From a $3 Million Lowball to a $70 Million Offer in 12 Months

When I'm hunting for companies to buy, I don't only read the deal listings. I read the job listings. When a company is advertising for a senior leader, it can mean the business is in turmoil or about to change. Sometimes the answer is capital and leadership together, and that can turn into a deal.

That's how I found this one. It was a national insurtech agency selling mostly preferred and ultra-preferred auto insurance, plus homeowners lines, in 45 states, that would eventually grow to writing more than $175 million in premium in force. On the surface it had a lot going for it: it wrote far more business than the average agency. Underneath, it was in a turnaround. It was about break-even, it couldn't get a commercial loan, and it couldn't raise more equity. The owner wanted someone with insurance experience, entrepreneurial experience and access to capital. We worked out a deal, and I came in as President in 2019.

Week one: the "offer"

In my first week, the owner asked me to sit in on a meeting with a group that wanted to buy the company for about $3 million, with almost none of their own money in the deal. I listened politely. Their pitch was wishful thinking, but for a company not making a profit, it was understandable. However, the true value was much higher with just a few fixes, let alone what we would end up doing with it. Between the people and the structure, the offer was ridiculous on its face. We passed and got to work.

The equilibrium problem

People think an insurance agency runs on good salespeople. This one ran on balance. Three things had to stay in sync:

1. Lead volume. Organic traffic, Google AdWords and third-party leads coming in.
2. Licensed agents on the phones, ready to bind policies.
3. Monetization. Ways to route some of that same traffic to third parties, often as warm call transfers, so it helped pay for the marketing.

If those three drift apart, you lose money fast. Buy too many leads and they go unanswered, and that eats your profit. Buy too few and you're paying a room full of licensed agents to twiddle their thumbs. It was a finer balance than anyone realized. A round of 15-minute breaks could throw the whole system off. Even the phone system dropped calls at times, and when we finally dug in, we found call-routing problems at the millisecond level.

So we mapped everything. We charted every step of the call flow, then drew an engineering diagram of every system that touched each step. We modeled scripting at each segment based on our highest performers and matched it to the type of caller. Then we built a set of levers to adjust lead and call volume in very small time windows. It wasn't glamorous. It was the business. It was the hard work no one had demanded before, and no one had the skill set for until that point.

Then COVID hit

We were deep in that rebuild when the pandemic arrived, and the owner couldn't get back into the US. Luckily, the company was in the northern Midwest. It was used to snow days, so people already had laptops and could work from home when the roads made the office impossible. Overnight, that habit became a lifeline.

It also became a market advantage. Consumers couldn't walk into their local agent's office, but the law still required them to carry auto and homeowners insurance. Someone was going to write that business online. It might as well be us.

The contrarian call

The big national carriers made their first round of advertising cuts that spring. The numbers back that up. In the week of March 22, 2020, insurance shopping dropped about 14%. Carriers pulled traditional TV spots and shifted their dollars toward buying leads, clicks and calls they could measure. Shoppers came back by early summer, and they were shopping online.

The real turning point came as we headed toward Christmas 2020. The carriers cut again, hard, for a brief stretch, and everyone in our company thought we should do the same.

I disagreed. If the giants were pulling out, leads would get cheaper. As a smaller player, we could be much pickier about which ones we bought. And because we were fully online, the pandemic played to our strength. We leaned in.

Then came a day when the volume we wrote blew past anything the company had seen. Our competitors had pulled out so hard that we bought up the day's Google volume and the third-party lead inventory they left on the table. And that traffic was high intent, which taught us a lot about what to target going forward. It was also a dress rehearsal. For one day, we saw our process running at full call-center and system capacity, and we saw exactly where it worked.

The marketing and leadership teams were shocked. Nobody had expected that outcome, and the win changed morale and the team's belief about what was possible. From then on, the question wasn't whether we could do it. It was how to do it again. We didn't just celebrate. We took that day apart and worked out exactly what had happened and why, so we could hit those numbers again on purpose.

The scoreboard

Within 12 months, the company that had been offered $3 million at break-even had doubled its revenue and grown EBITDA fivefold. A top-five national carrier was asking us to write more of its business. And a public company worth over a billion dollars, one we bought leads from, started paying attention.

We had dinner with its CEO. He got interested in being more than a lead seller. He wanted into the agency business, where he'd share in the recurring revenue. Long story short, they offered up to $70 million to buy us.

The part you can't model

Then, not long after, before anything closed, that CEO died of a heart attack, far too young.

No spreadsheet has a line for that. Deals are made by people, and sometimes the person on the other side of the table is gone, and the deal goes with him.

Don't manage to the averages

If I had to boil that year down to one idea, it's this: averages hide the truth. On average, our call center looked fine. On average, our lead spend looked reasonable. The real story was in the details nobody wanted to look at, down to milliseconds on the phone system. The team had to dig deep into those nuances to find the outlier levers that drove change with the most impact. That's where the money was.

The lesson from the trenches

The same company, with the same people, went from a $3 million lowball to a $70 million offer in about a year. The difference was that we turned a business with no documentation, strategy or leadership into one that had all three. Map the machine and find the balance. When everyone else runs for the exits, ask whether that's exactly when to buy.

If you own a company that's busier than it is profitable, I'd like to hear from you.