“This is an interview with a business owner that had his exit plan in place right from the beginning” stated Sam Thompson, a Minneapolis business broker and President of Transitions In Business. “He was able to take his business to the next level after implementing a recurring revenue model. Great story on how software companies are valued.”
Back in 2004, John Moore started 3D4Medical.com, a company that created three-dimensional models of the human body, photographed them and licensed the images to textbook publishers. When the Great Recession hit, Moore’s business took a turn, and he realized he needed to re-invent the company and decided to offer an application students could use to learn about anatomy.
They started selling their app directly to students, teachers and medical professionals. The business began to hum as more Universities – including the likes of Stanford and Cambridge – signed on.
By 2019, 3D4Medical was up to 75 employees, including a reliable management team. Moore was making plans to continue to grow the business when one of the biggest textbook publishers in the world made an offer to buy 3D4 Medical for $50.6 million.
Moore offers a ton of critical insights to an aspiring value builder, including:
Keep Your Partners Close: Elsevier, a book publisher, enjoyed a great relationship with 3D4Medcial and Moore for years leading up to the acquisition. The idea of an acquisition came up during the course of a friendly business meeting. Sometimes your best acquirer is an existing partner where there is already a bank of trust built up on both sides.
Create Automatic Customers: 3D4Medical’s growth stalled for a few years leading up to the decision to move to a subscription model. Moore credits the introduction of a subscription service with transforming his business into a growth company again.
Know and Protect Your Crown Jewels: Moore had created the most extensive library of stock medical images in the world using some of the most sophisticated 3D technology available. Elsevier could have created a bank of images for their textbooks. Still, they knew Moore had a 15-year head start, and the technology would be hard to replicate, which is one reason they decided to buy Moore’s company, rather than compete with it.
Lot’s more nuggets in the interview, including:
- How software companies are valued
- The impacts growth has on your valuation
- A formula for sharing sale proceeds with your employees
- How to know when to overhaul your business model