CAUTION: DO NOT POKE THE GIANT

On June 1, 2011, both Floyd’s Coffee Shops in Portland, Oregon were busier than usual. The regulars were elbowed out of the way by new customers visiting the store for the first time to redeem their coupon and get $10 worth of coffee for $3. 

This tempting offer was made because Floyd’s had been picked as the first-ever Google Offers “deal.” Google Offers is the company’s first baby step into the world of “social buying” style promotions where a special, limited time offer is made by a business hoping that the deal will spread virally and thereby introduce a new legion of customers to their business. 

Google, of course, did not invent the deal-of-the-day category; they were goaded into it after their generous $6 billion dollar offer to buy Groupon was turned down. 

Now Groupon is starting to feel the pinch after thumbing their nose at one of the world’s most valuable companies. According to compete.com, Groupon’s traffic went from 33.7 million unique visitors in June 2011 to just 18.3 million unique visitors in January 2012. That’s a drop of almost half inside less than a year. Not surprisingly, Groupon’s stock is also down around 25% since its IPO last year. 

Over-playing your hand 

The moral of the story is to be careful not to over-play your hand when being approached by someone who wants to buy your company. Acquirers usually have deep pockets and, while you may think your business is unique, never underestimate the resolve of a big company with lots of cash. 

They do have an alternative to buying you: they can simply compete with you. 

Typically when they make the decision to walk away from the negotiation table they do not leave empty-handed. They come away with new-found insight on how you run your business, what works, and what flops; so they have an enormous head start to launch a competitive company. 

And it doesn’t just happen in Silicon Valley. Take a hypothetical example of a home security company generating $500,000 per year in profit (before tax) installing and monitoring home alarms. One day a big alarm company comes along and says they want to buy the business and they’re willing to pay four times pre tax profit. The alarm company owner turns up his nose and demands six times earnings. 

Now the suitor has a choice. They can try and negotiate with the owner, but that would undermine the economics of the model they’ve used to buy hundreds of similar alarm companies across the country, or they can simply hire someone to start an office to compete with him. 

Let’s say they pick door number two and hire a young, aggressive manager. They guarantee her $200,000 a year in the first 12 months on the job while she is building her business. You have not only lost the opportunity to sell your business; you’re now competing against a young, motivated rival with a parent company who has an extra $1,800,000 ($2,000,000 withdrawn offer minus the $200,000/ year salary for their manager) that they didn’t use to buy you and they’re putting it towards helping your new competitor build her business. 

If you’re lucky enough to get approached by a big company who wants to buy yours, remember that they are usually not choosing between buying you or buying your competitor. They are often choosing between buying you or setting up shop to compete with you.

Get Free Business Valuation

or

Schedule Free Consultation

Recent articles for you

How to Double Your Chances of a Premium Acquisition Offer

By Kim Santos • April 21, 2025
Value Builder Analytics, drawing on proprietary data from over 80,000 business owners, found that companies that can run without the owner for at least three months are twice as likely to receive an acquisition offer above 6x EBITDA. The concept is simple. The execution? Not so much. Take Kristie Shifflette for example. She was an early master franchisee with Orangetheory Fitness, a one-hour, coach-led workout that uses heart rate zones to boost calorie burn during and after exercise. When she opened her first location, she did it all—marketing, hiring, payroll, and even handling construction headaches. It worked but only because she was working constantly. As she expanded, things started to break. With two locations, she was stretched. At three, it became clear: The model only worked when Kristie was the model. She knew she needed to change. Kristie stopped focusing on being in the business and started focusing on building the business. From Operator to Owner Kristie started documenting everything. From pre-sale processes to day-to-day studio operations, Kristie developed detailed playbooks that codified exactly how her Orangetheory locations should run—without her. She created a compensation structure for studio managers that gave them ownership over their results: modest base salaries paired with meaningful bonuses tied to net member growth and total revenue. Top-performing managers could double their pay, and they were treated like mini-CEOs with full responsibility for their studio’s performance. By the time she sold her business, Kristie had built a company with 13 locations generating well north of $10 million in annual revenue. Some of her top-performing studios, like the Chapel Hill location, were bringing in revenue of $2 million a year, with EBITDA margins around 40%.  Kristie’s story includes an important lesson: Make yourself less essential, and your business becomes more valuable. If you’re still the one opening the door in the morning and locking up at night—literally or metaphorically—it’s worth asking: What would break if I stepped away for 90 days? Start there. Whether it’s building a playbook, empowering your team, or simply learning to let go, taking even one step toward reducing your involvement makes your company not just more valuable but more enjoyable to own.

Why Imperfections in Your Business Don’t Make It Unsellable

By Kim Santos • April 14, 2025
For business owners considering their endgame, learning what makes a company valuable can feel overwhelming. Buyers prioritize factors like recurring revenue, a differentiated product or service, and a leadership team that operates independently from the owner. If a business doesn’t check every box, it can seem as though selling is perpetually just out of reach. But perfection is not a prerequisite for a sale. While improving the key drivers of value is important, an imperfect business can still be highly desirable to the right buyer. In fact, some acquirers actively look for businesses with fixable flaws because they see an opportunity to increase value. Blake Hutchison on Why Imperfections Can Be to an Acquirer’s Advantage Blake Hutchison, CEO of Flippa, has witnessed thousands of business acquisitions. Flippa is an online marketplace where business owners can buy and sell companies, particularly small to mid-sized digital businesses. The platform connects sellers with buyers looking for opportunities to grow or optimize an acquisition. In a recent Built to Sell Radio interview, Hutchison explained that many business owners assume their company won’t attract buyers because it has shortcomings. In reality, most acquirers aren’t looking for perfection—they’re looking for potential. Many buyers have a strategic advantage, whether it’s a strong distribution network, operational expertise, or access to capital, that allows them to take an imperfect business and make it more valuable. A prime example of this is the acquisition of PetCoach. How PetCoach Turned an Imperfection into a Selling Point PetCoach, co-founded by Brock Weatherup, was a two-sided marketplace designed to connect pet owners with veterinarians. The challenge for any marketplace business is keeping both sides in balance—generating enough demand from pet owners while ensuring there are enough veterinarians to meet that demand. PetCoach had built a strong product, but it lacked a broad distribution channel to acquire pet owners at scale. Without a solution, growth would remain limited. Instead of seeing this as a dealbreaker, Weatherup positioned it as an opportunity for the right buyer. That buyer was Petco. With more than 1,500 locations across the U.S., Mexico, and Puerto Rico, Petco had access to millions of pet owners. By acquiring PetCoach, Petco could instantly expand its offerings while solving PetCoach’s biggest challenge. Weatherup didn’t need to fix the scalability issue before selling. He needed to find an acquirer for whom the business’s weakness was actually a competitive advantage. Your Business Has Value—Even if It’s Not Perfect This doesn’t mean business owners should ignore the fundamentals of value creation. Strengthening factors like recurring revenue, customer retention, and operational efficiency will always increase a company’s attractiveness. However, not every issue needs to be resolved before an exit. Instead of viewing imperfections as obstacles, business owners should consider how an acquirer might perceive them: A company struggling with customer acquisition may be a great fit for a buyer with an established customer base. A business with inefficient operations might attract an acquirer with expertise in streamlining processes. A company overly dependent on its owner could be appealing to a buyer with a strong leadership team ready to step in. As Blake Hutchison explains, acquirers are often looking for businesses where they can add value. The key is to position the company in a way that highlights its strengths while framing its imperfections as untapped potential. The right acquirer won’t see weaknesses as dealbreakers—they’ll see them as opportunities.

Is Your Industry Next for a Roll-Up? Here’s How to Tell—and What to Do

By Kim Santos • April 7, 2025
The garage door industry isn’t the most obvious place for a business empire. Yet in just a few years, Guild has emerged as a dominant force, consolidating a fragmented market into a scalable platform worth millions. If you’re a business owner in a fragmented industry, Guild’s story raises two pressing questions: Could my industry be next for a roll-up, and if it is, should I lead the charge or sell to someone else? The roll-up model—acquiring and integrating small businesses in a fragmented market to create economies of scale—isn’t new, but its reach has expanded. From veterinary clinics to plumbing companies, private equity firms are creating billion-dollar platforms from businesses once considered too small to attract institutional capital. Roll-ups are like waves. Catch one early, and you can ride it to a lucrative exit. Private equity firms often pay a premium to consolidate a market, and the scarcity of scaled businesses drives multiples higher. Wait too long, however, and the wave dissipates. You’re left competing with a PE-backed giant with better pricing, marketing budgets, and scale. Timing is everything. How to Know if Your Industry Is Ripe for a Roll-Up When Guild co-founders Jordan Dubin, Joe Delaney, and Sean Slavzic set out to create a roll-up platform, they didn’t stumble into garage doors—they chose it methodically. Their approach offers a roadmap for owners wondering if their market is next. Fragmentation The more small, independent businesses in your market, the easier it is to consolidate. In the garage door industry, 92% of operators were small, local businesses—an ideal setup for Guild. Market Size A fragmented market needs to be large enough to justify consolidation. Guild found a $14 billion residential garage door market with plenty of room to scale. Growth Potential Growing markets attract investors. Garage doors were growing at 7–8% annually, compared to 3–4% for more saturated sectors like HVAC. Precedent Transactions A notable sale in your industry can validate its attractiveness. The sale of A1 Garage Doors to CoreTech at 21 times EBITDA signaled strong demand for scaled players. Scalability Industries with standardized, repeatable processes are easier to integrate and scale. Garage door companies focus on repairs and installations, making them well suited for roll-ups. Timing By the time Guild entered, private equity had already saturated HVAC and plumbing, leaving fewer opportunities. Garage doors offered Guild the chance to be a first mover and capture value early. Should You Sell or Lead the Roll-Up? If your industry meets these criteria, you’re likely at a crossroads. Do you sell to a roll-up or lead one yourself? Both options have merit, but the best choice depends on your goals and appetite for growth. Selling to a Roll-Up Selling offers liquidity and the chance to step back. To maximize your exit: Focus on EBITDA. Build systems. Make your business less dependent on you. Clean up financials. Transparent books boost valuation. “Private equity doesn’t want to buy a job; they want to buy an asset,” says Dubin. Failing to position your business as turnkey could mean leaving money on the table. Leading the Roll-Up If you’re not ready to sell, consider consolidating your industry. By acquiring competitors, you can scale your business, increase its value, and become the dominant player in your market. Dubin and his partners raised $35 million to launch Guild. “There’s too much money in the world and not enough good opportunities,” he says. Starting a roll-up requires capital, operational expertise, and a clear vision, but it lets you control your industry’s future instead of waiting for someone else to define it. The Wave Won’t Wait Markets ripe for roll-ups don’t stay that way forever. Once private equity enters, competition drives valuations higher and makes acquisitions less attractive. Early movers capture the lion’s share of value, whether they’re selling or leading the charge.