Arnie Malham had a nice little business in MedView Services, but it wasn’t really sellable.
“What we found out is that while we had a great little niche with great little margins, the upside wasn't big enough to put this in play for the normal players,” Malham says. “The revenue of this company was limited, making it a great little company to sell to someone who wanted to run it but not a great company to sell someone who wanted to grow it.”
That someone turned out to the company’s chief operating officer, who was running the business at the time. Malham sold him the business and immediately set his sights on growing his other business, Legal Intake Professionals, an answering service for personal injury law firms.
A chance encounter with John Ratliff, the founder of the AppleTree Answers telephone service, provided the insight into how Malham could get much more out of a deal for Legal Intake.
“John had a game plan,” he recalls. “He did it by creating margins that the industry couldn't ignore and a culture that that kept tenure high and turnover low.”
Smart Business Dealmakers talked with Malham, who is now founder and president of BetterBookClub.com, about the process of selling his third business and the impact deal professionals made on the outcome.
When it came to selling Legal Intake, Malham worked with STS Capital, led by Ratliff. And it made a big difference. Having experts involved gave Malham a playbook of how to get where he wanted to go with Legal Intake.
“This was like a six quarter process, and every quarter John would come in and look at where we were, he looked at the marketplace, he’d give us some things to start working on and then he would go shop our book a little bit,” Malham says.
As part of the plan, Malham got serious about keeping his employees happy and putting them in a position to be great on the phone.
“And lo and behold the higher our tenure got, the lower our turnover went, the more we could charge for our services because complaints went down,” Malham says. “We were already in a niche that no one else had really found, which was this personal injury space. Firms were willing to pay a very high dollar to get their phones answered correctly, and we just started going from there. And once we nailed that down the books turned into just a work of art and we had opportunities.”
With a clear path to more growth carved out and margins that were great, Legal Intake had suitors. Ratliff pitched to some 10 different prospects. Ultimately, it was a strategic buyer, Stericycle, that transacted.
“Our margins were so good and our niche was so unique that they wanted to add it to what they were doing.”
In addition to improving the company’s value during the sale process, Malham had another role.
“My job was to sell them on the industry, what we're doing to make it different and why it was scalable at a bigger level by another company.”
He says there was a non sequitur change that happened from how he started with the company to the role he had when pitching it for a sale.
“We spend half our business making ourselves feel valuable in the company and then if we want to get out we got to make ourselves the least important part of the company,” Malham says. “Part of my role was to explain why I had been valuable to the company in the in the early days, but now was actually holding the company back and that someone else could make it even bigger.”
With MedView, Malham says his highest priority was to give this business a life and to give the person who helped him build a business they could they could prosper from.
“I wasn't real concerned about how much money we made on the deal. I really wasn't concerned about what role I might play after. I just want to give it, our clients and the person the best chance possible and it worked out.”
With Legal Intake, he says he really wanted to make money on the deal because we had “Blood Sweat and Teared it,” and done everything right.
“And we got a great financial deal and we put it in the hands of someone that could really roll with it,” he says. “And so I was thrilled with that outcome.”