How to Turn a 3x EBITDA Offer into 5x
“Jeff Archibald founded Paperleaf, a software company that had an initial offer to sell his business at 3X EBITDA. With a creative earn out he was able to receive 5X EBITDA,” shares Sam Thompson a Minneapolis business broker and the president of M&A firm Transitions In Business. “This episode also covers utilizing effective forecasting, how to position your business to attract buyers and how to use fixed payments.”
Jeff Archibald founded Paperleaf, a company specializing in developing websites, mobile apps, and custom software. By offering a narrow scope of services to a variety of verticals, Paperleaf 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 Paperleaf’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 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.