How to Turn a 3x EBITDA Offer Into 5x | Built to Sell Radio

Jeff Archibald founded Paper Leaf, a company specializing in developing websites, mobile apps and custom software. By offering a narrow scope of services to a variety of verticals, Paper Leaf built a reputation for handling challenging projects that generalist agencies couldn’t. Jeff’s commitment to simplicity and effective forecasting played a significant role in Paper Leaf’s success. He used fixed payment contracts to ensure steady cash flow and offered a limited number of technologies, allowing his team to become experts. These practices stabilized the business and made it attractive for acquisition. 

When approached by ZGM, a marketing firm, Jeff initially received a 3x EBITDA offer. Through a creative earn-out structure, Jeff ultimately received proceeds of equivalent to around 5x EBITDA.  

You’ll Discover How To: 

• Negotiate a unique earn out structure that works for both you and your acquirer 

• Decline business without losing a customer 

• Position your business strategically to attract potential buyers. 

• Simplify your operations to enhance efficiency and attractiveness for acquisition. 

• Implement effective forecasting methods to stabilize cash flow. 

• Use fixed payment contracts to ensure steady revenue. 

• Delegate responsibilities while maintaining control through clear KPIs. 

Show Notes & Links

Jeff’s blog on his exit

Connect with Jeff on LinkedIn

Visit Jeff’s website

Definitions

Due-Diligence: This is a comprehensive appraisal of a business or investment undertaken before a merger, acquisition, or investment. It seeks to validate the information provided and uncover any potential risks or liabilities.

Earn-out: This is a financing arrangement for the purchase of a business, where the seller must meet certain performance goals before receiving the full purchase price. It reduces the buyer’s risk and aligns the interests of both parties post-acquisition.

Limited Partner (LP): An LP invests capital but does not have management authority or unlimited liability. They have limited liability, meaning they can only lose their investment and are not responsible for the partnership’s debts beyond their investment.

Re-Trading: This occurs when a buyer attempts to renegotiate the purchase price of a deal after initially agreeing to one. It is often seen unfavorably as it occurs after due diligence, seemingly exploiting newly discovered information.

Letter of Intent (LOI): This document outlines the basic terms and conditions of a deal before a formal agreement is drawn up. It serves as a mutual commitment between the buyer and the seller to move forward with the transaction on the agreed-upon terms.

About Our Guest

Jeff Archibald