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How to Handle an Acquisition Offer from a Customer

October 30, 2020 |  

About this episode

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In 2015, Nathan Hirsch and his partner started FreeUp.com, an online marketplace of virtual assistants. Four years later, Hirsch and his partner were billing more than $12 million when they received an acquisition offer from a customer they couldn’t refuse.

There are some transferable lessons in this episode, including:

Create a Positive Cash Flow Cycle: Hirsch billed clients upfront and paid his freelancers days later, so the faster they grew, the more cash they accumulated, which enabled them to avoid raising outside capital.

Diversify Your Customer Base: FreeUp’s largest customer amounted to less than 5% of their revenue, meaning they were never beholden to a single customer. It almost meant that even though their acquirer was a customer, they didn’t have excessive leverage over Hirsch.

Answer Questions With Questions: Diligence is an exhausting series of inquiries, but Hirsch managed to slow the flow by following each item with one of his own, meaning the more the acquirer asked, the more they had to answer, perhaps blunting their inclination to keep asking questions.

This episode includes several other nuggets, including:

  • Hirsch’s favorite question to ask freelancers in an interview.
  • What Hirsch believes every entrepreneur should do after they sell.
  • How to calculate your number.
  • The difference between re-occurring revenue and recurring revenue.

Hirsch’s positive cash flow model meant they could scale from zero to $12 million in billing in four years without raising outside capital. Discover your positive cash flow model using The Cash Flow Finder tool in Module 10 of The Value Builder System™ — complete module 1 for free by completing your Value Builder questionnaire.

Check out our article on Eight Key Drivers Of Company Value: Recurring Revenue.

Check out our full M&A Glossary

About Our Guest

Nathan Hirsch

Nathan Hirsch is a 31-year-old entrepreneur that’s been scaling businesses since 2009. Nathan’s first business, Portlight, sold over $30 million in sales through Amazon. Nathan then co-founded FreeeUp.com with an initial $5,000 investment in 2015, scaled it to $12M per year in revenue, and it was acquired in 2019.

Today, Nathan is a co-founder of Outsource School, a company working to educate entrepreneurs on how to effectively hire and scale with virtual assistants through systems and software. With all of his businesses, Nathan has hired and scaled with hundreds of virtual assistants and freelancers from all over the world. He shares his roadmap for scaling businesses with virtual assistants through Outsource School. Nathan has built himself into a social media personality online, he has appeared on over 300+ podcasts, and has spoken to thousands about remote hiring at industry events.

Nathan Hirsch also founded EcomBalance.com a monthly bookkeeping service for Ecommerce Sellers and Agencies.

 

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