{"id":2488,"date":"2023-06-08T20:54:54","date_gmt":"2023-06-08T20:54:54","guid":{"rendered":"https:\/\/www.b2bcfo.com\/kevin-campbell\/?p=2488"},"modified":"2024-01-16T22:05:29","modified_gmt":"2024-01-16T22:05:29","slug":"company-sale-case-study","status":"publish","type":"post","link":"https:\/\/www.b2bcfo.com\/kevin-campbell\/how-did-a-company-with-9-million-in-revenue-sell-for-54-million\/","title":{"rendered":"How did a company with $9 million in revenue sell for $54 million?"},"content":{"rendered":"

Stephanie Breedlove started Breedlove & Associates as a way to pay her nanny. The big payroll processors weren\u2019t interested in dealing with one person\u2019s wages and doing it themselves was complicated and time-consuming.<\/span><\/p>\n

Breedlove saw a business opportunity and started a payroll company for parents who needed to pay their nannies. Within 10 years, Breedlove & Associates had grown to $9MM in revenue and then she received a $54MM acquisition offer. <\/span><\/p>\n

What did Breedlove do right? We\u2019re going to look at the five things Breedlove did\u2014and that you can do\u2014to drive up the value of a business.\u00a0<\/span><\/p>\n

1. Sell Less Stuff to More People<\/span><\/b>\u00a0<\/span><\/p>\n

To grow, Breedlove had a choice: sell more to her existing customers (e.g., busy couples often need lawncare, house-cleaning, or grocery-delivery services) or stick with her niche of paying nannies. Most consultants and experts would say it\u2019s easier to sell more to existing customers (and they\u2019re right), but it doesn\u2019t make your business more valuable. Breedlove decided to stick to her niche and find more parents who needed to pay their nannies, and that decision laid the foundation for a more valuable business.<\/span><\/p>\n

Investors look for companies with a deep and wide competitive moat that gives the owner pricing authority. Companies with a differentiated product or service usually get significantly higher acquisition offers. <\/span>Rather than selling existing customers generic services in commoditized markets, Breedlove focused on selling one thing to as many customers as she could find.<\/span>\u00a0<\/span><\/p>\n

2. Strive for 50%+ Net Promoter Score\u00a0<\/span><\/b>\u00a0<\/span><\/p>\n

One feature that interested acquirers look for is your customer satisfaction levels. Increasingly, they are turning to the Net Promoter Score (NPS) as a measure of this. NPS was developed by Fred Reichheld and his team at Satmetrix, who discovered that your customers\u2019 willingness to refer you to their friends or colleagues is highly predictive of your company\u2019s future growth rate. The NPS approach is to ask your customers how willing they would be to refer your company to a friend or colleague, on a scale of 0 to 10. They are then categorized into Promoters (9s and 10s), Passives (7s and 8s) or Detractors (0\u20136s). The NPS is calculated by subtracting the percentage of Detractors from the percentage of Promoters. Most businesses achieve an NPS of 10% to 15%, while the very best companies (think Apple and Amazon) get scores of 50% or more.<\/span>\u00a0<\/span><\/p>\n

Breedlove obsessed over her company\u2019s NPS and realized the key to driving it up was perfecting the first few interactions with a new customer. When you call a big payroll company looking for a service to pay your nanny, the response can be underwhelming. With only one person to pay, you are often relegated to the most junior staff member and even they would rather be dealing with a larger client. When you call Breedlove, by contrast, you get a team of professionals totally focused on setting you up. You\u2019re not an afterthought. You\u2019re not passed on. Instead, you get the best onboarding talent the company has to offer. This set-up team was a big part of how Breedlove achieved an astonishing 78% NPS.<\/span><\/p>\n

3. Create Recurring Revenue Streams<\/span><\/b>\u00a0<\/span><\/p>\n

The third thing that made Breedlove\u2019s company attractive was recurring revenue. Regardless of what industry you\u2019re in, recurring revenue models give acquirers more confidence that the business will keep going strong after you leave. Given the nature of the payroll business, 100% of their revenue was recurring.\u00a0<\/span>\u00a0<\/span><\/p>\n

4. Reduce Reliance on Customers, Employees and Suppliers\u00a0<\/span><\/b>\u00a0<\/span><\/p>\n

Breedlove\u2019s company was also attractive to buyers because she had a highly diversified customer base with no single customer representing even close to 1% of her revenue. If more than 10% to 15% of your revenue comes from one buyer, you can expect prospective acquirers to ask a lot more questions.\u00a0\u00a0<\/span>\u00a0<\/span><\/p>\n

5. Find an Acquirer You Can Help Grow<\/span><\/b>\u00a0<\/span><\/p>\n

After 10 years in business, Breedlove & Associates was growing 17% per year, which is good but not blow-your-mind good. So how did she attract such an incredible acquisition offer? The trick was showing her acquirer how they could grow. <\/span><\/p>\n

In Breedlove\u2019s case, she sold her company to Care.com. Think of Care.com as the Angie\u2019s List of care providers (e.g., childcare, senior care, etc.). If you need someone to care for your kids or an elderly relative, you enter your address into their website and Care.com will give you a list of vetted caregivers in your area. At the time of the acquisition, Breedlove had 10,000 customers and Care.com had seven million members. Breedlove argued that if just 1% of Care.com members used Breedlove\u2019s payroll service, it would equate to 7X growth in Breedlove & Associates almost overnight. <\/span><\/p>\n

Care.com acquired Breedlove & Associates for $54MM\u2014an outstanding exit made possible by Breedlove\u2019s focus on what drove her company\u2019s value, not just their top-line revenue.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Stephanie Breedlove started Breedlove & Associates as a way to pay her nanny. The big payroll processors weren\u2019t interested in dealing with one person\u2019s wages and doing it themselves was complicated and time-consuming. Breedlove saw a business opportunity and started a payroll company for parents who needed to pay their nannies. Within 10 years, Breedlove…<\/p>\n","protected":false},"author":26,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_editorskit_title_hidden":false,"_editorskit_reading_time":0,"_editorskit_is_block_options_detached":false,"_editorskit_block_options_position":"{}","cybocfi_hide_featured_image":"","footnotes":""},"categories":[1],"tags":[],"class_list":["post-2488","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"acf":[],"yoast_head":"\nHow did a company with $9 million in revenue sell for $54 million? - Kevin Campbell<\/title>\n<meta name=\"description\" content=\"Care.com acquired Breedlove & Associates for $54MM\u2014an outstanding exit made possible by Breedlove\u2019s focus on what drove her company\u2019s value, not just their top-line revenue.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.b2bcfo.com\/kevin-campbell\/how-did-a-company-with-9-million-in-revenue-sell-for-54-million\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How did a company with $9 million in revenue sell for $54 million? 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