Ep 493 Exit Story: Selling a 20-Person Agency for 5.5x EBITDA

·45 min·4 clips

Jeff DeGarmo explains how the buyer shifted to a 50% earn-out after they'd already agreed on the sale price.

This episode of Built to Sell Radio features host Colin Morgan interviewing Jeff DeGarmo, co-founder of the marketing and web development agency Qubic. DeGarmo shares his realistic exit story after building and selling his 20-person service business over 16 years. The agency, Qubic, grew to over $4 million in revenue by initially specializing in custom content management systems for chambers of commerce and convention bureaus nationwide. DeGarmo explains the partnership began with five equal owners, later consolidating to four, and the company eventually expanded into a full-service ad agency. He details how the partners initially sought a minority investor to help scale from 20 to 50 employees and access larger client networks. The brokerage process yielded surprising interest, resulting in multiple Letters of Intent, including one offering partial equity retention and another from a public company. Qubic ultimately sold to that public company for 5.5 times EBITDA, with a deal structure comprising roughly 50% cash upfront and 50% in a three-year earnout tied to revenue and client retention metrics. DeGarmo reveals a significant twist occurred after signing the LOI, when the buyer shifted the deal from an all-cash offer to the cash-and-earnout structure. He notes the other final offer allowed the partners to retain about 20% equity but came at a lower multiple. The partners unanimously chose the public company buyer, influenced by its perceived stability, though DeGarmo personally leaned toward the equity-retention option. DeGarmo’s role encompassed operations, finance, and HR, which became redundant within the large acquirer, leading him to negotiate a buyout of his employment agreement just nine months post-sale. He received about 50% of his full earnout upon departure, a provision negotiated for protection. A key insight is that the partners' differing personal financial situations and life stages made internal reinvestment for growth challenging, pushing them toward a sale. DeGarmo reflects that, in hindsight, he would have pushed back on the deal structure, perhaps negotiating for more upfront cash or seller financing instead of a large earnout tied to employment. He believes the sophisticated buyer likely always planned the earnout structure, using it in previous acquisitions. The emotional high was the accomplishment of building and profitably exiting a business started from scratch; a low was doubting if they made the right choice as the deal terms changed. The episode is conversational and educational, focusing on practical lessons from a mid-market service business exit rather than a headline-grabbing transaction. It offers a detailed, behind-the-scenes look at partnership dynamics, negotiation nuances, and post-acquisition employment realities. Listeners who are agency owners or service business founders considering a sale will find this episode highly relatable and informative. Those seeking stories of massive, venture-backed exits or purely inspirational tales might find the grounded, procedural narrative less captivating.

As heard by us

A grounded exit story that keeps the sale mechanics clear and concrete.

Built to Sell Radio treats Jeff DeGarmo's Qubic sale as a plainspoken service-business exit, not a glossy victory lap. The company reached 20 employees and more than $4 million in revenue, then sold after 16 years for 5.5x EBITDA to a public company.

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See how a 20-person agency sold for 5.5x EBITDA to a public company.

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