The Basics of Buying & Selling Businesses

[0:00:00.04] Cool.

[0:00:00.32] Well, thank you very much for hosting me.

[0:00:02.12] So title of presentation today is basics of buying and selling businesses.

[0:00:06.92] I've been in the industry since about 2008.

[0:00:11] I founded Fe International in 2010.

[0:00:15.08] We are AM and a firm.

[0:00:17.04] So mergers and acquisitions essentially a fancy word for we help people buy and sell businesses.

[0:00:22.56] We specialize in the tech industry and a lot of our business is SAS specifically or or software.

[0:00:30.08] But we'd be basically anything in the tech space.

[0:00:32.76] We started out or I started out my first ever deal was $100 back in 2010.

[0:00:39.4] I was buying very small websites and then I would turn $100 into 300.

[0:00:45.04] Then I turned 300 into 1000 and then compounded from there many, many years ago.

[0:00:50.92] So right at the start of the business we weren't actually AM and a firm, we were a course business.

[0:00:56.76] I was essentially teaching people how to buy and sell websites.

[0:01:01.32] So very similar to what I'm going through today, except the world that has has evolved in the industry.

[0:01:07.12] So I very much started out with nothing.

[0:01:08.52] I didn't have any outside capital, I had no professional experience.

[0:01:11.8] I graduated university or college and went straight into my own business and then Fe international.

[0:01:18.96] Today we have two parts, 2 main parts of our business.

[0:01:22.84] We have the M and a business where we help people buy and sell companies.

[0:01:26.56] And then I also have a private investment fund I run with my business partner where we also buy businesses ourselves and we have some outside investors.

[0:01:35.6] Across the whole business we are about 40 million revenue of about 150 employees.

[0:01:41.76] I can mention at the start, I'm currently sat in our office in New York.

[0:01:45.52] I'm originally from England and the UK and I've been living here for like 6 1/2 years now.

[0:01:51.4] So that's super high level.

[0:01:52.96] I know in the group there's a real range of people of all different stages of their their business, so I'm going to start with setting up the slightly higher end to show you what it's like with much bigger transactions than many you will be thinking about.

[0:02:06.44] But I think that's some useful context to get an understanding of what the industry can look like and what also you can achieve and what you can build.

[0:02:14.64] A lot of people with 50 million, hundred million, $200 million exits start out like everyone else in this group.

[0:02:22.4] They don't necessarily have any outside money, any outside skills, any contacts, any other real advantages.

[0:02:30] They just take the time built thing up and and sell it.

[0:02:34.16] So getting into it, the the very first thing to understand is every single person at some stage has to exit their business.

[0:02:46.48] There's no way around that and that that can be technically never extinct.

[0:02:52.16] Some people will just die and then their business gets inherited or just gets shut down again.

[0:02:57.04] But at some point, it's completely unavoidable that you have to exit your business.

[0:03:02.76] My belief is the best way to do that is with a successful sale.

[0:03:06.76] So that's what part of the reason I built the business is to help people successfully exit.

[0:03:13.4] But a lot of people listening, a lot of people starting out say, oh, I'm never going to sell my business.

[0:03:18.56] I don't need to sell my business.

[0:03:19.76] I don't want to sell my business, which may very well be true in your current situation, but often people that do sell is either because they're forced to or they need to.

[0:03:30.76] Maybe it's a change of personal circumstances, professional circumstances, family, all sorts of different things that can happen that you don't necessarily expect and plan for, or people have made a very clear plan of what they want.

[0:03:46.44] So I always think the best thing to do when you're building a business is to decide what you're want to want to achieve and work backwards from that.

[0:03:53.96] And there's no right or wrong answers to that that question.

[0:03:57.6] I think if you spend your time browsing publications like Tech Crunch, people think if you don't build a billion dollar business, you're not successful.

[0:04:06.96] But I'm really not a believer in that.

[0:04:08.8] I don't think it matters how big your business is as long as you're kind of happy running it.

[0:04:13.56] Some people want to work 100 hours a week, seven days a week, and they want to sleep under their desk in their office.

[0:04:20.56] Some people want to work 2 hours a week and travel the world and not necessarily have the commitments of managing A-Team.

[0:04:28.84] There's there's definitely no right or wrong answer, but it is important to establish yourself what you're trying to achieve.

[0:04:35.52] It doesn't matter what I think doesn't matter what Daniel thinks, doesn't matter what.

[0:04:38.88] Like any of your friends think.

[0:04:41.52] Maybe it matter if you're married, it probably matters what your spouse thinks, but it ultimately really doesn't matter.

[0:04:45.96] You have to come up with your own, your own plan.

[0:04:48.08] There's no right or wrong way.

[0:04:49.64] And we've worked with people who have sold businesses for $50,000.

[0:04:53.88] We've worked with people who have sold businesses for $50 million and the people who sold the 50 millionaire, not necessarily more happy, normally necessarily consider themselves more successful.

[0:05:05.88] There's there's not really a huge amount of correlation between happiness and the amount of money you make from your your business unless you're very clear with what you're trying to achieve.

[0:05:15.56] So if you only take one thing away from the presentation, that's at some stage everyone has to exit and there's no right or wrong way to to do that.

[0:05:24.72] There's no right or wrong valuation you have to get to, you're not a failure.

[0:05:29.2] If you build a business which makes 100,000 a year equal a couple of hours a week, that can be a fantastic outcome for for many people.

[0:05:37.48] So don't feel like you have to chase a kind of billion dollar business if you don't want to.

[0:05:44.44] So wider context, a lot of people, particularly starting out, if you don't really have a huge amount of context in the industry, don't understand how big the industry really is.

[0:05:56.76] And particularly if you're an immigrant, like as someone who's personally moved from England to the US, there's a vast amount of wealth in the US that growing up I didn't grow up rich, didn't grow up with parents who had money, didn't really know people that had money.

[0:06:11.8] I didn't really realise how much cash was out there essentially.

[0:06:16.36] So for perspective, this graph is showing that in the US alone there's $4 trillion, so billion, that's trillion of dry powder.

[0:06:26.96] In very simple terms, dry powder is capital that private equity firms have raised from private investors and they need to deploy and invest.

[0:06:36.44] But this is not necessarily all for software or SAS companies or all buying outright.

[0:06:41.16] But that's investing and essentially buying private businesses for investing in private businesses.

[0:06:46.8] So there's a vast amount of capital there's, So you should never worry, like oh will someone want to buy?

[0:06:51.96] My business is if I build a $10 million business, other people out there with money.

[0:06:58.4] I didn't realise growing up there was lots of people out there who can acquire businesses for $10 million.

[0:07:04.16] But the truth is that is every single person in the small bets community could sell their business tomorrow and then I could do this presentation in a week and the the chart would barely have barely have moved like $4 trillion is a lot of a lot of capital.

[0:07:20.68] And as you can see that number is only only increasing that that will continue to happen particularly in the US where it's very entrepreneurial culture, people like like the I, the American Dream is essentially owning a business.

[0:07:33.52] So that that's never going to change and you can see over the last 20 years it's growing very consistently.

[0:07:39.92] So never feel like there's like a limit of what you can build.

[0:07:43.48] There's not a all and particularly in the software industry, it's very easy to get FOMO and think like 10 years ago it was easier, Five years ago it was easier IN2021A form of selling to create multiples.

[0:07:56.56] That's not happening anymore.

[0:07:57.88] The reality is there's always capital out there.

[0:08:00.2] You can always sell a business.

[0:08:01.88] There's you're never going to get to the stage where you can't sell your business because no one has any money.

[0:08:08.92] So perspective.

[0:08:10.16] A lot of people, I think in the small bets community, you guys are probably not in this group.

[0:08:16.72] But a lot of people are misled by the the press.

[0:08:21.2] They'll read the Wall Street Journal, they'll read Tech Crunch, they'll read big publications, they'll watch Fox News and things like that.

[0:08:29.36] And these places will say that there's no deals happening at the moment.

[0:08:33.08] Deal flow is dead.

[0:08:33.68] No one wants to buy a business.

[0:08:34.72] No one wants to sell a business.

[0:08:36.32] The market's terrible, but the reality is that's true for Wall Street.

[0:08:40.04] So between 2021-2022, there's a 38% drop in total deals closed.

[0:08:46.52] But the vast majority of US, 99% of US, 99% of us are never going to be able to do that because we're 99% of us will never be able to do that because we're just trying to build a regular sized business.

[0:09:02.8] You don't have to of worry about getting to a billion dollars.

[0:09:06.28] The kind of companies you care about on on Wall Street are not at that level.

[0:09:11.76] These are multi billion dollar transactions which have slowed down a bit.

[0:09:15.68] If we look at just what we've closed Fe international loan between 2021 and 2022, we closed kind of 51% increase in total deals.

[0:09:25.88] So there's been a pretty consistent increase over that over that time.

[0:09:33.04] Now I'm going to go into some very specific data, but I think it's interesting to understand what drives valuation specifically of bigger businesses.

[0:09:43.8] Then I'm going to get to much more specifics of how you actually buy and sell, but I think the more advanced data is useful to understand.

[0:09:51] So you see what the investors with $4 trillion are thinking about and some of the the data points I'm going to give here may apply to bigger businesses.

[0:10:00.6] That's where a lot of the data points came from, but they can be applied to businesses of any sort, these variables all all relevant.

[0:10:07.96] So there's lots and lots of factors that affect valuation.

[0:10:12.4] I could name you 1000 factors that affect valuation.

[0:10:16.04] What we've looked at is what most directly correlates with valuation.

[0:10:21.64] So if you want to sell a business for as much money as possible, these are all of the things you need to kind of think about.

[0:10:28.6] And if you don't have these things it's it's also fine.

[0:10:31.84] This is really just an indication of like what's what people are looking for.

[0:10:37.56] So firstly, very clear correlation between net dollar attention and valuation.

[0:10:44.96] In simple terms that's just revenue churn.

[0:10:47.56] Revenue churn is more important than customer churn.

[0:10:50.04] And the reason that's the case in my mind is because customer, you could have a relatively low end product offering that has an enterprise package as well.

[0:11:00.72] If you're lower end customers paying say $19.00 a month are churning for your enterprise, customers are going from paying you 1000 a month to 2000 a month because they're of adding users.

[0:11:14] That's a kind of, that's a, that's a good thing.

[0:11:17.84] So your revenue churn will look great because you're showing expansion revenue.

[0:11:23.16] Your customer churn will not look so great because you're losing that lower end.

[0:11:27.2] So customer churn is not necessarily that much of A problem, particularly if your revenue churn is going in the right direction.

[0:11:35] So again, you can sum up for for the purpose of the presentation, you can somewhat ignore what multiples we're talking about because these can be quite large transactions.

[0:11:42] But so you're going to focus on a metric when you're building your business, revenue churn is, is important.

[0:11:49.32] Is this, is this basically is Ave.

[0:11:51.04] growth like not the not the essential or there's a distinction that we should think about?

[0:11:57.12] So what was the question?

[0:11:58.24] Like is the revenue growth basically was this correlation implies like revenue increasing month over month and year over year or does not the low retention sort of has a distinction between just regular growth of the top line.

[0:12:12.92] Monica Lincoln, I guess net dollar retention is specifically your existing cohort.

[0:12:17.8] So it's not gross, it's your existing cohort.

[0:12:21.52] How many of them are expanding?

[0:12:23.4] So if you have, so if you start them up with 10 customers paying $100 each and which obviously $1000 MRR and then you get to the next month and they're all suddenly paying $200.00, so you have 2000, your net dollar attention is technically 200%.

[0:12:41.24] So this is not necessarily correlated with size or or growth.

[0:12:44.56] But this brings us on to the next slide, which is why is one of my businesses which are growing does not mean you can't sell a business.

[0:12:51.68] It isn't growing, but it's very clear correlation between businesses that are growing of businesses that are not.

[0:12:57] So if you're going more than 40% a year, according to our data, you could settle for significantly higher valuation than if you're growing less than 20%.

[0:13:07.92] And then exactly the same applies over a course of a number of years.

[0:13:13.44] Buyers are becoming increasingly more savvy.

[0:13:16.6] When I started at The International in 2010, there wasn't a huge amount of documentation about how to buy and sell a business.

[0:13:23.92] Communities like Small Bets did not exist.

[0:13:26.08] There was almost no good information if you wanted to build a software company other than reading kind of old school blogs and hanging out on a couple of Internet forums that existed, But there's much better information today.

[0:13:40.96] But it also means buyers are more sophisticated and buyers fundamentally One of my businesses which are consistently running next chart shows that essentially in very simple terms, the more effectively you spend your marketing dollars, the higher the valuation you achieve.

[0:14:02.96] So if you spend $100 on marketing and that generates $100 in revenue, that's not very efficient.

[0:14:09.6] If you spend $100 in marketing and you generate $1000 in revenue, that's very efficient and buyers will recognize that, pay more for businesses which spend money efficiently.

[0:14:21.48] A lot of very small businesses.

[0:14:22.72] So a lot of people in in the community probably say, oh, I don't spend any money on marketing, which is not necessarily a a bad thing.

[0:14:31.28] It can show you're extremely efficient.

[0:14:33.36] But if you want to start selling for building a bigger business and higher valuations, often it does make sense to invest into marketing so you can show more growth.

[0:14:43.68] Even if you are a technical founder and you say you don't like marketing, you don't know anything about marketing, you don't like sales, all of those things.

[0:14:51.88] And ultimately investing in marketing is important as long as it's efficient.

[0:14:57.44] And we're talking here about businesses which we're all trying to build, which are sustainable, profitable companies.

[0:15:05.64] We're not talking about raising a billion dollars, investing a billion dollars and generating 100 million in revenue and stuff like that.

[0:15:14.2] We're talking about building a sustainable, profitable long term business.

[0:15:21.6] The majority of people in the community are building SAS companies.

[0:15:25.12] There's lots of different business models we work with within tech.

[0:15:28.48] If you're building a SAS company, you will sell your business for more money than somebody who's building a e-commerce business, and you'll sell it for more than somebody who's building a digital media business.

[0:15:39.88] A digital media business could be like a a podcast, A blog, a course business.

[0:15:46.44] Lots of different things fall into that in that category, but buyers like SAS because it has recurring revenue, its proprietary often has a high barrier to entry and again these very much rule of thumb.

[0:15:57.12] So shouldn't worry too much about the numbers on the Y axis.

[0:16:02.44] Just look at relatively speaking, SAS companies sell more for more than other businesses.

[0:16:10.32] And then final metric and then we'll go into like a real deal, The more your business is growing which already spoke about and the higher your margins, the higher your valuation will be.

[0:16:21.68] So the the, the technical term people use in SAS and you'll often read this is the kind of thing you read on kind of like Tech Crunch, Y Combinator, all of those kind of places.

[0:16:31.08] They'll talk about the rule of 40.

[0:16:33.2] We looked at whether or not the rule of 40 is actually important and the data actually shows that it is.

[0:16:38.08] So when it comes to evaluation companies that meet the rule of 40, in super simple terms, it's your annual revenue growth rate plus your EBITDA margin.

[0:16:48.84] So if you're growing at 20% year on year, you have 20% EBITDA margin, you have 40%, which is the rule of 40.

[0:16:56.84] And then anything above that is very good.

[0:16:59.64] Anything below that is still fine.

[0:17:01.04] It doesn't mean you can't sell your business, but a business at 50% is going to sell for a higher multiple than business at 20%.

[0:17:10.44] So let's get into a real deal completed this recently.

[0:17:13.56] Then I'm going to go into some more specific tactical points about what the process looks like and things like that.

[0:17:19.44] So and this I guess gives you an idea of what, what, what can be achieved.

[0:17:25.8] So the business we worked on specifically was growing 43% year on year.

[0:17:30.44] So you don't have to be growing 300% year on year to sell your company.

[0:17:36.48] It had 110% net dollar attention.

[0:17:40.16] So it had very low revenue churn, people were spending more rather than earning.

[0:17:46.56] It was 8 figures.

[0:17:48.68] ARR again, it doesn't matter how big you build your business, you can be at 5 figures.

[0:17:51.72] ARR that's great.

[0:17:53.2] You can be at 9 figures.

[0:17:55] All of these things will apply, but they were eight figures and many of the people we work with today started out ten years ago $10 ARR.

[0:18:03.04] It took took them some time to build up and this business had very high to 17% customer churn.

[0:18:09.68] So it's my earlier point, it doesn't really matter what your customer churn is.

[0:18:12.4] If your revenue churn is, it's good.

[0:18:15.32] A lot of people starting out make the not necessarily a mistake, but they will start out by primarily servicing low end sites and low end customers.

[0:18:28.16] So they'll sell a price point at $9.19 dollars, $29.00 whatever that might be and that's absolutely fine.

[0:18:35.28] There's no reason why you shouldn't sell at that level, but always make sure you have at least a slightly higher price plan for bigger companies.

[0:18:43.32] And companies that have the ability to to sell, sell more.

[0:18:49.44] So behind the scenes it's just one founder.

[0:18:52.52] You don't necessarily have to have a business partner or business partners, but I do.

[0:18:57.04] I personally don't think I'd be very successful without working with someone else.

[0:19:01.8] Many people work much better by themselves.

[0:19:04.72] It doesn't matter.

[0:19:05.56] There's no no correlation at all between valuation who you work with.

[0:19:09.84] They had a profitable business and they built it to 75 people entirely run run remotely.

[0:19:16] Personally, our team are in the office, I'm in the office, but a lot of companies run remotely.

[0:19:21.16] There's no right or wrong way to do it.

[0:19:22.92] Buyers don't care.

[0:19:23.92] Some buyers prefer remote, some buyers prefer in office.

[0:19:27.68] The average buyer doesn't care what differences.

[0:19:30.12] They were primarily product LED growth.

[0:19:32.08] So I can mention a lot of people in the community probably aren't marketers or probably aren't of sales people.

[0:19:38.88] That's fine.

[0:19:39.52] Some of the most successful businesses have put up LED grows rather than sell.

[0:19:43.4] Set grows don't necessarily need to hire 20 sales people or 20 marketers and business development reps to grow and build a successful business.

[0:19:52.92] And this founder certainly didn't.

[0:19:54.24] We spoke a bit at the start about motivations for selling.

[0:19:56.96] In this case, the founder just got to the stage where they didn't want to run the business anymore.

[0:20:01.88] There's no more to it.

[0:20:02.6] There's nothing wrong with the business.

[0:20:04.36] There wasn't a particular personal reason why they wanted out.

[0:20:07.28] They just thought someone else would do a better job of growing the business.

[0:20:11.52] And it was big enough they could sell and never have to work.

[0:20:14.96] Yeah, so you can heal itself.

[0:20:18.16] And again, in a minute I'm going to get into some, like, process stuff so you don't have to worry too much about some of the terminology in here.

[0:20:24.48] Business had 11 qualified offers, so 11 back to the $4 trillion slide.

[0:20:30.28] There's lots of capital out there at this level, so 11 competing qualified offers.

[0:20:36] A qualified offer is just a buyer that actually has money, not I'm going to buy a business if I haven't got any money.

[0:20:42.92] This is I would like to buy a business.

[0:20:45.16] Here is my offer and here is the proof financially that I can do it.

[0:20:49.52] There's 90% cash upfront.

[0:20:51.12] So super simple explanation.

[0:20:53.48] If you sell your business for 100,000 dollars, 90% cash upfront means on day one you get 90,000 and then 10%, 10% of the total deal value aside in the US is what's called reps and warranties or representations and warranties, which essentially in the purchase agreement just means there are certain things you are agreeing to.

[0:21:17.12] So the financials I've provided to you, Daniel, as a barter of my business are accurate.

[0:21:21.92] If it turns out they're not accurate, there's 10% of the transaction that can then be used to offset that.

[0:21:27.56] So if I forgot about the the pen I bought and it wasn't in the the P&L, a lot of people get really worried like from a process perspective they're going to get sued and go to court and things like that over kind of minor financial disputes.

[0:21:41.28] The reality is and most deals that's not true, you have a reps and warranty protection and this is generally larger transactions you see there.

[0:21:49.76] So over $1,000,000 below that level there'll be less common, but including it can be a good thing for buyer and seller because it means that much easier way to handle often very simple disputes like forgetting an expense.

[0:22:04.48] The short transition period, a lot of people think when they sell their business, they have to go work for the the seller or sorry, the seller has to go work for the buyer for three years or five years and they like can't actually get out of their business.

[0:22:17.48] We've worked on numerous 8 figure transactions where the sellers left on day one and they've not had to really do any transition at all.

[0:22:26.72] And then we've worked on even small transactions where the seller has decided to stay around and they want to work with the buyer.

[0:22:32.96] There's no right or wrong way to approach yet, but don't feel like selling a business means you're obligated to work for a buyer for forever because in most cases you're really not.

[0:22:43.32] And the buyer was a proactive term.

[0:22:45.08] Like I mentioned, there's nearly $4 trillion of dry powder.

[0:22:48.04] If you're selling a business, often it'll be to a proactive term.

[0:22:52.8] And ultimately the outcome for this founder was $75 million, the vast majority in in cash.

[0:22:58.32] So that's a cherry picked good deal we worked on, but there's lots of different way and this founder was just like you and I and everyone else in the community didn't have any particularly good skills or outside capital.

[0:23:12.2] So now let's get into some like more specifics.

[0:23:15.04] So back to kind of basics, what does selling a business look like?

[0:23:20] So really high level and we can get questions at the end if you'd like more specifics.

[0:23:25.4] So the first thing you want to do if you're selling your business is prepare it for sale.

[0:23:30.24] So that means looking at the financials.

[0:23:32.72] So having AP and L, it means preparing like operation.

[0:23:36.52] So maybe it can be literally written on paper, that's fine.

[0:23:39.88] You could have it in notion.

[0:23:41.08] There are lots of different software products that exist today to help you document processes and SO PS legal documentation.

[0:23:48.32] So I don't, do you have a trademark, do you have a patent, do you have a copyright?

[0:23:51.96] Whatever.

[0:23:52.8] It doesn't necessarily matter if you do or don't, but it's always legal preparation that goes into a deal and then technical preparation if you've got a a technical business.

[0:24:03.16] So if you have a software company that thinks like source code, making sure your kind of repositories are up to date, your codes well documented, all of those different things.

[0:24:14.64] Once you have your business prepared for sale, and I'll get into the different ways you can sell in some later slides, your job is to then find a buyer.

[0:24:22.24] Or if you hire an M and a firm like us, we will find you a buyer.

[0:24:26.12] If you work with a marketplace, they will help find you a buyer.

[0:24:29.16] So lots of different ways to find a buyer.

[0:24:31.04] But the next thing in the process, regardless of who you work with, is you have to find a buyer.

[0:24:35.92] And a big part of that process involves Q&A.

[0:24:38.76] So you'll be asked answering lots of questions.

[0:24:40.96] But the better prepared you are upfront, the more accurate the financials are, the clearer your operations are documented, making sure legal.

[0:24:50.6] It might just be as simple as making sure if you've hired a contractor, you have a basic agreement in place with them and all of the work they've done for you means you own the IP.

[0:25:00.76] If you've found a buyer you then have to agree terms and again we'll get into some more detail on what that looks like.

[0:25:07.36] But agreeing terms is how much they're paying when the deal is going to close what they want from you post sale, all sorts of there's lots of different things that can kind of go into go into that.

[0:25:18.84] Then there's a due diligence.

[0:25:21.76] Due diligence can vary massively in terms of time.

[0:25:25.16] It can be a week, it can be 8 weeks.

[0:25:28.88] A lot of this will really depend on complexity.

[0:25:31.52] There's correlation between the size of the deal and the amount of time due diligence will take.

[0:25:37.84] If you're selling a company for $100 million, due diligence might take 8 weeks.

[0:25:42.76] If you're selling a company for $100,000, we've completed deals in one day.

[0:25:48.52] So there's no necessary rule of thumb, but due diligence is essentially very simple terms, the buyer verifying everything they can about your business and what you've said about your business and making sure that it's all accurate.

[0:26:01.36] So if you sent them AP and L and your financials and you say you made $100,000 in June, they need to be able to verify you made $100,000 in in June.

[0:26:13.36] And it's really as as simple as that.

[0:26:15.6] A lot of people get scared and worried about due diligence, but if you are open and honest throughout the process you won't have any problems.

[0:26:23.32] Then once that's done, there's a transfer process and the deal will close.

[0:26:27.72] So by then you'll have a purchase agreement signed and that will that will determine what the transfer process looks like and how long it will take to to close.

[0:26:37.44] So what does the transfer process look like?

[0:26:39.56] So once you have a purchase agreement signed, it will generally say there's 30 days to transfer the business, The buyer in most cases, not all deals will use what's called an escrow account.

[0:26:54.24] So that means they will wire or transfer the money to a third party agent who holds the cash.

[0:27:01.64] Effectively, they'll hold the cash.

[0:27:04.88] The seller then transfers all of the assets to the buyer and you will define what those assets are upfront.

[0:27:12.2] So this is not a random process where it's like I'm listening to pen and then we're going to like send the table, all of that.

[0:27:19.8] There's there's no randomness in there.

[0:27:21.84] You've defined upfront what is being transferred and what's what's agreed upfront is what gets transferred.

[0:27:27.96] Then at the end, everything's been transferred.

[0:27:32.52] Buyers, the seller say I've transferred everything.

[0:27:34.56] Here's the list.

[0:27:35.12] We've sent everything across the the buyer then has to essentially agree that they've got everything, and then funds are released so that the third party agent says, OK, the seller says they've transferred everything, The buyer's happy.

[0:27:49.08] The seller then gets paid and then generally in most transactions there's ongoing obligations for the seller.

[0:27:55.92] So usually training and that could be as little as an hour a year or it could be 40 hours a week.

[0:28:03.4] There's no right or wrong way to approach this.

[0:28:05.64] It really depends on the deal you negotiate and the deal you you want.

[0:28:10.96] And then beyond that there's often what we'd call contingent terms, so things that could or couldn't happen based on future events.

[0:28:20.56] So for example that might be an earn out.

[0:28:22.68] An earn out is a amount of money paid in future based on a financial event.

[0:28:28.84] So it might be I'm buying a business Daniel for $1,000,000 and at the end of next year if the business makes $500,000 in revenue, there's a $200,000 payment deal and that's called earn out.

[0:28:42.48] There are as a team, team have closed over 1500 deals.

[0:28:48.92] There's probably 1500 different ways you can structure deals, but on earn out is a common way to to do it.

[0:28:56.24] And generally the buyer and seller will maintain a level of relationship post deal to make sure some of these things are hit.

[0:29:04.08] Because if you're agreeing to buy my business and there's a revenue share or some sort of payment tied to the financial success of the business, I'm going to make sure that you do well with business.

[0:29:17.88] I'm not.

[0:29:18.4] I have no intent to hide things from you because otherwise you're not going to be able to run business and I'm not going to get paid my my own out.

[0:29:26.32] So in terms of selling options, I spoke a bit about what the process looks like.

[0:29:30.36] The process doesn't really change however you decide to sell some.

[0:29:34.92] Some of it might be dictated by way you decide to sell, but fundamentally everyone sells in the same way.

[0:29:43.12] You have really three main options to sell your business.

[0:29:47.12] You can do it yourself and that's it's generally free.

[0:29:50.12] You can use a third party marketplace, forum, community.

[0:29:55.2] There's lots of different places you can sell.

[0:29:57] It really depends on the kind of business you have, what your your options are.

[0:30:00.8] Generally a marketplace will have a small success fee, so 4 to 5% is is quite common and a listing fee.

[0:30:08.24] So it might be $500 to list and then you pay them 4% when the business sells and if the business doesn't sell, you don't pay them anything off the listing fee.

[0:30:18.76] And then you have an M and a firm like Fe International.

[0:30:21.76] If you come to us with $100 million business, we'll probably charge you 3%.

[0:30:27] If you come to us with $1,000,000 business, we might charge you 10% or even slightly more than that.

[0:30:32.88] And often M&A firms will have a retainer.

[0:30:36.84] And a retainer is just like any professional services firm, usually a small monthly fee to cover deal expenses because the bigger and the more complex your, the business is.

[0:30:49.4] While DIY is technically free, the reality is selling a business is not actually free.

[0:30:55.12] There's a bunch of expenses that go into it.

[0:30:56.88] There's time and cost that goes into the listing preparation.

[0:31:01.24] There's time and cost that goes into things like financial preparation.

[0:31:05.08] So we audit the financials of every company we represent.

[0:31:10.04] We don't send it out to buyers based on what sellers have told us.

[0:31:13.2] We have a full accounting team in our office in New York and have an office in Mumbai as well.

[0:31:17.76] So our team now will work on financial verification.

[0:31:22.64] So most M&A firms will ask for a retainer.

[0:31:25.32] And then every deal, in addition to what you decided to sell, you usually have some legal expenses.

[0:31:32.28] Escrow agents, if you use one, generally have an expense and accounting expenses.

[0:31:37.08] They will really vary deal by deal.

[0:31:39.64] Generally, if you work with an M and a firm like us, we'll do a lot of this for you.

[0:31:44.24] So theoretically, you could sell a business with no legal or accounting expenses, although many people choose to have their accounts a little bit involved anyway.

[0:31:53.6] If you use a marketplace, this is generally where you'll incur the most expenses from a legal or accounting perspective, because you'll need a very kind of watertight purchase agreement with the buyer.

[0:32:06.92] If you're selling yourself, which many people choose to do often, that's because they've been approached by a buyer.

[0:32:12.04] There might usually be a high level of trust, and it can be relatively simple because it's like, hey, I'm going to send you $1,000,000 to your business, let's keep it simple so you don't have to overcompensate it.

[0:32:20.6] You don't have to use the marketplace.

[0:32:22.36] You don't have to come to an M and A firm.

[0:32:24.36] Generally, people come to an M and a firm.

[0:32:26.08] They want a competitive process.

[0:32:29] They don't want to run it themselves.

[0:32:30.8] They want to get 11 competing offers like the example I showed rather than just one offer that you might be able to get yourself.

[0:32:39.52] If you are selling a business is a couple of things you need to do to position it correctly.

[0:32:45.36] And some of these options will vary depending if you are representing yourself either literally yourself on a marketplace where you're working with an MA firm.

[0:32:54.84] Part of what you're hiring firms like us to do is we represent the business for you.

[0:33:00.24] So a lot of it is like we've got our reputation behind a business, but if you're doing it yourself, I think you know, and this applies to all business, I think it's important to be clear and honest.

[0:33:11.68] If you lie or hide things, you might get away with that upfront.

[0:33:15.68] It might not be very clear, but it's a due diligence.

[0:33:19.12] There's a legal agreement.

[0:33:21] You don't want to be misrepresenting and lying about things.

[0:33:24.36] So if you know you have a big customer and the big customers told you they're going to cancel, but they haven't cancelled yet, you should disclose that.

[0:33:34.28] Yes, you might be able to get away with it for a little bit, but eventually you're going to get found out.

[0:33:38.2] And in my mind that's not a good way to build a business, particularly if you're going to sell a business and then go build another one.

[0:33:43.96] And many clients who've worked of don't just sell one business, they sell a business and they go launch a new one, maybe they buy one and then they sell one.

[0:33:52.32] If you want to be in the industry for a long time, the the best way to do that is get reputation to kind of being being honest and transparent.

[0:34:01.24] Transparent financials are important.

[0:34:03.88] If you are not an accountant, which is most people in the group, hire an accountant to help you.

[0:34:09.48] Or at the very least make sure you use something like QuickBooks or Zero.

[0:34:15.68] There's lots of different products out there to clearly document your financials.

[0:34:20.84] They do not necessarily need to be perfect, but it's important they're at least clear.

[0:34:25.76] And if you're not sure about certain things, you can just mention that.

[0:34:29.88] Mention that in that help tell the story of your business.

[0:34:33.48] Buyers aren't just buying your business as is.

[0:34:36.88] They want to understand a little bit about what you've done, what's worked, what's not worked.

[0:34:41.04] So hey, I spent $10,000 on Facebook ads and it didn't convert.

[0:34:46.12] That's fine.

[0:34:46.72] That's good information.

[0:34:48.44] Hey, I I hired a sales person and they've been selling 500,000 a year of products and I've been paying them $100,000 a year.

[0:34:57.32] That's great.

[0:34:58.4] Buyers want to know that and that might determine the kind of buyer you work with.

[0:35:01.44] So telling the story is it is important.

[0:35:06.68] I think this is really important with business in general.

[0:35:09.96] I think it's particularly relevant to community.

[0:35:13.32] It's very important you're contactable.

[0:35:15.32] A lot of people really hate the idea of phone calls or in person meetings or getting on video.

[0:35:20.76] They're like, oh, I don't want to be on video and things like that.

[0:35:24.44] The reality is you are selling your business to a real person.

[0:35:28.84] It might be called a private equity fund, but you're not selling to a faceless entity the person you're dealing with or the people you're dealing with for real people.

[0:35:39.52] So often a lot of problems that might come up in transactions are highly preventable because of bad communication.

[0:35:47.76] So it does not necessarily mean you have to give every buyer that reaches out to you your cell phone number and say, hey, call me anytime.

[0:35:54.96] That's not what you need to do, but be willing to communicate.

[0:35:59.4] The more buyers is very basic economics or sales.

[0:36:03.28] The more buyers you speak to the more likely you are to have it successful outcome and get a better better price.

[0:36:09.28] On the other side of the table going to buy a business like where do you get money from?

[0:36:18.2] Like I personally started out with nothing.

[0:36:21.36] I put $100 on a a credit card I I literally had no money.

[0:36:25.56] I would not necessarily recommend buying a business on a credit card.

[0:36:28.44] So there are some other ways you can get money to buy a business and all of you a bit complete different stages.

[0:36:34.08] I think the the data shows the most successful founders start their company aged 45 and I think a lot of people like I'm personally 35A lot and I often feel like I've missed the boat and I'm behind.

[0:36:49.04] But the reality is there's not a age limit on success.

[0:36:53.36] So you can start a business at any age.

[0:36:55.4] There's no reason why you can't work a good job for 20 years and then start a business or buy a business.

[0:37:03.28] But if you want to use some outside capital, there's four main ways you can get money.

[0:37:09.44] One, and this is only if you're in the US and you have to have a green card or be a citizen.

[0:37:15.4] You can get an SBA loan, which is Small Business Administration.

[0:37:19.24] They'll back you generally, and it's very complicated government run process.

[0:37:25.2] But in simple terms, usually you can borrow up to $5,000,000 that the government will are effectively like backstop with a a bank.

[0:37:35.64] So you're still borrowing money from a bank, but the government are underwriting that and making sure that if you default, they'll essentially pay it.

[0:37:42.6] Look, all businesses will qualify for SBA loans and there's a process behind it is a very, very effective program.

[0:37:49.56] Lots of people we work with who buy businesses under $5,000,000 and in the US we use the SBA program.

[0:37:56.92] There's beginning to be unlike real estate where almost everyone gets a mortgage, there's not many other options to get outside capital.

[0:38:07.64] You can use some alternative financings.

[0:38:12.44] So that's a non bank, non bank lender.

[0:38:15.72] So for example the company will work with called Blue Pace and they will often fund buyers.

[0:38:24.84] The interest can be very high, so their interest rate can be 15 to 20%.

[0:38:31.2] But they understand online businesses and it can be a good way to get your first deal done, particularly if you have a good plan how to grow the business.

[0:38:41.88] You can do what I did.

[0:38:43.4] I started out with my money and now I started a five act fund.

[0:38:47.84] So I have a bit of a kind of reputation.

[0:38:50.48] I've done it successfully privately for a long time.

[0:38:53.12] You can start your own fund, and this sounds very intimidating, but when I started I had no clue what a fun people was and figured out how to do it.

[0:39:02.92] You don't need to raise a billion dollars to create a successful fund.

[0:39:07.64] You could raise $100,000 from 10 people, so that's $10,000 from 10 people.

[0:39:16.2] You know, I personally growing up did not know 10 people with $10,000, but many of you may do.

[0:39:22.08] That's one way to to do it.

[0:39:24.16] So use outside capital.

[0:39:26.12] You run the business, you get paid a salary and you get paid a profit share, like a revenue share or whatever it might be.

[0:39:31.8] There's hundreds and thousands of different ways to structure this to run the business.

[0:39:36.64] Or you can use seller financing, and there's a lot of misinformation out there about seller financing.

[0:39:45.6] There's lots of people who claim you can buy a business with no money down and 100% seller financing.

[0:39:51.32] That's yes, there's always one example.

[0:39:54.64] You can find where that's happened, but the vast majority of the time that's really not possible.

[0:40:00.04] Generally, the way I look at seller financing is it's a small percentage of the deal that the seller can contribute towards.

[0:40:07.92] So one of the things I mentioned earlier was something now.

[0:40:10.4] So hey, if I've got a great plan to grow your business, if I do grow it and I meet all these fans, I'm going to pay you a percentage of that that that gross.

[0:40:19.96] That's one way to do it.

[0:40:21.24] Or it can literally be as simple as I want to buy a business for $1,000,000.

[0:40:26.76] I have $500,000 available.

[0:40:29.8] I'll give you 500,000 and then I'll pay you $500,000 over the next three years and I'll pay you 10% interest rate, which is more than you're going to get from the back.

[0:40:41.4] That's just one simple example.

[0:40:43.24] Lots of different ways to do it.

[0:40:44.88] As a seller, you have no obligation to accept seller financing.

[0:40:48.2] But it can be a good way to get more buyers and play.

[0:40:50.92] There's there's there's always buyers out there who want to use a former seller financing.

[0:40:56.68] But lots of caveats around.

[0:40:58.36] Make sure you have be a good lawyer or a good attorney to structure things properly.

[0:41:03.04] And ultimately, success isn't overnight.

[0:41:05.92] You don't have to buy.

[0:41:07.64] If you have $100,000, it's probably not realistic that you can buy a $10 million business.

[0:41:13.08] So start small.

[0:41:14.52] Build up a track record if you want to get outside investor capital.

[0:41:18.08] It's much, much easier if you've shown that you've done it before.

[0:41:22] So don't just try and completely figure it out yourself.

[0:41:25.72] Do it.

[0:41:26.36] Then go to investors and say I'm raising money for a new deal.

[0:41:30.16] Here's what I've done before.

[0:41:31.64] Yes, this previous deal was smaller, but I've got experience now.

[0:41:34.56] Would you like to invest if you're a buyer and you want to buy a business?

[0:41:40.36] I already mentioned this as a seller.

[0:41:42.12] It's exactly the same as a buyer.

[0:41:43.76] Remember that people buy from people.

[0:41:46.08] The picture app is Kevin.

[0:41:48.12] Kevin bought a business for $35 million recently.

[0:41:52] You had some investor backing, investor backing behind him, but ultimately, no, the seller did not know who his investors were.

[0:42:00.48] They just dealt with Kevin.

[0:42:02.12] So the the seller liked Kevin and the seller in this case had five different offers on the table, all from different companies.

[0:42:10.44] But one of the reasons he dealt with Kevin is he he liked it.

[0:42:14] It can offer businesses often.

[0:42:15.48] As simple as as that.

[0:42:17.12] People like doing entrepreneurs, like doing business with people they like.

[0:42:22.64] Part of one of the best reasons to be an entrepreneur in the birth place is because you can work with who you want.

[0:42:28.6] If you don't like people, you don't have to work with them.

[0:42:31.28] It's not like having a regular job where you're often stuck working with people you don't like.

[0:42:34.92] That is really not the case.

[0:42:36.32] So remember people.

[0:42:39] People buy from people very big on this.

[0:42:43.44] I've already mentioned how to sell it, but lying is not a good idea.

[0:42:47.48] If you if you want to buy a business for $10 million and you have $100,000, don't tell the seller you have $10 million when you don't, because eventually it will come out.

[0:42:56.68] And just as people buy from people, people generally don't get on with people who lie.

[0:43:04] Most people, maybe you'll hang out.

[0:43:06.12] You have like friends or family members who rely a little bit and like as you grow up, kind of leaf into it.

[0:43:13.36] But eventually, particularly as you get older, you stop working or hanging out with people who lie consistently in business or in personal life.

[0:43:22.68] And it's no different buying a business.

[0:43:25.8] So be honest, be clear what your plan is.

[0:43:29.52] Everyone's selling their business.

[0:43:31.16] Their business is their baby, probably the first business they've ever sold, and they want to make sure it's going to a good buyer.

[0:43:40.64] So the worst thing to do is say, oh, I'm going to buy you a business because I want to make a bunch of money.

[0:43:45.16] Sellers don't care about that.

[0:43:46.64] So the most important thing to do is be very clear what your plan is and that could be growth plans, hiring plans if the the business has a team, Sellers generally love to hear that there's a plan in place for their team, like a growth plan, like are they all going to stay?

[0:44:04.12] Lots of different things come into it.

[0:44:05.48] Every business is different, but go the plan so you have the cash.

[0:44:10.24] Again, don't lie and say I have $10 million, if you have 100,000, if you only have 100,000, be honest and you can explain how you think you might finance it.

[0:44:18.92] Some sellers might give you a chance if you work with an M and a firm like us will be very strict.

[0:44:23.64] If a buyer comes to us and says you want to buy a business, we'll get them to prove how much money they have.

[0:44:28.92] But upfront and it's part of our job is being bad cop and saying well no, we're not going to deal with you if you haven't got money.

[0:44:37.48] And often sellers don't like to have that conversation themselves.

[0:44:40.56] Hence why companies like part of the reason why companies like Effie internationally exist.

[0:44:45.8] And this I think, particularly for people who read, read books on negotiation or they're negotiating for the first time.

[0:44:54.56] I think a lot of people negotiate too hard.

[0:44:59.56] They negotiate on too much.

[0:45:02.44] Every every negotiation has to be a balance.

[0:45:05.28] If there's 10 things that need to be done for a deal to happen, you can't win all ten of those points.

[0:45:12.76] You have to pick the ones that are most important to you and get those.

[0:45:17.24] So I usually say to people, be 3 things you care about the most.

[0:45:21.96] So the seller that might be guaranteed cash, how long you're going to transition out from the business and does the buyer have a track record running a business like yours and you think they're going to do a good job in the future?

[0:45:34] If you try and negotiate on literally every point, you're going to kill deals because sellers won't want to work with you.

[0:45:39.88] Again, people work, buy from people.

[0:45:42.68] If you try and negotiate everything, there's going to be someone else out there willing to do a deal without you very high level that we can answer questions.

[0:45:52.88] Probably the most common question everyone asked me is how do you value businesses.

[0:45:57.2] I've gone over some slides earlier on show correlation between different factors like your growth rate rule of 40, revenue churn and valuation.

[0:46:07.6] Generally speaking, small software companies and by small say below $1,000,000 will sell for a multiple of what's called seller discretionary earnings.

[0:46:20.04] And in very simple terms that's the profit of your business excluding what you pay yourselves.

[0:46:26] So if your business makes $0.00 in profit, but you've paid yourself half $1,000,000, that's adjusted to be half $1,000,000 in seller discretionary earnings for profit and then a multiple of that.

[0:46:38.4] As businesses get bigger and then SaaS based particularly quite often you can sell through a revenue multiple.

[0:46:44.2] So costs are slightly less relevant, but this is a very long topic.

[0:46:47.68] We would need 5 hours to go through all of that.

[0:46:49.64] So high level generally speaking SAS companies selling the five to 10 times range, yes, there are examples higher than that, yes, there are examples lower than that.

[0:46:59.6] Rule of thumb, if you have a digital media contents of blog forecast business, sports business, service business generally in the three to six times range.

[0:47:09.04] And if you have an e-commerce business, so selling physical products four to six times range and the current market e-commerce businesses have probably come down a little bit.

[0:47:17.52] So back to what we said at the start, we're building a SAS company with recurring revenue.

[0:47:22.36] You're going to get the highest valuation out there of pretty much any business model.

[0:47:27.04] So that's high level.

[0:47:28.2] I definitely do not have time to explain all the nuances of valuation.

[0:47:33.04] But essentially when the very simple way of explaining valuation is companies are primarily valued off what similar businesses sought for.

[0:47:43.04] So if you have a certain type of business, what our valuation team will do is go find similar businesses we've sold or similar businesses which have been sold and have public data and we will then use that data to determine what the the valuation is.

[0:47:58.48] So if three similar companies sold for a five times multiple or six times multiple and a seven times multiple, in very simple terms we might say OK, well the average is 6, therefore your business is probably worth 6 times and that's very much simplifying it.

[0:48:14.48] There's mathematical models behind it.

[0:48:17.12] It takes multiple hours and days of work to put together.

[0:48:20.24] Evaluation high level, that's what it looks like.

[0:48:24.36] So just want a few notes on what builds a business you can sell, what you should work on if you want to sell your business.

[0:48:32.6] Improving Chan is always important.

[0:48:34.56] Revenue Chan specifically, but growing businesses are good.

[0:48:37.68] That doesn't mean you can't sell a business.

[0:48:39] It isn't growing, but so if you're growing, that's a good thing.

[0:48:41.4] More people want to buy it all of 40.

[0:48:43.84] It's a very cliche SAS term, but it does correlate with valuation.

[0:48:49] There's always someone that wants to buy your business, and particularly in in the Small Bets community, and I've been in, I've been in small SAS communities and software communities for many, many years.

[0:49:01.72] People build all sorts of businesses that lots of people would never know exist or even a thing.

[0:49:07.32] That's great.

[0:49:08.12] There's still someone that wants to buy it, so don't feel like no one wants to buy your business which provides X service for Y people in Z country.

[0:49:17.88] It doesn't matter, there'll be someone out there that's disinterested and we sort of arrange.

[0:49:22.4] And it's important if you're building a business to understand what your business is worth because ultimate, it's an asset you can sell.

[0:49:30.84] So yes, you might not be planning on selling at all, and that's fine, but it is important to have an understanding of what your business is is worth even if you're not planning on selling.

[0:49:41.4] So it might be your business is worth $1,000,000 today, but when you get to $10 million, you want to sell it because you can create generational wealth.

[0:49:50.36] You never have to work yet.

[0:49:51.32] And if you have parents, you can make sure your parents never work again, spouse never work, yet kids might not have to work.

[0:49:57.12] There's lots of freedom that you come with selling a business.

[0:50:00.56] So we're going to some Q&A now anyone wants a free valuation, so the community more than happy to put that together for you.

[0:50:07.96] So scan the QR code, I can send it around in the Discord channel afterwards as well if everyone's interested but what more than happy to do that.

[0:50:15.52] So happy to go into questions and as but I don't know if Daniel you want to moderate or?

[0:50:21.68] Yes, yes, I can lead.

[0:50:22.88] I can lead absolutely.

[0:50:23.88] First of all thank you for all of this great information As let me see first actually I had a question of my from my own before I did the from the chat you gave us a great example of the of that eight figure business like that closed recently and you mentioned if I remember correctly like that there were 11 qualified buyers.

[0:50:41.96] Is this like for the for the significantly smaller business, say?

[0:50:47.16] Assess doing $200,000 in earnings per year, right, Something pretty small.

[0:50:52.16] Is it still realistic to expect 11 buyers or something in that ballpark?

[0:50:58] Would it be more or less?

[0:51:00.44] I don't think there's much correlation between the size of the business and the number of offers you can get.

[0:51:07.04] It really depends on the the process you run.

[0:51:09.44] It's definitely not a.

[0:51:10.6] So in, in short, no, I don't think it really matters.

[0:51:13.68] But eleven, I would say 11 is is quite a lot.

[0:51:16.2] Lebanon is, is good.

[0:51:17.28] Generally speaking to sell your business successfully you want to get at least three offers, but you can also sell your business one.

[0:51:25.4] Some.

[0:51:26.12] Some of the biggest deals have ever happened in history when you think about like Instagram for example sold for a billion dollars and you had one offer.

[0:51:33.72] So as an M&A firm from a negotiation perspective, we like to get multiple offers because we can leverage more and we can kind of negotiate harder, but it's not not necessarily essential to get that then.

[0:51:48.48] Makes sense.

[0:51:49] Makes sense somewhat for the latest question, like is there a minimum valuation to work with MA and a firms like yours, or or maybe other requirements?

[0:51:57.6] Does the business have to be profitable or or some other requirements that you might reject If listings don't have certain things?

[0:52:07.56] Yeah, so all M and A firms will have their own criteria.

[0:52:11.76] Some M and A firms won't pick up the phone if your business is worth less than $100 million.

[0:52:17.28] Generally for us, we don't have the hard and fast rule.

[0:52:20.76] Generally today we don't work on many transactions below $1,000,000.

[0:52:25.96] If you ask me that question five years ago we worked on $100,000 deals.

[0:52:30.28] So things have changed.

[0:52:31.72] In terms of criteria, again it depends.

[0:52:35.4] We take a relatively like subjective look at every business.

[0:52:40.2] We're generally it's quite creative and quite good at selling businesses that people think can't be sold and often people will try sell themselves and then they come to us when they haven't been successful.

[0:52:51.32] So yeah, the criteria are very and that there's specialist firms that work in all business models.

[0:52:56.12] So pretty much any business you've built, there's probably someone that can help you sell it.

[0:52:59.92] It's not necessarily us, but there's there's always options out there.

[0:53:04.48] Sounds good, sounds good.

[0:53:05.48] And you say you said you don't welcome businesses of under $1,000,000.

[0:53:10.36] Is this because?

[0:53:11.68] The the buyers are generally expecting more or is it just for for your firm, it doesn't make that much sense maybe to those kinds of businesses anymore.

[0:53:20.44] Yeah, it's more just the economic sense which is partly fundamentally selling a business for say $100,000 and $100 million isn't that much different.

[0:53:32.16] But from a brand positioning perspective and people we hire perspective, it's very different in New York particularly, well, most places in the world, it's very difficult to find people who want to work on $100 million deals and also at the same time work on $100,000 deals.

[0:53:51.24] So we're trying to build a team of specialists and it's impossible to do that if you're working on small deals and and larger deals.

[0:53:59.6] So our average deal sizes gradually increase, but for that, that's really just of personal business preference.

[0:54:08.04] That does not mean there's not a market for selling $100,000 business.

[0:54:12.24] That's where we we started out for many years.

[0:54:14.52] We didn't do anything above $1,000,000.

[0:54:17.08] All of our deals were five and six figures for many, many years and that market definitely still exists, but it's just not where we are now.

[0:54:24.88] But I certainly still understand that well that if we wanted to do deals with our level, we could.

[0:54:29.88] Makes sense?

[0:54:31.28] So if if if I'm considering selling a business and I'm not particularly forced by, you know, because I'm desperate or or something like that, do you think there's an opportunity to time the market maybe seasonality during the year or maybe economic conditions, recession or things happening or in general you should sell whenever you think you're ready.

[0:54:53.8] I think you should always just sell when you're ready.

[0:54:55.68] Seasonality comes into it a little bit, but buyers are not stupid and generally seasonality is quite obvious.

[0:55:02] Particularly if your business has a few years of history, it'll probably show like a like that every year at the same time or something like that on your revenue chart, your your traffic.

[0:55:10.68] So no, it definitely doesn't make sense to wait for kind of a seasonal uplift, economic conditions.

[0:55:19.24] We could have this question for hours and there's no right or wrong way to approach it.

[0:55:23.92] I generally think you can sell when the business reaches the valuation you want.

[0:55:29.08] Does that mean valuations can be better when the market is good and lower when the market is bad?

[0:55:35.88] Yes, that's definitely true.

[0:55:38.44] But if you sell your business for, you've never made any money before.

[0:55:45] You sell your business for $10 million, but two years ago you could have sold it for $11 million.

[0:55:51.08] Does it really matter?

[0:55:52.56] It's kind of by philosophical way of looking at it.

[0:55:56.28] You still have $10 million.

[0:55:57.64] So yeah, the market can change, but you can't do anything about that.

[0:56:01.36] You can't predict that.

[0:56:02.56] Ultimately, if you build a good business, people will always want to will always want to buy it.

[0:56:08.08] Makes sense.

[0:56:08.64] Louie's asking during the bidding process, do businesses usually go above or below the asking price, generally speaking?

[0:56:15.84] And I know Louie has real estate experience, so I can't.

[0:56:18.64] I think I know where he's coming from.

[0:56:22.16] Is there is there any any any pattern that you notice that most bids come slightly below or there's like bidding wars?

[0:56:28.72] Like what happens in the estate, almost all buyers will offer below the asking price and then the more buyers you get play the more likely there is you can negotiate above asking price.

[0:56:39.76] Generally speaking, it's uncommonly for the M and A firm to get deals much above the asking price because our job is to be aggressive but realistic on valuation.

[0:56:51.64] So if you look at it in very simple terms that might be we think your business is worth $9.5 million, we'll probably try and sell it for 10 million.

[0:57:03.08] So if an offer comes in for 9.5 million, we've we've achieved what we're trying to achieve and that's very oversimplified because often on deals at that level there's not a disclosed asking price.

[0:57:15.12] We might provide a range.

[0:57:16.72] On smaller deals, it's much more common to do that.

[0:57:18.72] If you're selling something for $100,000, you can't just say make me an offer because some people will offer you $1.00, some people will offer you $2.

[0:57:29] You'll get all sorts of stupid offers.

[0:57:31.24] So as as deals get bigger, I guess there's a bit more of a not professional process, but it's a more common process to say hey, make an offer, the expectation is between 5:00 and 7:00 times multiple or something like that.

[0:57:45.96] So asking prices become a little bit less relevant.

[0:57:48.68] I I can't really speak for marketplaces, but I'd say the average seller significantly overvalues their their business, so uncommon to sell for more.

[0:58:01.52] Do you think so?

[0:58:03.08] You mentioned like PE firms sell a very common type of buyer.

[0:58:06.76] If I were trying to sell a business, I don't know, like, do you think it's easier to sell to PE firms compared to individuals?

[0:58:13.88] More or less.

[0:58:14.72] Headaches.

[0:58:15.36] One or the other?

[0:58:17.48] That's a good question.

[0:58:19.32] It it depends why.

[0:58:21.12] The equity firms would generally be quite disciplined with what they can do.

[0:58:24.36] They'll have paperwork and paperwork which says this is what we're allowed to do, and if what you have is slightly different, they'll often not be able to do it.

[0:58:33.88] Some funds and funds can come in lots of different shapes and sizes.

[0:58:37.44] It could be a small fund where it's run by one person with a few investors and they can pretty much do whatever they want.

[0:58:43.2] But a lot of funds would be quite strict.

[0:58:44.8] Generally, funds are good to work with because they won't have as much emotion in a deal because their job is buying businesses.

[0:58:53.68] So they're probably not going to get upset by things that happen in a deal if you're selling to an individual.

[0:59:00.72] The downside is there might be a more emotions in the transaction, but also they might be willing to pay more if they like you.

[0:59:07.76] A private equity firm if they like you, it might help the deal happen, but they're not going to suddenly change how they approach a deal because of who you are.

[0:59:18.12] Where is it?

[0:59:18.56] An individual might might be easier to work with.

[0:59:21.56] Really depends.

[0:59:22.16] Generally speaking it's easier to sell to a private equity firm.

[0:59:25.84] But I mean individuals can vary.

[0:59:27.44] If someone has bought 10 businesses before, they're probably going to be fine to work with.

[0:59:33.28] But always make sure you do your due diligence and background like background checks on people today.

[0:59:40.92] Obviously with things like social media, you can go on Twitter, LinkedIn, Facebook, figure out what people are talking about and you get you should get an idea if you like someone without even having to ever, ever speak to them, so that's definitely important as well.

[0:59:55.88] Makes sense, makes sense.

[0:59:56.72] So in the chat here, we had some conversation about business blockers versus marketplaces versus M&A firms.

[1:00:02.52] And I know you mentioned for example, the fees and the costs are different, but maybe at least from a buyer perspective and like what do you think?

[1:00:11] Like, how should I think about the quality of the deals I might be getting from a marketplace versus a firm like yours?

[1:00:18.56] I'm sure, I'm sure there's probably better quality, better vetting of the listings, but are there any other things that buyers should be, should watch out for, especially when I'm going on the marketplaces where there's probably less vetting?

[1:00:32.36] Yeah.

[1:00:32.56] I think generally speaking, you'll have to get through a lot of deals where sellers aren't serious.

[1:00:38.96] Sellers should say.

[1:00:39.72] Oh, it's kind of.

[1:00:41.04] Couple of $100 to list.

[1:00:42.24] Let's just try and see what happens.

[1:00:43.76] And they won't take the process very seriously, so they'll never reply to you.

[1:00:46.68] Some will just have unrealistic expectations.

[1:00:49.68] Some, and by some I'd say almost everybody, to an extent, will privately misrepresent their business.

[1:00:57.28] They'll inflate their numbers a bit.

[1:00:59.72] They'll forget about, forget about some expenses.

[1:01:04.4] They'll if they work full time on the business, they'll tell you they work 15 hours a week, not 40 hours a week.

[1:01:10.12] So generally speaking, I'd say unfortunately a lot of sellers are quite dishonest and there's not a perfect way to get round that.

[1:01:20.2] But I'd say generally speaking, if someone has hired an M and a firm and they're willing to go through a vetting process and pay a retainer kind of cage fees that go with it, generally they're going to be more serious.

[1:01:32.36] And a big part of our job is establishing who's honest and who's not, hence why we do financial audits.

[1:01:39.4] Because often people genuinely do forget about expenses because they run a small business.

[1:01:44.76] Almost no small business has perfect financials.

[1:01:47.12] So it's not necessarily that sellers are more honest working with an M and a firm, it's more that they would have been corrected on their errors before the the process starts.

[1:01:56.72] I think a lot of buyers like the idea of buying from a marketplace because you don't have an M and a firm like us in the way we're, we're ultimately A gatekeeper.

[1:02:05.84] So a lot of people don't like buying through.

[1:02:08.92] Firms like us because we'll be quite restrictive.

[1:02:10.96] We'll say, well, if you haven't got the money, we can't show you information on this business.

[1:02:15.2] If we don't think you're serious, you can't have a call with the seller.

[1:02:18.68] But if you go on a marketplace like in some cases, you could almost get hold of any seller to talk about their their business.

[1:02:28.4] But say if you're a buyer and you're looking to buy a business, you should look everywhere.

[1:02:33.32] Look privately.

[1:02:35.2] Look on marketplaces, Look with business brokers.

[1:02:38.92] Look, with M&A firms, you shouldn't worry as much where you're buying from.

[1:02:42.76] It's like who you're buying from.

[1:02:44.44] If you find a good business privately, it makes no real difference that they're selling privately versus selling through us.

[1:02:50.64] We'll provide you a more consistent professional experience, but that doesn't mean it's impossible to do a deal as well.

[1:02:58.04] So, so, so you mentioned business blockers and it's came up in the chat like what's the difference between the business blocker, the M and a firm and the marketplace, maybe that's a category, it's not clear to me yet.

[1:03:09.92] Yeah.

[1:03:10.16] I mean the only real difference between a business broker and M and a firm essentially do the same thing.

[1:03:15.12] See, business brokers generally would work on transactions below $10 million and M and A firms generally welcome transactions above $10 million.

[1:03:26.64] There's other than the terminology, there's not really that much difference other than the size and complexity of deals they work on.

[1:03:34.52] As deals get bigger legally they can be structured in some more complex ways and accounting wise they can be structured in more complex ways.

[1:03:43.68] But really it's the same thing.

[1:03:45.12] And marketplace is literally that.

[1:03:47.4] It's a marketplace you list there.

[1:03:50.12] You don't have any.

[1:03:53.24] They don't do anything for you.

[1:03:54.96] They might sell that, say they match you with buyers, or you fill out a listing, but ultimately you're the one doing work, Whereas if you work with an M and a firm.

[1:04:04.04] We're the ones doing all the work.

[1:04:05.72] You're just answering our questions and sometimes joining calls with buyers.

[1:04:10.12] We've lined up, we do the negotiations, we do the preparation.

[1:04:15.64] We'll we can't force you to accept an offer or how to negotiate, but we will tell you what we think throughout the process.

[1:04:22.12] A lot of what you're paying for is partly the work but partly also the experience of knowing what a good deal is or not.

[1:04:28.68] So if you get 11 offers.

[1:04:32.08] Which offer should you go for?

[1:04:33.16] Which offer should you counter?

[1:04:34.8] Which ones actually likely to close?

[1:04:37.44] That can be very difficult to know.

[1:04:38.68] Actually selling for the first time?

[1:04:40.28] Yeah, the only real difference between M and a firm business broker is just the terminology and that size.

[1:04:46.6] A marketplace is really just do it yourself.

[1:04:49.36] They provide you a platform.

[1:04:50.92] They might tell you they match your buyers, but it's not quite the same thing as M and A firm.

[1:04:57.96] Makes sense, makes sense.

[1:04:58.72] And you mentioned you do financial audits.

[1:05:00.76] Is there any other type of audits you do?

[1:05:02.36] For example, what about a website traffic or or app downloads or things like that?

[1:05:08.36] Is that something that gets?

[1:05:10.48] Looked at as well, We'll look at lots of things.

[1:05:12.32] So traffic, yes.

[1:05:14.16] If it's an app and it has downloads, we'll look at that.

[1:05:16.04] Where do the downloads come from?

[1:05:18.76] Are you using, like, paid ads?

[1:05:20] If you're using paid ads, what's the ROI?

[1:05:22.4] If you're not, how have installs trended over time?

[1:05:25.48] How's traffic trended over time?

[1:05:27.92] What are you doing to generate that traffic?

[1:05:30] If you sell the business, will that traffic go away because you have a really big Twitter account and that's driving traffic.

[1:05:36.36] There's lots and lots of different factors that go into it.

[1:05:38.92] But yeah, essentially we look at everything.

[1:05:42.12] And yes, our job is to make sure the business we're representing is legitimate.

[1:05:46.84] Does that mean I would personally buy every business we represent?

[1:05:50.76] No, absolutely not.

[1:05:51.68] That'd be a lie.

[1:05:52.8] But our job is to make sure it's clearly represented so as a buyer.

[1:05:57.08] You don't get through the process and say, oh, this isn't what I thought it was upfront.

[1:06:01.6] Whereas if you're buying privately, often that will happen because sellers will, whether they realise it or not, will maybe be a little bit misleading in the process.

[1:06:12.2] Sounds good, sounds good.

[1:06:13.2] We had a few questions about SBA loans when you mentioned that I think something that interests quite a few people, at least from your experience like you, you mentioned that you need to at least be AUS citizen or a green card holder.

[1:06:26.2] But are there any common prerequisites?

[1:06:28.92] You know, like for example in the, let's say for example, a mortgage, you might need to do 20% down payment and there's income to loan ratios and things like that in SBA loans.

[1:06:39.56] Are there some zoos of the town or at least some hard zoos when it comes to buying businesses that maybe you can share with us just to have a bluff flame of mind of what you might expect?

[1:06:52.2] Yes, FPS have a lot of requirements.

[1:06:54.2] So generally the business you're buying force has to be in the US because that's usually have U.S.

[1:07:00.16] tax returns for I believe three years.

[1:07:04.04] They're constantly changing the the kind of exact terms, but I believe at the moment you usually need about 15% deposit.

[1:07:14.24] So if you're buying a business for what's like your own contribution, you're buying a business for?

[1:07:19.92] $5,000,000 you need to have 750K pull up front and then sometimes some working capital needs you need to have a little bit more than that to kind of fund the ongoing operation and the actual closing of the business.

[1:07:32.08] So I guess kind of similar to a mortgage from that perspective.

[1:07:36.2] There are definitely other requirements as as well, but usually you'd work with a specialist bank and specialist company that knows about the SBA loan program and they'll work through it.

[1:07:48.76] It's.

[1:07:49.56] Reasonably uncommon that people will just figure it out themselves.

[1:07:53.4] Doesn't really make make sense to do that.

[1:07:55.6] You go to a bank that knows about SBA loans and they will tell you what we need and that the terms are always changing and it will depend a little bit on the the business and also depends a little bit on the bank.

[1:08:07.76] Very similar to a mortgage as well.

[1:08:08.96] Some some places like you in the US buy buy a house with a 10% deposit.

[1:08:14.72] I know as a green card holder.

[1:08:18.04] I have far more restrictions, very difficult for me to buy a house with 10% deposit, so I think I had to put down nearly 30% on on my.

[1:08:25.92] I was in that situation as well once, yes.

[1:08:28.52] Yeah.

[1:08:28.96] So it's it's very difficult in the situation when it comes to qualified buyers like you mentioned that you only you only forward bids to the seller who once they're qualified and you verify they had the money.

[1:08:42.56] If the buyers tend to finance with NSBA loan, is there a way to have like pre qualification from the bank or something or like?

[1:08:52.16] Or there's the contingencies that the bank will lend money like in real estate?

[1:08:56.88] Like what happens in that case if the buyer starts trying to finance the deal?

[1:09:00.36] Can stay still become qualified leads?

[1:09:04.52] Yeah, So what?

[1:09:06.32] So, and I'm just reading some of the chat as well, like people asking me about through posts, if it gets like through posts or back, what they'll usually do is look at the business you want to buy and they'll say yes.

[1:09:17.72] This is something we would potentially fund.

[1:09:19.4] They'll look at you and your personal financial situation and say yes and then you'll get usually what's called a pre qualification letter.

[1:09:26.2] So very similar.

[1:09:26.84] It's like a mortgage letter and it will say yes, we've reviewed this person and their personal financial situation.

[1:09:34.72] We will lend them up to $5,000,000 and we've also reviewed the business and we think this is something we can lend against.

[1:09:40.08] So if you're a buyer, you would then go to the M and a firm or the broker or the seller directly and say, hey, I've got my.

[1:09:46.44] Pre approval, I want to buy a percent and then part of our job of part the seller's job is then determining who the most likely buyer is to complete the deal.

[1:09:56.68] And obviously if you're taking out a loan and there's contingencies, that's less likely than someone that might be paying cash.

[1:10:02.84] Again, exactly same as real estate in the US if you want to buy property and you're a cash buyer, you are usually going to be ahead of someone who has a mortgage contingency.

[1:10:13] But no, you absolutely can turn up with.

[1:10:15.72] We'll accept pre qualification that is all the time or a letter from an investor saying, hey, I know Daniel hints by business, I'm going to lend him $5,000,000 as long as we can review it first.

[1:10:26.88] So there's a little bit of subjectivity in that, but you can definitely do that makes sense, makes sense.

[1:10:31.28] But, and I don't know if you answered this, but when it comes to SBA loans in particular, for example, I imagine your approval of the SBA loans needs to be based on an actual business like, not hypothetical like what's happened?

[1:10:42.44] Because in the US state they tell you you can buy a house up to $1,000,000, whichever house it is.

[1:10:47.72] Usually the bank might tell you something like that, but I imagine for SBA loans it's different.

[1:10:52.08] Is that correct?

[1:10:53.44] Yeah, they they look at both.

[1:10:54.92] So you as an individual, but then also the the business itself.

[1:10:58.92] So you as an individual might be qualified, but the business will not.

[1:11:03.24] And that means you can't.

[1:11:04.56] You have to be qualified for.

[1:11:07.2] Got it.

[1:11:08.48] Yeah, got it, got it, got it.

[1:11:11.92] So we had a question from then.

[1:11:13.08] It's like what if the business isn't growing or maybe it's Dejanant or maybe even is shrinking, Is it a deep Laker?

[1:11:19.36] You know, I think you told us many times that every business can sell, but realistically, like if his business is shrinking, for example the rapidly, I just don't know what should sellers expect?

[1:11:29.6] Yes, I mean you can really sell any business.

[1:11:31.56] The only real difference between some of the slides I showed at the start showing what?

[1:11:36.4] Correlates with higher valuation.

[1:11:38.56] So the more your business is growing, the more it's worth that.

[1:11:42.64] But that just means that a business that's not growing as much will probably just sell for a slightly lower multiple than one that's growing faster.

[1:11:48.76] It's a bit different if your business is declining.

[1:11:50.8] If you have a business declining, say 20% year on year, that can be quite challenging and that might be more difficult.

[1:11:56.84] But if your business is slow, that's often why people decide to sell.

[1:12:00.48] They decide to sell because they can't grow their business any anymore.

[1:12:03.4] So that happens all the.

[1:12:05.48] All the time, yeah.

[1:12:06.28] So it doesn't really affect sellability, It just affects the the valuation multiple.

[1:12:10.6] So I provided quite a broad range of five to 10 times for a SAS business.

[1:12:15.2] If you're not growing, you're probably at the low end of that range.

[1:12:17.24] If you're growing really quickly, you could be at the the upper end of that that range.

[1:12:22.84] Makes sense, makes sense.

[1:12:24.24] OK.

[1:12:24.44] So one of us asking some other buying structural alternatives in addition to error notes when you're not willing to put out all cash up fund.

[1:12:34.56] So for example, if you're only willing to do 50% cash up funds, you could structure part as earn outs.

[1:12:40.72] Is there any other sort of creative common ways?

[1:12:44] Yeah.

[1:12:44.32] So you have lots of different ways and there's sort of quite generic terms that cover a lot of things but earn out.

[1:12:50.48] So essentially a percentage of the future of the business based on something happening, so percentage of revenue and no what's called a note, that's literally just a loan, so.

[1:13:00.52] Daniel, I'm buying a business, you're going to lend me $500,000 to contribute towards that.

[1:13:04.88] I will pay that $500,000 off over three years and I'll pay 10% interest.

[1:13:09.76] So that's that's the seller note usually what it's called then you have what's called a hold back.

[1:13:13.96] So I'm buying a business, I'll pay $1,000,000 today and I'm going to pay $200,000 at the end of next year assuming you do all of the training that we've we've agreed.

[1:13:24.52] So it's just essentially deferring some of the payment assuming the seller does things which are?

[1:13:30.4] Like, easy to prove have been done.

[1:13:32.68] Sometimes you get more creative of an employment agreement.

[1:13:35.32] So hey, I want to buy a business.

[1:13:37] I'm actually going to invest a bunch into business and grow it.

[1:13:39.4] I want you to be CEO.

[1:13:41.12] You've like done a great job at the business so fast you might say, hey, I'm buying a business for $1,000,000, I don't need to be CEO.

[1:13:46.6] I'm going to pay you salary of $250,000 a year.

[1:13:50.32] So while that's not necessarily part of the deal as such, it's still kind of part of the transaction that the mind is the the seller.

[1:13:59.04] They'll say well.

[1:14:00.32] I'm getting a bit more money except an employment agreement, they're really the main categories.

[1:14:05.48] There aren't really many other ways to to to do it.

[1:14:10.08] But I mean you can get very creative with those structures like I said I could.

[1:14:13.36] I could give you 100 different earn out structures that that work.

[1:14:16.84] Generally you want something quite simple, so some form of revenue share is a good way to do it if you start including expenses and you start doing over.

[1:14:27.56] In a very long period of time it becomes too complicated and difficult to to calculate, but they're generally the the the main areas you kind of see used to get deals done.

[1:14:41.2] Makes sense, makes sense, sounds good.

[1:14:42.64] I had another question from Simone which I think is the interesting.

[1:14:46.08] Any advice on your laptop on how your approach should be if you reach out to a business that is not listed for a sale?

[1:14:52.68] So like you find some business online and you want to reach out to the owner trying to acquire it.

[1:14:58.04] I know it's not that necessarily what you do, but have you seen it done or do you have any tips?

[1:15:02.6] Yeah.

[1:15:03.32] We do a lot a big part of our business as well as we do a lot of outreach, we do a lot of.

[1:15:08.6] OK, interesting.

[1:15:09.16] Yeah.

[1:15:09.6] So you actually do this yourselves, part of your fund or for your clients?

[1:15:14.2] Both?

[1:15:14.96] Yeah, both.

[1:15:15.36] Sometimes we represent buyers who say, hey, I want to buy a business like this, I've got $10 million to go find it, so.

[1:15:20.96] Firstly, most sellers get lots of emails.

[1:15:23.52] If you run a business, all of you in this group will know you get.

[1:15:26.12] I get about 1000 emails a day and I'll delete 950 of those emails because they're they're junk.

[1:15:32.36] So you need to be very personalized.

[1:15:36.08] If you send the same e-mail to 1000 people saying hi, my name's Daniel, I would like to buy a software business.

[1:15:43.24] I used to, I'd be a software developer.

[1:15:46.16] I have $1,000,000.

[1:15:47.8] That's not going to work.

[1:15:48.48] No one's going to reply to that.

[1:15:49.8] If you say, hey, my name's Daniel, I really admire what you've done with your business, had a great interest in this space for a long time.

[1:15:57.64] I'm currently looking to acquire my first business.

[1:16:00.72] Are you interested in a conversation about selling?

[1:16:02.88] So saying, super personalized.

[1:16:04.72] But see, today there's lots of different ways to automate emails or to make follow-ups.

[1:16:10.28] I could do an entirely different presentation about effective kind of outreach at scale, but I think if you actually want to buy business.

[1:16:16.88] We do need to do that kind of personalized one-on-one.

[1:16:20.64] There's no real other approach to doing it.

[1:16:24.76] So that'd be my suggestion from from that perspective.

[1:16:27.84] But expect to send lots of emails because the average person you e-mail, it's not going to want to sell.

[1:16:34.72] And if they do want to sell, they'll only want to sell some sort of unrealistic valuation, which I guess is why firms like us exist, because the clients we're working with are motivated and.

[1:16:45.96] Mostly realistic about what they want.

[1:16:48.2] So if you want to, if you definitely want to buy a business, you go to go to an M and a firm because we'll have motivated sellers.

[1:16:57] Yeah, I mean, my advice to any cold e-mail, and that's not just to buy a business.

[1:17:00.28] It's be as personalized as you can and kind of keep the e-mail short as well.

[1:17:05.12] No one wants to read A7 paragraphs long e-mail maybe.

[1:17:09.6] One of my friends told me this a long time ago and I tried to stick to it.

[1:17:12.84] His rule was no more than five sentences.

[1:17:15.84] Or cold e-mail.

[1:17:16.68] And I think that's actually quite a good approach.

[1:17:19.52] Don't need to write a long winded explanation.

[1:17:22.08] Like I said with social media today, if you're active on Twitter or LinkedIn or whatever, if someone wants to know more about you, it's generally not that hard to find.

[1:17:30.72] Just go on LinkedIn and find them, or Twitter or whatever it might be.

[1:17:34.92] Sounds good.

[1:17:35.36] Sounds good.

[1:17:36.28] Since from you're from the UK, do you happen to know if there's an SBA loan equivalent in the UK that people from there might use?

[1:17:44.56] Not that I've ever heard of.

[1:17:46.04] I think the SBA programme in the US is about the only government back scheme I've heard of that's effective.

[1:17:51.76] I think Canada has something similar.

[1:17:54.6] I don't remember exactly what it's called, but they have something similar.

[1:17:57.56] UK I'm not aware of at all.

[1:18:00.36] I mean they're definitely programmed out there to help small, but every country has something that helps small businesses, but generally not for buying businesses.

[1:18:07.56] Often it might be tax breaks for investing or lending or whatever.

[1:18:12.88] But I'm not aware of anything in the in the UK and I don't know if you can ask this if you can answer this and feel free to say no if you don't want to as someone is asking for people with low buying budgets.

[1:18:26] Like do you have any recommendations for places to go to find businesses, specific marketplaces or other things?

[1:18:33.76] It depends what kind of business you're looking to buy, I mean.

[1:18:36.88] So the first marketplace ever existed when I started in the industry is, is it wasn't called that back then, but it's now it's called Flipper.

[1:18:42.96] They have lots of online businesses.

[1:18:44.88] There's a marketplace called, I think they're called acquire.com now used to be micro choir, lots of small businesses there.

[1:18:50.64] I think they're probably the two most well known at the moment.

[1:18:54.6] But all marketplaces have the challenges I spoke about with dealing with marketplaces you're dealing with generally.

[1:19:02.48] Not motivated, not serious sellers who don't really understand the process, but that'd be a good place to start.

[1:19:06.84] And there'll also sometimes be specialist brokers who work on small deals as well.

[1:19:12.08] Like I said, if you found us five years ago, we would have had a business to sell for like $100,000.

[1:19:18.64] Generally below that you're not going to find business.

[1:19:21.6] Broker has to be like a marketplace often.

[1:19:23.64] Just like communities like I've seen people buy businesses from Twitter or just in kind of forums and communities where.

[1:19:33.08] People with that kind of business hang out.

[1:19:35.44] So go find out where, if there's a particular type of business you want to buy, go find out where those people hang out and join that community.

[1:19:44.48] Go to that conference, go to that event, go to that, meet up again, put it in my slides, People by people.

[1:19:51.72] Go find the person who who owns it and do the deal directly.

[1:19:58.16] There's a bit of a question about DIY doing it DIY right?

[1:20:02.36] Do you think it's realistic for people to do it completely?

[1:20:05.56] DOI they find an SQL themselves, they find the buyer or the seller themselves, at least on the small valuations I imagine.

[1:20:14.84] Or is that something that you wouldn't recommend, so you might have somebody professionally help you?

[1:20:19.68] I I'm obviously a little bit biased by always think it makes sense to get professional help because there's lots of pitfalls and yeah, I've been doing this a a long time and there's always new things that come up that I've not seen seen before.

[1:20:34.08] So if you're selling for the first time, it can be challenging.

[1:20:36.4] It's certainly possible today.

[1:20:38.04] I mean you can go to likeescrow.com for example as a common escrow agent for selling online businesses you can go to most attorneys can put together a basic purchase agreement for you.

[1:20:48.48] Most accountants will tell you how to structure a deal properly.

[1:20:51.08] So particularly if you're doing a small deal, you don't necessarily need the M and a firm like the primary thing we bring to the table is we'll get you a better price.

[1:20:59.8] So you could sell your $10 million business yourself for $10 million, but we might sell it for 15.

[1:21:06.68] So a lot of people kind of have the false economy of, hey, I've saved money because I didn't have to pay their M and a fee.

[1:21:13.68] And technically they've successfully sold, yes, but they could have got more if they hired some representation.

[1:21:18.84] That's usually why people hire an M and a firm.

[1:21:21.72] But no, you certainly you can do it yourself.

[1:21:23.76] There's always people out there looking to buy businesses.

[1:21:25.76] But I'd say you need to get a lot of buyer demand if you're going to be successful and maximize valuation as a seller, if you're buying, buying privately can work fine as well.

[1:21:37.52] But just be prepared.

[1:21:39.08] There's lots of people out there looking to buy businesses and it can be a very long road to find a a daily life.

[1:21:45.04] I know many, many people who have been looking to buy business privately for years because they're not happy with, they don't want to pay the essentially the premium you'd have to pay if you buy through an M and a firm because we're going to get the seller a good deal.

[1:21:59.72] So you might have to overpay in the mind of some buyers.

[1:22:04.6] But my mind says if you get a deal done today and you start working on it, that's much better than not getting a deal done at all for two years.

[1:22:14] Because in the two years the person who worked through the M and a firm has already bought that business, it's already been making money and they've already grown up.

[1:22:22.56] Absolutely.

[1:22:23.8] OK.

[1:22:24.08] So maybe last couple of quick questions.

[1:22:25.96] Let me see.

[1:22:26.4] So Louis was asking how do you say that the market is generally demand and supply constraint?

[1:22:32.72] Does that change a lot as the valuations change, right.

[1:22:35.72] You know, there's all these ranges with valuations.

[1:22:37.44] I'm sure it depends a lot on the type of business, but do you think it also depends on, again, the number of buyers and sellers?

[1:22:44.24] I mean, there's always more buyers out there than sellers.

[1:22:47.16] So there's almost an unlimited amount of capital that wants to buy businesses.

[1:22:51.6] So generally the challenge is finding motivated sellers who have realistic expectations.

[1:22:56.88] But that doesn't really change as deal sizes change.

[1:22:59.24] I think a lot of people think, oh, if I have a business to sell for $1,000,000, that's going to be, I don't know, I'd say 1,000,000 potential buyers.

[1:23:07.8] If I want to sell for 10 million, that's going to be 1000 potential buyers.

[1:23:11.56] But at least from personal experience, part of that is just personal buyers.

[1:23:15.96] So I personally growing up did not know anyone $10 million.

[1:23:19.8] So it's a reasonable assumption to make that there's not many people buying $10 million businesses.

[1:23:25.04] There's a lot necessarily through those buyers at all levels.

[1:23:29.96] I'd say you probably don't really get constrained in terms of what's available to buy a business until you get to like a multi billion dollar valuations where yes, at that level there might only be three companies that could potentially buy you.

[1:23:44.84] But if you have a $10 million business, there's a almost unlimited number of businesses out there that can buy you.

[1:23:51] You'll never run out of buyer demand from that perspective.

[1:23:55.36] Sounds good.

[1:23:55.76] Sounds good.

[1:23:56.8] OK, I'll end up with a very easy question.

[1:23:58.76] Like what does your city of mine, what does Fe stand for in Fe International?

[1:24:02.68] I've been curious.

[1:24:04.56] Founder exits.

[1:24:06.08] Founder exits.

[1:24:06.76] So awesome.

[1:24:07.4] OK, that makes sense.

[1:24:09.12] Yeah, we've changed it a bit over the years.

[1:24:10.48] We're thinking of like a completely brown book now.

[1:24:12.48] Is Fe in Tackle.

[1:24:14] That's great.

[1:24:16.08] OK.

[1:24:16.48] I think we covered probably almost all the questions, but I want to be the respecter of your time, Thomas.

[1:24:21.08] So this was really interesting.

[1:24:23.2] Thank you a lot for spending some time with us and teaching us some of the and we can dispose is a bit less daunting.

[1:24:30.68] Thank you so much.

[1:24:31.88] Thanks so much.

[1:24:33.28] I'll go hang out on the Discord channel if people have more questions.

[1:24:36] I know there's there's been a bunch coming in, but I'm happy to go there.

[1:24:39.52] Wonderful.

[1:24:40.16] Really appreciate that, Thomas.

[1:24:41.68] Thank you again.

[1:24:42.6] Thank you so much.

[1:24:44.04] Thank you everyone.

[1:24:45.08] Bye, bye.