Kristopher B. Jones is an Internet entrepreneur, investor, public speaker, and best-selling author. He is the founder and former president and CEO of Pepperjam (sold to eBay), managing partner of KBJ Capital (13 companies), and the founder and CEO of

A Meeting With the "Perfect Buyer"

In early 2009, I was invited to a meeting with Michael Rubin, the CEO of GSI Commerce (which later became eBay Enterprise), at its Philadelphia-based company headquarters. eBay Enterprise was interested in the possible purchase of my Internet marketing company, Pepperjam.

I was strictly advised to arrive alone. Sweaty and nervous, I entered the executive conference room. You could have cut the air with a knife. Michael, surrounded by his C-level executives, sat expressionless on the other side of the vast conference table.

Without hesitating, he looked me straight in the eye and uttered three words.

"What's your price?"

I was totally flustered. I knew that standard wisdom tells you to never "throw a number out"; this is tantamount to showing your cards in the mergers and acquisitions poker game. And yet, I was tempted. There I was, all by myself, enjoying the undivided attention of my ideal, perfect buyer. I took the leap and simply blurted out my desired price.

No one moved. You could have heard a pin drop. After what felt like an eternity, Michael looked straight at me once again and said quietly, "OK. I think we can get a deal done."

Start With Synergy and Trust

In hindsight, my decision to break conventional wisdom and name a price was right. The buyout process--which was now built on strategic synergy and trust--played out without a glitch. A few months later, my company sold for millions.

Here are 10 more important lessons I learned on my journey from startup to the successful sale of my business:

  1. Be laser focused. Like anything in life, half the battle is being crystal clear about your goals. Selling a company is not something you do at the last minute. Be proactive about it from the beginning.
  2. Zig and zag. Though you need to be clear about your ultimate goal, you also need to be prepared to "zig and zag" to get to your destination. My journey with Pepperjam is a classic example. We originally launched as a gourmet food company on the basis of a delicious jam recipe concocted by my grandmother. As marketing head, I became obsessed with the power of Internet marketing--websites, SEO, and PPC--and realized that was the real opportunity. So we shifted gears and proceeded to build one of the biggest Web, SEO, and affiliate marketing companies in the world, appearing on the Inc. 500 fastest-growing privately held company list three years in a row. In the end, I had come a very long way from my grandmother's kitchen--zigging and zagging the whole way.
  3. Make a shortlist. As with any marketing task, the first question you need to answer is, "Who is going to buy?" Create a shortlist of all your potential acquirers. Include the obvious companies (i.e., businesses that do what you do), but don't forget the less obvious companies (i.e., companies who aren't in your line of business but could benefit from what you do).
  4. Look for a strong strategic fit. Your buyer should be an excellent strategic match with your business. Pepperjam was undeniably a much stronger company in alliance with eBay's resources and vice versa.
  5. Button up your finances. The M&A process is a numbers game. Get your financial controls and systems set up correctly from the beginning:
    1. Clearly separate your personal and professional finances. Don't fall into the classic entrepreneurial trap of commingling personal and business assets. Make sure to pay yourself a salary that is large enough to cover expenses.
    2. Set up tight financial controls at all levels. During Pepperjam's due diligence, we discovered that our post 90+ day receivables account had ballooned owing to inadequate collections controls. Though it didn't stall negotiations, it could have been a problem. Hire an experienced CFO from the start so you can avoid situations like this.
  6. Hire an M&A adviser. Hire the best M&A adviser you can afford. An M&A adviser will do a lot of the heavy lifting: prepare teaser documents, write executive summaries, present your financials in the best light, and arrange meetings with prospective buyers.
  7. Meet your financial projections. Hitting your financial projections is absolutely critical in the M&A process. When you put together your three-year financial projections, use achievable numbers.
  8. Understand your strengths. Your potential buyer is looking for the best price and so has a vested interest in poking holes in your business. Do a complete SWOT analysis so you can promote your strengths and defend your weaknesses.
  9. Be visible. Make sure you maximize the visibility of both you and your business. Speak, write guest posts, and issue strategic press releases to get people talking about you.
  10. Keep your eye on net profit. The number all buyers are interested in is your net profit or earnings before interest, taxes, depreciation, and amortization, or EBITDA. The higher the EBITDA, the higher your buyout will be.