Ep 567 Rejected at 4x, Sold for 8 Figures: The Growth Mistake That Nearly Cost Jim Fitzgerald Half His Exit

Colin Morgan (0:02)

Hi there, and welcome back to another edition of Built to Sell Radio, the podcast designed to help you punch above your weight in a negotiation to sell your company. I'm the executive producer Colin Morgan.

Now, how do you balance growth with profitability? A lot of founders assume that acquirers care most about growth, so they sacrifice their bottom line just to show a buyer how fast they're growing.

It's an easy trap to fall into, and you often don't find out. It was a mistake until the offers come in. That's what happened to Jim Fitzgerald. He bootstrapped Taradel from a spare bedroom into a $30 million direct mail company, made the Inc. 5,000 12 years in a row, and put every spare dollar back into growth. When his banker took the business to 100 potential buyers, the five who made offers all landed around four times EBITDA, roughly half of what Jim had in mind. So we walked away, rebuilt his company around profit and tried again. The second time, nine buyers put in indications of interest, and Jim sold for a low eight figure sum, all cash. Jim shares what changed between those two processes, and what buyers really want to hear in a management meeting, and how he handled missing his numbers a month before closing. Without further ado, here is Jim Fitzgerald.

Jim Fitzgerald (1:22)

Enjoy.

John Warrillow (1:29)

Jim Fitzgerald, welcome to Built to Sell Radio.

Jim Fitzgerald (1:32)

Well, it's great to be here. Thanks so much for having me, John.

John Warrillow (1:35)

Yeah, I'm looking forward to hearing about Taradel, because this business you started had a few, it's like a cat with nine lives. It had a couple of different iterations. Walk back to the kind of early days and kind of bring us a flash forward. How did this business evolve over the years?

Jim Fitzgerald (1:52)

Yeah, if it weren't for pivots, I don't think I'd have a business. So yeah.

I started out of a spare bedroom, and the business model was to help newspapers, and we'll get past that quickly, reach smaller businesses to reach local audiences. So we created a platform to make it easy for small business to target the newspaper route, where they wanted to drop a flyer.

John Warrillow (2:19)

So if I was a dentist and I wanted to put up my flyer in the newspaper that got delivered to all the homes within a kilometer or a mile of my house, that's what you guys did? That's it.

Jim Fitzgerald (2:32)

So yeah. So in the process, we created a pretty cool platform where we incorporated some high-level demographic information into the routes that the newspapers delivered, because traditionally, FSIs or freestanding inserts were common for larger brands, national brands, but we democratized it and brought it down to the pizzeria that wanted to drop 10,000 flyers.

So we did this thing called gang printing, where we ran multiple disparate jobs together under press, and the economies were very powerful, so we could deliver 10,000 flyers to a newspaper for 400 bucks. And they charged the pizzeria, in this case, 1,000 bucks, and for 10 cents a home, he's getting his menu inserted in 10,000 homes. And it was a nice deal. But as circulations, go ahead, go ahead.

John Warrillow (3:23)

Yeah, no, I was just getting... Like, how did the commercials work? So did you charge the pizzeria and then buy the space from the newspaper? Did you charge the newspaper?

Jim Fitzgerald (3:31)

Yeah, so the newspapers were my partner. So I would go in there, and usually in the front end, spend a little time with the ad director or the VP of advertising, and very often do like an in-house seminar on how to reach the small audience for their salespeople.

And so, yeah, so every time I signed up a newspaper, I'd pick up 15, 20, 50 salespeople that were out there pushing this product. And the margins were exceptional. And I simply created the platform, collected the orders, found printers that were good at that type of thing, and had the printer ship the flyers directly to the newspaper.

John Warrillow (4:19)

So cool. And then you went through a pretty big pivot when the newspaper circulation sort of died off. What was the next iteration?

Jim Fitzgerald (4:27)

So we figured the next logical vehicle would be direct mail. So instead of, you can imagine, an 8.5 by 11 flyer. We did like a 6 by 9 post card. Now the cost jumped because of postage. But at about that time, USPS launched a new product called Every Door Direct Mail. And what was unique about that was you could reach every address in a postal carrier route, and zip codes are made up of clusters of carrier routes. There's usually 400 or 500 addresses within one. As long as you mail every home in the carrier route, you don't have to address the piece because the carrier literally puts one in every mailbox, every door direct mail.