$12.5m Sale at 28: A Seller’s Take

Dear subscriber,

Today we’re going to dive into another real world deal and this one is reviewing a new media article posted by CNBC Make It. An 8 figure deal just three years after the company is founded. Sounds great, but my spidey sense are tingling, so I’ll try and cut through the noise and see what it’s really about.

The full video is here:

So here we have entrepreneur Nathaniel Farrely, and firstly I have to say he’s a clean cut character. He comes across as stable, family orientated man and a strong Christian. You might be surprised that I started with this but it’s important from a buyer’s perspective that you look like a stable character. So much of business is based on non financial, personal feelings and coming across as a no-drama, trustworthy type of person will go a long way.

Now that being said, he doesn’t say too much about the details of the business, but I can piece it together.

It’s clear it’s a labour arbitrage. He’s sourcing nurses (he used to be one) and getting contracts to send them to people’s homes rather than they go to the hospital. It’s a growing market and a smart move to go into this, but I have to be frank I can’t see where the business ‘moat’ is, where this company is different to others in the space.

Potentially, it’s for that exact reason why it’s sold, and the lack of differentiation makes it a commodity business and therefore can be rapidly integrated into a larger business ion the same niche, which is actually what he sold into.

Ultimately, he managed to sell for over $10 million and from looking at prior deals I know this industry is not a high margin one, what it seems like is that he sold it an incredible multiple because I don’t think there was 1 million in profit before he sold. He said that ‘the first million he made’ was two years before he sold and was equity, therefore not actual cash. 

Maybe there’s some aspirational growth projections involved in the purchase price. Which is great if you can get it, but shouldn’t be relied on that a buyer will accept projections. 

So either there’s some more assets not revealed in the video or he got an incredible multiple. Regardless, it shows that these sorts of deals do happen and can be completed rapidly after a business is started (3 years in this case)

Add a relatively short earn out (he finished a year after he sold) and you’ve got yourself an incredible life changing exit.

Let me know if you’ve got any stories of 8 figure exits

Here’s to your next deal,

Unlocking Wealth Weekly