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The Decision to Exit

In 2012, on a scorching hot day in Chicago, I walked in to negotiate the final terms in the sale of my company, Appletree Answers. The tension level was through the roof. We argued back and forth about the finer points of the deal and I even walked out two times. When it was all said and done, I left having sold the business for almost four times the industry average.


Finding a strategic buyer and exiting well are goals of most business owners, but it doesn’t happen overnight.  I started my business from scratch in 1995, a call center that I ran out of my apartment. It was a lone venture and in 1997, when my buzzer woke me up at 4am to answer a call, I had a make or break moment – rip that buzzer out of the wall and get the sleep I had been deprived of for so long, or continue on with the knowledge that it would get better if I just kept at it.

My decision was to keep going, and along the way, I built a company that would command a higher valuation when it was time to exit. From my experience, here are four factors that will drive value when you exit your business.


Perhaps the most important thing strategic buyers are looking for in a company is predictability. They want to feel comfortable that the business is going to create predictable results, and it will give a predictable return on investment.

One key part of predictability is consistency. Picture yourself as a buyer for the moment. What if you were looking at two companies, each predicted to do $100 million in revenue over the next five years:

  • Company A: $15M, $18M, $20M, $23M, $24M
  • Company B: $39M, $17M, $12M, $24M, $8M

Which company would you buy? Of course, you’d choose company A. You want the company with the most consistent and predictable curve.

Predictability and consistency are not just about financials, though. They also show up in your processes and operations. At Appletree Answers, we began acquiring other companies in 2003. In 60 days we grew from one company to three, with acquisitions made in Florida and Maine. Looming debt forced us to get clear about operational excellence and efficiency. We created processes and procedures that would allow our companies to remain predictable and consistent in our operations and outcomes, which was highly valued by buyers at the time of exit.

The Redundant Entrepreneur

The entrepreneur is potentially a constraint to the exiting sale. Often business owners get so invested in their company that it becomes an extension of themselves, not an entity of its own. The business becomes part of their identity and they wonder, “How could this place possibly run without me?”

The thing is, it has to.

Being redundant means that you can step away from your business, and it will continue to function as normal. If you went away for six months or if something happened to you and you couldn’t assume your normal role, what would happen to your company? You must create a process that allows the business to operate without you there. This should be a goal even if you are not ready to sell, but when you do exit, being redundant can drive tremendous value.

Redundant doesn’t happen overnight, but there are several steps you can take to get there. This includes:

  • Set up a business operating system.
  • Develop a strategic plan.
  • Build a management team that understands the vision and goals of the business.
  • Take yourself out of operations and day-to-day management.
  • Transform your role into being the strategist who sets the direction of your company.
  • Being redundant is important because a strategic buyer wants to buy a company that will produce results on its own, as an entity that is separate from you, the business owner.

Recurring Revenue

The value of recurring revenue goes back to predictability. Buyers want to see a high level of recurring revenue, so the financials are predictable and consistent. As a call center, Appletree Answers had about a 95 percent recurring revenue, which helped boost its value in the eyes of strategic buyers. However, there are ways in every business to create more recurring revenue streams.

To increase your value at the time of exit, you must begin thinking of creative ways to add a recurring component to at least some of your revenue. At the Symposium, one participant mentioned that they, a book publishing business which was mostly transactional, had just purchased a marketing agency. Authors who publish a book with them are also interested in marketing that book, so a monthly marketing package adds a steady stream of recurring revenue.

Strategic buyers lean in and get really excited when the discussion turns to recurring revenue within your business. Start thinking of how you can make it happen in your own company today.

The Rembrandt in the Attic

Imagine that you are going to buy a house. The price is set at $500K, and that seems reasonable, so you are ready to make the purchase. But what if you had secret knowledge that there is an original Rembrandt painting hidden in the attic behind the wall boards? Wouldn’t you be willing to pay more than $500K for the house, knowing that there is extra value inside?

Every business also has Rembrandts in the attack. These are things that add extra value for strategic buyers and can drive up the price during the exiting sale. The problem is that if you’ve been running your business for a long time, your Rembrandts may be hiding or even things that you take for granted.

At Appletree Answers, our predictability, recurring revenue and the fact that I was redundant were all Rembrandts in the attic. However, we also had another that interested strategic buyers.

You see, call centers are known for their high turnover rates, with 100 percent being the norm. We too had a high turnover rate, but we decided to do something about it. We took a serious approach to company culture and core values and ended up bringing the turnover rate down to only 18 percent. The company that purchased Appletree Answers wanted to take our culture, values, process and systems and replicate them across their own 14,000 employees.

You should start looking for and highlighting your Rembrandts in the attic now, but you can also discover them through the exiting process. How? Through conversation and listening. Buyers will often overshare, and you will start to understand your value to them. They’ll tell you where they see your business fitting in with their own goals and strategies, the shortcomings they have, and what they like about your business that they want to add to their own. In discovering these Rembrandts, you should also be aware that different buyers will be interested in different Rembrandts; when Company A and Company B get in a bidding war during the exiting sale, they very well may be finding value in different aspects of your business.

These four factors will increase the value that strategic buyers see in your company and drive up the sale price at exiting time. But don’t minimize the value you have for your own company either. One of my biggest tips is that “Due diligence is a validation process, not a renegotiation process.” Until the ink dries and the wire has cleared the bank, always operate your company as if the deal is going to fall through. If due diligence turns into renegotiation, you have to be willing to commit to walking away from it all, or else you’ve given up all the authority, leverage and power you had in the deal.