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Episode Summary
The call comes from the strategic buyer. You’re flattered. They open at a number 40% below where you think you’re worth, and 100% stock instead of cash. The reflex is to meet them halfway and call it a win. Stephanie bootstrapped her nanny payroll and tax company for 22 years to $9M in revenue at a 50% EBITDA margin. When Care.com came calling, she had every reason to take the deal and one reason to walk away: she was already producing generational wealth just running the company. We got into how she ended the negotiation, sat at the kitchen table with her husband, and asked if they had just thrown away the best opportunity of their lives. What brought Care.com back two months later at her terms. Why the earnout almost undid her after the headline number was already locked. She also gets honest about hiding the deal from her executive team, why they skipped the investment banker and hired a consultant, M&A attorney, and accountant by the hour, and the Intuit/Paycycle comp that anchored the EBITDA-multiple conversation. Final number: $55M at 11x EBITDA, 50/50 cash and stock.
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## Top 10 Takeaways- Goal one is breaking even. Goal two is growing out of profitability. Skip those and you’re funding someone else’s expectations.
- Hiring an executive team forces you to ask what the business could become without you sitting in the chair.
- Get a valuation a year before you sell. The number will deflate your ego. That’s the point.
- Awareness about buyer types is not a commitment to sell. It’s the homework that lets you say no with confidence.
- Reinvesting profits decreases your income on purpose. The voice that says don’t is the same voice keeping you small.
- Strategic buyers pay for the fit you complete. Financial buyers pay for cash flow. Know which conversation you’re in.
- The no-shop agreement strips your only leverage the moment you sign it. Know what you’re trading for that signature.
- Don’t sign a term sheet until 80-90% of the deal is already hammered out in conversation first.
- Your ability to walk away is a function of the business you built, not the deal in front of you.
- The earnout is where the headline number gets clawed back. Negotiate it like it’s the whole deal.
Sound Bites
“For probably the last 10 years of the business, we had a 50% EBITDA margin, which allowed us to grow so easily out of profitability.” (@TBD) — Stephanie Breedlove
“If you aren’t at least talking about, or even doing a high level of information gathering about what your company could do next, you’re what’s holding it back.” (@TBD) — Stephanie Breedlove
“They were at 39. We were at 65. We wanted 80% cash. They wanted 100% stock. And we just kept talking in circles around this.” (@TBD) — Stephanie Breedlove
“The negotiation of the earnout almost undid me. That was one of the hardest things I’ve ever done.” (@TBD) — Stephanie Breedlove
“If you built a healthy business, then you’ve got the ability to walk away. You’ve got the ability to choose a different buyer. You just have choices, which puts you back into the driver’s seat.” (@TBD) — Ryan Tansom
About This Episode
Stephanie Breedlove is a 25-year entrepreneur who bootstrapped Breedlove & Associates, a nanny and in-home caregiver payroll, tax, and benefits company, with her husband Bill from a personal pain point in the mid-1990s into a $9M revenue, $4.5M EBITDA business. She sold to Care.com in 2012 for $55M at 11x EBITDA, stayed two years through the integration, and is now an angel investor, speaker, and mentor for women entrepreneurs. She is the author of All In, a book of business and life strategies for women founders looking to scale. Ryan first heard her story on John Warrillow’s podcast and at his Value Builder Summit, and brought her on because of how rare it is to find an exited owner willing to share the real numbers and the real emotional turmoil of the negotiation.
Resources Mentioned
- All In by Stephanie Breedlove — Available on Amazon
- stephaniebreedlove.com — Stephanie’s website. — stephaniebreedlove.com
- @BreedLoveSteph on Twitter — Stephanie’s Twitter handle
- Care.com — The acquirer, now a public company
- Mergers and Acquisitions for Dummies — The book Stephanie read in three days before stepping into negotiations
- Intuit/Paycycle acquisition — The comp that anchored the EBITDA-multiple conversation
- John Warrillow’s Built to Sell podcast & Value Builder Summit — Where Ryan first heard Stephanie’s story
- The Happiness Advantage by Shawn Achor — Referenced for the definition of happiness as joy in pursuit
- Mihaly Csikszentmihalyi — Flow — Referenced for the concept of state of flow in entrepreneurship
Connections
Phase + Module:
- Module 1 — Ownership Goals — Knowing what you want from the business shapes who you’ll sell to
- Module 4 — Sustainable Financials — A 50% EBITDA margin is what gave her the leverage to walk away
- Module 7 — Leadership Team — Building the exec team is what forced the strategic conversation about a big next
Concepts referenced:
- Normalized EBITDA — The 11x multiple was negotiated on EBITDA, not revenue
- The Multiple & WACC — Strategic buyer multiples vs. financial buyer multiples
- Three Lenses of Value — Owner’s number, valuation expert’s number, transaction number, and the gap between them
- Independence Escape Velocity — She was already producing generational wealth running the company, which is what made the walk-away possible
- The Owner-Operator Trap™ — She avoided it by hiring an exec team and growing out of profitability before the exit conversation started
- Value Gap — The space between what she thought the company was worth and what the valuation experts came back with