The Shotgun Breakup

The Shotgun Breakup

“This is a story of a business that had tremendous growth and how the owners survived the Great Recession while adding value to their business. An excellent lesson on scaling a business while controlling capital expenditures,” states Sam Thompson a Minneapolis business broker and the president of M&A firm Transitions In Business.

Back in 2006, Michael Kaplan and his partners bought into a Zerorez Carpet and Living Surfaces Care franchise. The business was generating $300,000 in revenue and losing $40,000 a year.

By 2019, the company was generating $17 million in revenue when Kaplan and his partner had an irreconcilable dust-up which led to Kaplan triggering their shotgun partnership agreement. In the end, Kaplan sold for around four times EBITDA.

This story has some fantastic twists and turns, and through it all, you’ll discover:

  • Why Kaplan refers to the “no man’s land” between a start-up and a mid-sized business as “the awkward teenage years.”
  • How to leverage word of mouth to grow your business.
  • The Price vs. Value equation and why getting it right is the key to increasing your Net Promoter Score.
  • The danger of “aspirational” core values.
  • A definition for a “waterfall” distribution.
  • Why it may be time to sell if you feel as if you are “trading misery for dollars.”
  • How a shotgun agreement works and how that’s different from an operating agreement (and why you need both if you have partners).

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