Andrew McConnell on Why a “Short List” of Acquirers May Be a Trap
- 3 hours ago
- 3 min read
About This Episode
Andrew McConnell built a SaaS company that helped vacation rental managers price homes like airlines using dynamic pricing based on demand.
He eventually successfully exited, but not before learning the hard way that building a company and selling one require two entirely different skill sets.
In this episode of Built to Sell Radio, Andrew walks through the pivot that saved his business, why his VC backers stayed on board, and the exact moment he realized that a “short buyer list” is a dangerous trap for founders.
Listen in to discover how to:
Spot the “hidden ceiling” in a business that looks like it’s doubling—right up until it isn’t.
Move a cap table from a failed bet into a new one without lighting your professional relationships on fire.
Understand liquidation preference in plain English (and why it can erase a founder’s take-home pay at exit).
See why a banker’s real value isn’t just managing the process—it’s forcing pressure and widening the field of potential acquirers
Avoid the “I can sell this myself” mindset that often results in a year of free research for buyers and zero leverage for you.
About Our Guest
Andrew McConnell
Andrew McConnell is a serial entrepreneur and business builder known for founding and scaling companies at the intersection of real estate, marketplaces, and the future of work. He co-founded OfficeSpace.com, which was acquired by WeWork, and later founded Rented.com and VacationFutures, both focused on helping property owners maximize revenue through innovative rental models. Recognized for his practical and transparent approach to entrepreneurship, McConnell frequently shares insights on leadership, scaling companies, and navigating market shifts, and he is also the author of Get Out of My Head, where he explores decision-making and resilience through Stoic philosophy.
Definition of Terms
Due-Diligence: This is a comprehensive appraisal of a business or investment undertaken before a merger, acquisition, or investment. It seeks to validate the information provided and uncover any potential risks or liabilities.
Earn-out: This is a financing arrangement for the purchase of a business, where the seller must meet certain performance goals before receiving the full purchase price. It reduces the buyer’s risk and aligns the interests of both parties post-acquisition.
Roll Over Investor: A rollover investor, in the context of selling a business, refers to an individual or entity that rolls some of their proceeds from the sale with the buyer. This strategy allows the seller to defer capital gains taxes and potentially leverage their expertise or resources in a new venture.
Debt Coverage Ratio: The debt coverage ratio is like a financial health check for a small business applying for a loan from a bank. It shows whether the business earns enough money to comfortably cover its debt payments.
In simpler terms, it’s a way for the bank to see if the business can afford to pay back the loan. If the ratio is high, it means the business is making enough profit to easily handle its debts. But if it’s low, it could indicate that the business might struggle to make loan payments, which could make the bank hesitant to lend them money.
Let’s say there’s a small bakery called “Sweet Delights” that wants to expand its operations by taking out a loan from a bank to buy new equipment. The bank wants to make sure Sweet Delights can afford to repay the loan, so they calculate the debt coverage ratio.
Sweet Delights’ annual net income (profit) is $50,000, and they have annual loan payments of $20,000 for existing debts.
The debt coverage ratio formula is:
Debt Coverage Ratio = Net Operating Income / Total Debt Service
In this case: Net Operating Income = $50,000 (annual profit) Total Debt Service = $20,000 (annual loan payments)
So, the debt coverage ratio would be:
Debt Coverage Ratio = $50,000 / $20,000 = 2.5
This means that for every dollar of debt Sweet Delights has, they’re making $2.50 in profit. In simple terms, the higher the ratio, the better, because it shows that Sweet Delights is making enough money to comfortably cover its debt payments. This would likely make the bank more confident in lending them the money for the new equipment.
The Transfer of your Business may be the Biggest Financial Transaction of your Life!
At Flight Plan Strategies, we utilize ExitMap® to help Business Owners understand their current level of preparedness so that they can begin the succession planning process.
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