How to Quadruple an Offer for Your Business
“In this interview, Gary Nealon, owner of RTA Cabinet Store, offers valuable insights into selling your business from converting a “soft offer” into a Letter of Intent to weeding out competitors posing as acquirers,” shares Sam Thompson a Minneapolis business broker and the president of M&A firm Transitions In Business. “Gary also shares how he was able to get his product placed on TV for free.”
Gary Nealon started selling ready-to-assemble kitchen cabinets under the RTA Cabinet Store brand. It was around the time HGTV was taking off on a steady diet of home improvement shows. Nealon was contacted by one of the show’s producers who had a last-minute request for a shoot where they needed kitchen cabinets. Nealon scrambled his team and delivered.
That experience led Nealon to become the go-to supplier of kitchen cabinets for home renovation television. TV was just one of the many tactics Nealon relied on to grow RTA to $40 million in annual sales.
Struggling to find the time to continue to dedicate to marketing, Nealon decided to sell and quickly got an offer of around $2 million, which Nealon thought was low despite his thin margins. He decided to change the way he positioned the company in the eyes of acquirers to try and jack up his value. He made three modifications and was able to quadruple his selling price:
- Position the company in the mind of the buyer: Instead of positioning the business as a simple drop shipper of kitchen cabinets, he emphasized the breadth of the company he had built, including the infrastructure, SEO juice, brand, technology, and the team he had recruited.
- Forecast: Nealon created a five-year forecast for the business, showing suitors where the company would be in the future and how much more value acquirers stood to gain.
- Bundle and Trademark technology: Nealon also bundled the propriety technology he had created (e.g., shopping cart and shipping applications) and rolled them into the deal. He made the case that an acquirer could leverage those apps when selling anything online.
Nealon got six offers, each with a different combination of cash upfront and future consideration. His final agreement was for 90% of his value in cash at closing, with 10% of his proceeds being rolled into the acquiring firm.
There’s lots more to love about Nealon’s story, including:
- How to ferret out a competitor posing as an acquirer.
- How to winnow down the scope of your non-compete.
- A definition of a “soft offer” and how to convert it into a firm LOI.
- The secret to getting your product placed on TV for free.
- The one thing Nealon wished he’d done differently.