrificing your margins to impress acquirers who will value you on profit anyway
- Spot the self-deception that convinces owners a buyer will “see past” lean EBITDA
- Know when a cluster of offers is the market talking, not buyers colluding to lowball you
- Make your company more efficient simply by leaving less cash lying around in it
- Walk into a management meeting ready for questions about the future, since buyers already know your past
- Hold your ground when a big partner’s bureaucracy threatens to stall your closing
- Keep your team motivated with phantom equity without handing out a single real share
Watch the full episode below.
Quote of the Week
I was convinced that my ability to grow the business was the catalyst for a higher valuation. That’s when I learned it’s not just about growth. You need to make money too.
Jim Fitzgerald, on why his first attempt to sell Taradel drew offers of about 4x EBITDA, half of what he expected.
Curious what an acquirer might think of your business? Let’s take a look.
Deals
Proscia, a software company that helps hospitals and pharmaceutical labs manage digital pathology slides, AI tools, and lab workflows in one platform, was acquired by Agilent Technologies (NYSE: A), a global leader in life sciences and diagnostics, for $240M upfront plus up to $30M in performance-based earnouts. Proscia generated over $18M in trailing revenue, implying a valuation of more than 13x revenue.
