How Mainspring Went From a Valuation of 1 to 5 Times Revenue
September 20, 2017 |
Want to increase the value of your business by up to 71%?
Take the 13-minute survey and get your Value Builder Score
About this episode
Subscribe:
In 2014, Hank Goddard got an offer of one times revenue to buy his software company, Mainspring Healthcare Solutions.
Goddard said, “No, thank you”.
A year later, the acquirer came back and doubled their offer to two times revenue. Again, Goddard declined.
It wasn’t until the acquirer came all the way up to five times revenue that Goddard agreed to sell.
In this episode, you’ll learn:
- How to get an acquirer to quintuple their offer
- How to structure employee stock options (structure vesting, etc.)
- The biggest mistake to avoid when hiring “C-level” leaders
- The definition of a preferred share and how venture capitalists use them to wipe out founders
- How to get employees to buy in when you need to pivot your business model
- When to strategically ignore acquirers
Goddard shifted Mainspring from selling perpetual software licenses to a Software-as-a-Service (SaaS) model that enabled him to maximize the proportion of Mainspring’s sales that were recurring—a key driver in getting five times revenue for their business. Have you figured out your recurring revenue model yet? If not, you’ll nail it in Module 5 of The Value Builder System™. Get started for free by completing Module 1 now.
About Our Guest
Hank Goddard is an entrepreneur and investor based in Boston, Massachusetts. Over the course of his career, Hank has designed jet engines, made a living flipping houses, acquired and sold multiple companies, and built companies from scratch. Hank’s most recent operating role was the CEO of Mainspring Healthcare Solutions, one of his portfolio companies that had been under performing. He took the company through a restructuring and turnaround, grew the business five-fold, and sold it in early 2016 at a very healthy multiple of revenue.
Related to this topic
The first time David Phelps sold his dental practice, he ended up in a legal battle that cost him more than $100,000.
From Paper Sketches To $441M Sale
Oribe sold in early 2018 for $441M, but in 2008 they were just a few sketches of shampoo bottles on a piece of paper. Tev Finger shares the surprising tactics they used to drive revenue.
The Backstory Behind Dream Water's $34.5M Exit
David Lekach started Dream Water; a natural sleep aid bottled in a 5 oz shot similar to the famous 5-Hour Energy Drink.
Lekach built Dream Water up to almost $10 million in annual revenue before selling it to Harvest One, a cannabis company, for $34.5 million in cash and Harvest One stock.
America’s Condom King Sells His Business
Adam Glickman started hawking “Jumbo Brand Condoms” from his dorm room in 1989 under the moniker “a safe jumbo is a happy jumbo.” His brand grew and upon graduation, he started America’s first retail condom shop in New York City.
Built to Flip: From Start Up To Sell Out In Just 2 Years
After a motorcycle accident shattered Jon Read’s collar bone into 6 pieces, he wasn’t able to follow-through on his post-surgical rehabilitation appointments because of his busy travel schedule. So, he created an app.
The Founder of the “Female Viagra” Sells Her Business for $1 Billion
Cindy Whitehead started Sprout Pharmaceuticals and created the drug ADDYI, which has become known as the “female Viagra”.
Is Your Business Worth Less Than You Think?
Bert Martinez started Accelerator, a supplements company. When Martinez started to worry that one of the supplements he sold, ephedra could be banned, he put his business on the market, only to realize it was worth a lot less than he thought.
Why Policy Medical Got 7.2 x Revenue
Saud Juman built PolicyMedical, a company enabling hospitals to document their procedures and policies, into a software company growing 100% a year when he sold it for 7.2 times revenue. It was a remarkable exit for a business Juman started in his mother’s basement.
into a profitable business after year one. Ten years later he sold Merced for $192 million, equating to over 3 times top line revenue.
How One Founder Moved Her Multiple From 2 to 8 Times EBITDA
Dr. Kristin Kahle helps businesses pick a benefits program for their employees.
She started three insurance agencies and the first two were service businesses that sold for a modest 1.5-2 times EBITDA.
With her third business, Kahle wanted to attract a higher multiple, so she decided to transform it into a technology company.
How To Sell Your Family’s Business
Ross Organic was a family business, so when Stephanie Leshney took over from her father, she knew she had to make some changes if it was going to grow into a more valuable company.