Unlike many of my peers in the technology industry, I focused on building a profitable company from day one. Within the first couple months it generated a couple thousand dollars in profit. In the sixth month it generated $17,000 in net profit.
It was at that point, in December 2015, that a business broker approached me and asked if I was interested in selling my business. He told me that it could sell for 1x earnings. In other words, I could cash out 12 monthly paychecks right then and there. I told him I wasn’t ready to sell, but 6 months later I talked to another broker who valued the company at 2x earnings. I told him I was interested and we began the process of talking to potential acquirers and investors.
Over the next 6 months I’d get an email from my broker every few weeks saying he had found an interested party. We’d get on a call and I would answer the same questions: how’d you start the business? Why are you selling? What are the biggest growth opportunities? After talking to about 10 potential buyers we found an investor willing to pay 2x earnings in an 80% cash deal.
In the months that followed I reflected on my experience building SimpleData. During this period I thought a lot about the mistakes I made that prevented me from selling for a higher multiple. Below I’ve tried to outline the biggest mistakes I made, what I learned, and how you can avoid these mistakes.