Ornaments for Crocs: A $20 million idea

A husband and wife made their little company into a successful, $2-million-a-month business - then sold for $20 million.

By Ian Mount, FSB Magazine contributor

(FSB Magazine) -- Crocs clogs have launched more than a fashion craze. The popular perforated shoes have also inspired a piggyback business.

Rich Schmelzer, a software entrepreneur from Boulder, started Jibbitz in August 2005, selling ornaments designed by his wife, Sheri, to fit in the footwear's famous holes.

By September 2006, Jibbitz was pulling in $2 million a month, selling in 4,000 stores in North America (and several hundred more internationally). In October, Crocs bought Jibbitz for $10 million upfront and another $10 million if the company hits earnings targets.

According to Fred Zirkle, CEO of IndustryPro, a Midvale, Utah, M&A advisor, "earn-outs" are a common arrangement in acquisitions of young, fast-growing companies whose sellers think they will be worth more soon.

"It can be a sweet deal for the buyers. Sometimes they can make the second payment out of earnings from the acquired company," Zirkle says.

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.