Latest / The Buyer & Seller Podcast with Fexingo: Business Brokers, Exits, and Private Sales Explained / How a Baby-Proofing Service Sold at 75x EBITDA
Transcript
- Lucas: Luna, I want to walk through a sale that I think flips a lot of assumptions about what kind of business can trade at a high multiple. It's a baby-proofing company in Denver that sold for 75 times EBITDA. Luna: 75 times? For baby-proofing? That feels like a business where you show up once, install some cabinet latches and outlet covers, and you're done. How do you get recurring revenue out of that? Lucas: That's exactly the question. And the answer is what makes this case interesting. The owner, a guy named Mark, started out doing one-off installations. But after about three years, he realized his clients — mostly new parents — were coming back every time their kid moved from crawling to walking to climbing. So he built something he called the 'Safety Renewal Program.' Luna: Which is? Lucas: An annual subscription. For $299 a year, a technician comes out, does a full home safety audit, replaces any worn or outdated parts — cabinet latches, outlet covers, furniture straps — and installs new products for the next stage of childhood. So instead of one $600 project, he was getting $299 every year from a growing base of clients. And because the renewal rate was over 80 percent, the business became predictable. Lucas: Now, before we go deeper on the mechanics — I want to say something brief about the show itself. We keep these episodes ad-free because we think that's the right way to have a real conversation about business. If you've gotten value from these cases and want to support that, the link is buy me a coffee dot com slash fexingo. No pressure, just a way to keep it going. Luna: Yeah, it matters. And it's a small gesture that adds up. So back to Mark's baby-proofing business — how did he get from a few recurring clients to 75 times EBITDA? Lucas: Right. So the key was density data. Mark mapped every household within a 15-minute drive of his existing service area that had a child under three years old. He cross-referenced that with public birth records and neighborhood demographics. He found that in a three-mile radius around his shop, there were roughly 4,000 eligible homes. And he had only 200 subscribers. Luna: So the addressable market was massive relative to his current footprint. That's the kind of story buyers love. Lucas: Exactly. He didn't just show up with three years of financials. He showed up with a map of every home that should be his customer, and a model showing that if he converted just 10 percent of those, his revenue would triple. The buyer — a roll-up platform called SafeHome Holdings — was already consolidating home safety services. They had childproofing companies in five other cities. Mark's data let them see exactly how fast they could scale in Denver. Luna: So the multiple wasn't based on what he had already done. It was based on what the data proved he could do. That's a huge lesson. Lucas: That's the core of it. The business was doing about $400,000 in EBITDA at the time of sale. So 75 times that is $30 million. But here's the thing — Mark only had three full-time employees. He was still doing some installs himself. The business wasn't some high-tech operation. It was a service business with a smart recurring model and a data asset. Luna: Let's talk about the subscription model more. How did he structure it so that customers kept paying year after year? I imagine the first year is easy — you're a new parent, you want everything safe. But year two, year three? Lucas: He designed it around the idea that safety needs change as kids grow. In year one, it's outlet covers and cabinet locks. Year two, you need furniture straps and stove knob covers. Year three, it's window guards and pool alarms. Each annual visit, the technician brings a kit of products appropriate for the child's age. So the customer isn't just paying for labor — they're getting new products that prevent new risks. The renewal rate was over 80 percent, and the average customer stayed for four years. Luna: That's smart. You're not selling the same thing twice. You're selling the next thing they need, but they don't have to think about it. Lucas: Exactly. And the data that the buyer valued most wasn't just the financials. It was the churn analysis by neighborhood, by child age, by referral source. Mark could show that customers who came through a pediatrician referral had a 90 percent renewal rate, while those who came from a Google search had a 70 percent rate. That kind of granularity lets the buyer optimize marketing spend immediately. Luna: So the buyer wasn't just buying a subscriber base. They were buying a playbook for how to acquire and retain baby-proofing customers in any market. That's worth a multiple premium. Lucas: Right. And the buyer had a specific thesis: home safety services are fragmented, local, and mostly project-based. If they could convert the industry to a subscription model using Mark's playbook, they could multiply the value of each acquisition. They paid 75 times because they believed the combined entity could trade at 100 times within three years. Luna: So what did Mark walk away with? After taxes, fees, all that. Lucas: He netted about $22 million. The deal structure was 60 percent cash at close, 40 percent in SafeHome equity. He's now a regional manager for their western division, overseeing six cities. He gets a salary plus carry on the growth of his region. So he's still incentivized to expand the model. Luna: That's a great outcome for someone who started with a van and a ladder. What's the one takeaway you'd want a listener to leave with? Lucas: I think it's this: even in a business that seems purely project-based — baby-proofing, dog walking, house painting — you can create recurring revenue if you think about the customer's lifecycle. Mark didn't invent a new product. He packaged an existing service into an annual renewal that aligned with a recurring need. And then he layered data on top to prove the repeatability. That combination — recurring revenue plus density data — is what justifies the big multiples. Luna: And the data doesn't have to be fancy. Public birth records, a spreadsheet, and a map. That's all it took. Lucas: Exactly. So if you're running a service business today and you think you can't sell for a high multiple, look at your customer base. Ask yourself: do they come back for a different reason at a different time? If you can prove that they do, and you can show how many more of them are out there, you've got the bones of a 75-times deal. Luna: Alright, next episode we'll look at a business that tried this model and failed — and what they got wrong. See you then. Lucas: See you then.