Carrie Kerpen, co-founder of Likeable Media
In 2021, Carrie Kerpen achieved something that many entrepreneurs aspire to: she sold her social media agency, Likeable Media, for an eight-figure sum. This success wasn’t just a matter of chance; it was the outcome of careful planning, strategic decisions, and a strong focus on building value. For any business owner looking to maximize their company’s sale price, understanding the steps Kerpen took can provide a helpful guide.
Social media agencies, like many service-based businesses, often struggle with maintaining steady revenue and growing effectively. Industry statistics reveal that only about 10% of small businesses successfully exit, and even fewer command a high sale price. Carrie Kerpen’s story, however, stands out as a practical example for those aiming to overcome these odds.
In this article, we’ll explore the strategies and insights that led Likeable Media to its lucrative sale. We’ll look at how the Kerpens built their agency from scratch, focusing on key aspects like recurring revenue, turning services into products, and using cost-effective growth strategies. By the end, you’ll understand how to enhance your business’s value and make it attractive to potential buyers.
The birth and growth of Likeable Media
Carrie and Dave Kerpen
Carrie and Dave Kerpen founded Likeable Media in 2006 with a clear vision: to create a leading social media agency that would stand out in a crowded market. Starting as a small business, the company quickly expanded, growing to over 50 employees and becoming a significant part of the Kerpens' net worth. By 2017, the agency was generating substantial revenue, with more than 80% coming from recurring contracts, a key factor in its eventual high valuation.
The Kerpens’ journey wasn’t without its challenges. Early on, they faced the problem of scaling with limited resources. Dave Kerpen recalls, “We started with virtually no staff and minimal revenue. To build our team, we hired interns who worked for college credit and stipends, which allowed us to grow without spending too much.” This approach not only helped them build a strong team but also created a culture of creativity and resourcefulness that became a hallmark of Likeable Media.
The importance of recurring revenue
One of the biggest factors that boosted Likeable Media's valuation was its focus on recurring revenue. Carrie Kerpen stresses, “Predictable revenue is key when selling a business. Buyers are willing to pay more for companies that can show consistent, reliable income.” At the time of the sale, Likeable Media’s recurring revenue made up 80% of its total income, making it a highly attractive option for potential buyers.
In the service industry, moving from project-based work to retainer-based contracts can significantly increase a company's value. Recurring revenue offers stability and predictability, which are critical factors for buyers assessing a company’s worth. Carrie Kerpen explains, “We transitioned many of our clients to retainers by showing them the value of our ongoing services. This not only secured steady income but also made our business more appealing to buyers.”
Strategies to build predictable revenue
Carrie Kerpen outlines several strategies that helped Likeable Media establish a strong stream of predictable revenue:
1. Transitioning to retainers
Many service businesses rely on project-based contracts, which can be unpredictable and less valuable to potential buyers. Kerpen advises, “Convert project-based work to retainer agreements. This not only secures steady revenue but also allows you to manage your resources more effectively.” She suggests starting with a low initial retainer and gradually increasing it as you build trust with clients.
2. Leveraging initial projects for retainers
Securing a retainer from the start isn’t always possible. Kerpen recommends using initial projects as a way to build trust. “Offer a small project, like a social media audit, to demonstrate your expertise. Once the client sees the value, they’re more likely to commit to a retainer,” she says. Likeable Media often provided a social media “playbook” as an initial project, which served as a stepping stone to a long-term contract.
3. Careful scoping and pricing
Negotiating contracts can lead to reduced revenue if services aren’t priced and scoped carefully. Kerpen emphasizes the importance of clear pricing. “Create an itemized list of services with individual prices. This helps clients understand the value of each service and makes it easier to negotiate fair terms,” she explains. By offering a bundled discount for retainers, businesses can encourage clients to opt for long-term agreements.
Turning services into products for increased value
Turning services into products can significantly enhance a business's value and appeal to buyers. The Kerpens introduced several productized offerings at Likeable Media, which helped secure recurring revenue and differentiate their agency from competitors. They developed the Content Credit System, a subscription-based service allowing clients to purchase annual content packages. This system provided predictable income and highlighted the agency's commitment to quality and consistency.
Carrie Kerpen highlights the importance of branding and marketing these productized services. “We named and marketed each of our services, like Content Cubed, to create a strong brand presence. This not only added value to our offerings but also helped us stand out in the market,” she notes. The Kerpens’ approach demonstrates how packaging and branding services can create a lasting impression and attract more clients.
Using interns for cost-effective growth
In the early stages of Likeable Media, the Kerpens faced the challenge of growing their business on a limited budget. They turned to interns, or "buzz builders," who worked for college credit and stipends. This strategy allowed them to build a strong, motivated team without spending too much. Dave Kerpen recalls, “We had up to 60 buzz builders working for us at one point, providing valuable support and helping us scale our operations efficiently.”
This approach not only helped Likeable Media manage its growth effectively but also fostered a culture of innovation and learning. By providing interns with hands-on experience and training, the Kerpens were able to cultivate a pool of talent that contributed significantly to the agency’s success.
Getting through the sale process
Selling a business involves more than just finding a buyer; it requires careful negotiation and strategic decision-making. The Kerpens’ experience offers valuable lessons for business owners considering a sale:
1. Beware of bait-and-switch tactics
Initially, the Kerpens received an attractive offer: 6.5 times EBITDA, paid entirely in cash. However, after signing the Letter of Intent (LOI), the buyer changed the terms, offering just 60% upfront. Realizing they were being misled, the Kerpens walked away and eventually secured a better deal.
2. Understand earn-outs
Many service businesses involve earn-outs, where part of the sale price depends on future performance. Initially, the Kerpens faced a reduced upfront payment with the rest as an earn-out. Understanding these arrangements and maintaining control over the process is crucial. Dave Kerpen emphasizes, “Ensure you have a clear understanding of earn-outs and the potential risks involved.”
3. Focus on long-term value
Rather than being swayed by attractive offers, it’s essential to focus on your business’s long-term value. By prioritizing recurring revenue, productizing services, and building a strong team, the Kerpens increased Likeable Media's value and secured a higher multiple at sale.
4. Think like an entrepreneur
Dave Kerpen stresses the importance of thinking like an entrepreneur rather than just a small business owner. This perspective encourages innovation and helps businesses stay competitive in the market.
The role of branding and marketing
The success of Likeable Media was driven by strong branding and marketing efforts. The Kerpens owned the name "Likeable" and created a positive association with their brand. They also launched LikeableU, a conference that brought clients and prospects together to learn from social media experts. Dave Kerpen emphasizes, “Owning the name 'Likeable' and creating a positive brand association was a huge asset for us.”
By consistently branding their services and maintaining a strong market presence, the Kerpens built a reputation that attracted more clients and added significant value to their business. This approach highlights the importance of effective branding and marketing in building a successful and valuable company.
Conclusion
The journey of Likeable Media from a small startup to an eight-figure sale offers valuable lessons for any business owner looking to maximize their company’s value. By focusing on recurring revenue, turning services into products, using cost-effective growth strategies, and maintaining a strong brand presence, the Kerpens successfully increased their business's value and achieved a lucrative sale.
Carrie Kerpen's journey shows how careful planning and determination can lead to significant success. For any business owner aiming to sell their company, understanding these strategies can provide a clear path to success. As you navigate the challenges of growing and selling your business, remember the importance of creating long-term value and being prepared to negotiate or walk away from unfavorable terms.
