How to Keep More Equity by Getting Customers to Fund Your Growth

getting customers to fund your growth before selling your business

How to Keep More Equity by Getting Customers to Fund Your Growth

“Brad Lorge founded Premonition in 2015 and sold his software company in 2022 for seven times Annual Contract Value (ACV). In this episode you’ll learn many tips such as how to identify a short list of strategic buyers and how to approach an acquirer without appearing desperate,” shares Sam Thompson a Minneapolis business broker and the president of M&A firm Transitions In Business.

In 2015 Brad Lorge founded Premonition, a technology company that offers logistics software to streamline a company’s delivery operations. Rather than the traditional approach of financing their start-up through rounds of dilutive funding, Lorge asked his customers to pre-pay, allowing the founding team to retain 80% of the equity in their business.

By March 2022 Premonition had grown to $3 million in Annual Contract Value (ACV), which is when it was acquired by Shippit for $20.5 million—an implied valuation of just under seven times ACV. In this episode, you’ll learn how to:

  • Calculate the difference between ARR and ACV and how each impacts the value of your business.
  • Use customer pre-payments to finance your growth.
  • Identify a short-list of potential strategic acquirers.
  • Approach an acquirer without appearing desperate.
  • Utilize an unconventional strategy for accelerating an M&A transaction.
  • Know when to accept equity in lieu of cash when selling your business.

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