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Episode Summary
Most professional services firms sell at one times revenue with a three-year earn-out, because the owner IS the business. You’re the rainmaker. You’re the relationships. The buyer wants you locked up because without you, the asset evaporates. Pete Martin sold his SAP consulting firm to KPMG for 12x EBITDA, no earn-out, and didn’t go with the deal. That’s not luck. That’s design. Pete and I got into how he wrote a 15-page company manifesto in the first ninety days that his team actually signed, why he turned down a $5M project that violated the values, the W-2 versus contractor mix that let him scale without drowning in cash burn, and the move that unstuck the deal at the very end: walking into the KPMG vice chairman’s office and explaining why the buyer didn’t want him on the cap table afterward. The strategic narrative he built for KPMG turned a financial multiple into a strategic one. And the pull-yourself-out-of-the-business work he started 18 months before the sale is what made the no-earn-out term possible.
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## Top 10 Takeaways- Most services firms sell at 1x revenue because the owner is the asset. Decouple or stay stuck in an earn-out.
- Your first hires will irreversibly set the culture, so be ruthless about who walks in the door early.
- A written manifesto signed by employees becomes the test when a wrong-fit $5M contract shows up two years later.
- When you build specifically for exit, employees and customers feel it and you attract the wrong people.
- Independent contractors protect cash but build no transferable value. W-2 employees burn cash but build the asset.
- Buyers pay for future revenue and captive intellectual capital. A federation of independents is worth almost nothing.
- Necessity forces growth strategies that cost zero cash, like publishing your IP until you out-rank the mothership.
- Tie individual variable comp to Net Promoter Score and every other KPI takes care of itself.
- Pull yourself out of sales eighteen months before the deal, not the week before due diligence opens.
- Build the buyer’s strategic narrative, not your own. Show them what your asset unlocks inside their model.
Sound Bites
“Those first couple of hires that you bring on board will pretty much irreversibly set the culture. And so you’ve got to be very mindful about what you do up front.” (@TBD) — Pete Martin
“When you build a company specifically for an exit, you make very different decisions and employees get that and customers get that. They know whether you’re going to grow and scale because you’re going to do an exit.” (@TBD) — Pete Martin
“Companies are buying your future revenue and income streams. They’re buying the intellectual capital of your people. And if these are not captive people in terms of being employees and it’s not captive intellectual capital, it’s just not worth a lot of money.” (@TBD) — Pete Martin
“I’m not the rainmaker. I’m not the guy who’s bringing in the business. You don’t want me. You want these other people. And I’m an entrepreneur. This is my fourth company. I will make a really bad employee.” (@TBD) — Pete Martin
About This Episode
Pete Martin is the founder of Ask My Board and CEO of an online voting company built on blockchain. He has built six companies and exited four, including an SAP consulting firm sold to KPMG for 12x EBITDA with no earn-out. His career started in sales at IBM, ran through executive management at SAP, and includes over $1B of software, services, and technology sold to companies like Dow Chemical, Lockheed Martin, and Eli Lilly. Recorded in 2022, this conversation sits in the early Intentional Growth catalog before the iBD methodology was fully formed, but Pete’s playbook for decoupling the owner-operator and building strategic narrative for the buyer maps cleanly onto the Plan and Transition phases of the current framework.
Resources Mentioned
- Ask My Board — Pete’s current firm, helping owners grow, scale, and exit. — askmyboard.com
- KPMG — The acquirer of Pete’s fourth company, the SAP consulting firm.
- John Warrillow / Built to Sell — Referenced for the “owner’s trap” concept around rainmaker dependency.
- Norm Brodsky — Referenced for the strategy of nurturing strategic-buyer relationships years in advance, then folding them into a controlled auction.
- Net Promoter Score — The customer-loyalty measure Pete tied to individual variable comp.
- Arkona Intentional Growth digital course — Sponsor mention. Ryan and Pat Hobby’s training on shifting from annual income to long-term value creation.
Connections
Phase + Module:
- Module 6 — Transferable Margins — The W-2 versus contractor margin trade-off and how it changes what the business is worth
- Module 7 — Leadership Team — The functional leaders Pete trained to sell so he could step out of the rainmaker seat
- Module 8 — Executive Compensation — Tying individual variable comp to NPS as the single alignment KPI
- Module 9 — Operator Transition — The 18-month decoupling that made the no-earn-out term possible
Milestones:
- Milestone 13 — Strategic Plan — The manifesto as the strategic plan that filtered every revenue decision
- Milestone 16 — Target Gross Margins — Why the W-2 mix matters for both margin and transferable value
- Milestone 22 — Company Bonus Pool — Variable comp tied to a single customer-loyalty metric
- Milestone 25 — Operator Transition Plan — Pulling yourself out of sales before the buyer ever shows up
Concepts referenced:
- The Owner-Operator Trap™ — The rainmaker dependency that caps services valuations
- Three Lenses of Value — Financial value versus the strategic narrative Pete built for KPMG
- The Multiple & WACC — Why 12x is “beyond ridiculous” for services without intentional design
- Enterprise Value vs. Equity Value — What gets bought, captive IP versus a federation of independents
- Value Growth Plan™ — Building a fundamentally valuable company so every exit option stays open