Dan Martell - What Buyers Look For in a SaaS Business with Thomas @ FEInternational.com

00:00:00.000 Every business at some stage has a problem that happens at 10 p.m. on a Sunday or 4 a.m. on a

00:00:06.520 Wednesday. Whatever it is, you have to have a business where you're not going to hate it or

00:00:13.420 yourself if you have to make that personal sacrifice to handle it. So the way I look at it is like if

00:00:18.220 you're on vacation, if this business interrupts you for the entire vacation and you lose your

00:00:23.580 one week of vacation you have per year, are you going to end up resenting the business or the

00:00:28.380 team or whatever if the answer is yes then maybe firstly you should probably

00:00:33.820 not be buying a business at all and you probably should not be buying that business

00:00:52.300 thomas how's it going man hey buddy good to have you on here uh i love that we just bantered for

00:00:57.260 for 20 minutes.

00:00:57.800 Hopefully, Jared's going to put all this on.

00:00:59.720 All the good bits.

00:01:00.380 All the good stuff.

00:01:02.060 You are the co-founder.

00:01:03.660 Are you CEO of Effie?

00:01:04.820 No, I'm definitely not the CEO.

00:01:06.080 OK, so you're not responsible for actually

00:01:08.000 the important stuff, but.

00:01:09.200 I just get the credit for the good stuff.

00:01:10.740 There we go.

00:01:11.240 And I get none of the blame for the bad stuff.

00:01:12.240 Somebody else takes care of it.

00:01:13.380 Effie International, broker for tech companies,

00:01:17.660 internet companies?

00:01:19.040 Yeah, we're an M&A firm.

00:01:19.880 We focus on SaaS e-commerce content business.

00:01:22.400 Yeah, you're the SaaS guy that I send everybody to.

00:01:26.480 How long have you been doing that now, a decade?

00:01:28.300 Yeah, nearly a decade.

00:01:29.160 We founded May 2010.

00:01:31.160 And just got named Inc. in the UK version, top company.

00:01:37.160 Yeah.

00:01:37.540 So that's crazy that you're-

00:01:38.720 So Europe has an Inc. 5000 list, and the US

00:01:40.840 has an Inc. 5000 list.

00:01:42.360 We have two entities, and we're in both.

00:01:44.100 And we think we're the only company in the world

00:01:46.200 that got on both.

00:01:47.120 OK.

00:01:47.620 And why do you have two entities?

00:01:50.220 So as a company, we started out in the UK.

00:01:53.700 That's where we were originally based.

00:01:54.560 We have a UK entity, and then we have a subsidiary entity

00:01:58.040 in the US.

00:01:58.620 And the main reason we have two entities is we have employees

00:02:00.740 in the UK.

00:02:01.680 We have employees in the US.

00:02:03.180 So you have to have an entity for both, yeah.

00:02:05.020 And what is it that when a company is thinking of selling,

00:02:08.360 when they come to you, what's the stuff you help them with?

00:02:12.320 Yeah, so at a fundamental level, usually

00:02:15.040 we try to keep a really open line with founders

00:02:17.320 who are thinking about selling one day.

00:02:19.560 So it's never only speak to us if you're thinking about selling

00:02:22.320 tomorrow.

00:02:23.720 At the very base level, we're trying to get them an understanding of what their company's worth today

00:02:28.060 and where they need to get to in the future.

00:02:31.120 So for most founders, what we think the business is worth today is not what they want to sell for.

00:02:36.700 But usually people from there have a time or a value-based goal and will help you determine what that is.

00:02:42.140 So it may well be that today your company's worth $10 million and you want $50 million or $20 million or $100 million.

00:02:50.040 It doesn't really matter what that number is.

00:02:51.160 that's a very personal number and that's something that we would then help you determine and also

00:02:57.580 figure out with I like to call it personal and company stakeholders so that might be your wife

00:03:03.280 or your husband or your business partner it could be your investors so you're aligned with what

00:03:08.720 you're trying to achieve because otherwise you can be in a situation we have great company you

00:03:13.140 maybe have a co-founder the co-founder wants to get to x you want to get to y and if they're

00:03:18.420 completely different numbers, you're not going to be aligned.

00:03:20.360 So you actually suggest that to them

00:03:22.520 right off the beginning. So that's what we want to do

00:03:24.520 because the nature of our business, we only get

00:03:26.460 paid if your business sells. We don't take a

00:03:28.480 retainer. There's no incentive for us whatsoever.

00:03:30.620 And you get paid based on

00:03:32.140 the value of the business.

00:03:34.200 The higher the value, the more we get

00:03:36.520 paid. And we're fortunate

00:03:38.520 that we've been in business nearly 10 years

00:03:40.420 with a huge amount of inbound interest.

00:03:43.820 I guess

00:03:44.400 the value of referrals compounds

00:03:46.540 over time so we're not we're not short of business so it's really in our best interest to give you

00:03:51.040 the best advice so if you come back to us with a 50 million dollar company that's better than a 10

00:03:55.480 million dollar company yeah but you have to make that decision yourself we don't say your number

00:03:59.740 should be 10 or and we also never tell people if their goal is realistic or unrealistic we might

00:04:05.300 just give them a timeline so if you're a hundred thousand dollars a day you want to get to 50

00:04:10.300 million we're probably not gonna be working together in the next 12 months

00:04:14.380 that might need a fundamental pivot or shift in your strategy to get to where

00:04:19.240 you want to be what is the change in ambition maybe it's like you're probably

00:04:23.260 not gonna get to 50 million work in 10 hours a week but yes you can have a nice

00:04:27.220 business kicking off 200k a year working 10 hours so you have to really like align

00:04:31.780 those things now I remember and maybe they're still around like sites like

00:04:35.200 Flippa like what's the difference between a Flippa I mean I feel bad Thomas

00:04:40.240 asking you this question because i know it's a fair question but it's a real thing right like

00:04:43.880 what what what's the difference and what do you feel the value add can be by having somebody like

00:04:49.740 you support a process yeah so there's there's lots of marketplaces out there i guess whatever

00:04:55.060 you're selling in the in the world there's a marketplace i generally think marketplaces and

00:04:59.780 the mechanism of a marketplace works really well if you have a business and there's probably a

00:05:05.060 to other things maybe it's like antiques or anything like that below ten thousand dollars

00:05:10.580 at that level it really is just the highest bid wins so if you bid ten thousand i bid five thousand

00:05:16.180 for this this glass then you're going to win every single time but the business is a much more of a

00:05:22.660 complex transaction if it's a and what we generally advise to clients which most people don't

00:05:28.820 understand when they start the process is often the highest number or the highest bid is not

00:05:34.340 always the offer you want to go with. It's all about the terms, the structure, the

00:05:39.380 alignment. If you're gonna sell your business to someone for ten million

00:05:42.720 dollars, there's gonna be a transition period, that deal is unlikely or that can

00:05:47.100 be unlikely to be all cash. Yeah. So you have to align with them, you have to like

00:05:51.180 them. A lot of people think it's just about the money until they realize that

00:05:55.640 you're effectively selling your legacy. You want to make sure that... It's gonna be in good hands.

00:05:59.840 Yeah, you want to make sure that in five years time we say I sold X, the X is

00:06:03.680 still doing well it's not shut down bankrupted was run into the ground by the acquirer so fundamentally

00:06:11.840 the mechanisms behind the marketplace which is purely bidding does not work for a bigger business

00:06:17.300 and then beyond that marketplaces self-serve so you have to figure everything out yourself the

00:06:22.440 valuations the contract negotiations the kind of buyers looking on marketplaces or so completely

00:06:29.540 different from the kind of buyers who are working with M&A firms and strategic

00:06:34.020 buyers so yeah the marketplace mechanism works well below 10k beyond that you

00:06:40.160 really want to be in a position where you have someone who can help you weigh

00:06:42.440 up the different options get multiple offers for you and ultimately find out

00:06:47.540 the best the best offer and structure for you and I say beyond a million

00:06:52.880 dollars is very rarely the highest bidder wins it's usually a combination of

00:06:58.760 structure bid fit how much how much how much you like them is a really important part and that's

00:07:06.760 why having an advisor like us in the way is is good because we'll do calls for most deals there

00:07:12.380 be an in-person due diligence meeting so that alignment is is a really important part of it

00:07:17.320 um so say a fundamental level that's the main difference between a an m&a firm like us and a

00:07:22.440 marketplace it's really just the mechanics how do you avoid I mean as

00:07:27.960 somebody takes a performance-based fee like how do you protect yourself to not

00:07:33.240 work with the dud yeah so I'd say at the moment the vast majority of our

00:07:40.120 business is inbound we've completed over 750 transactions so and entrepreneurs as

00:07:46.080 you know like to talk they like to share the knowledge so we get a lot of from

00:07:50.760 marketing perspective it is actually quite difficult to track where our

00:07:53.280 business comes from because you may have heard about us and you work with us I

00:07:57.360 remember yeah reading your blog post hearing about you and then I think you

00:08:01.020 guys worked on Rob at drips yeah that was 2016 so yeah so I was like okay these

00:08:07.280 guys are you know doing real stuff yeah so from that perspective we have a very

00:08:11.400 long client life cycle we do lots of lots of things where you're gonna hear

00:08:16.940 about us but not in your face we never try you're never gonna see me at an

00:08:19.860 event and I'm handing out business cards saying, Hey, come work with us, come sell your business.

00:08:24.020 Where it might be a podcast. It might be a video interview. It might be a book. It might be our

00:08:30.180 conference. It could be all sorts of different things like that. So we have lots of different

00:08:34.080 touch points throughout the process. Your magazine. The magazine. Exactly. So we do tons of different

00:08:38.520 stuff to be, I wouldn't even say front of mind, like middle of mind, you know, who we are, have

00:08:44.700 good reputation um with fortune i mean so internally we effectively consider ourselves

00:08:51.280 to be as exclusive as harvard with the intake of businesses we work with so for every hundred

00:08:56.700 businesses that inquire we might only take on one or two of those so a lot of it is have a huge

00:09:02.320 amount of inbound interest we can be very selective with who we work with because we've

00:09:06.680 sold so many businesses over the years we know what sells we know what doesn't sell sometimes

00:09:11.400 we may be a little bit speculative it might be a business model we've not seen

00:09:15.960 before but we think will be a good fit for our buyers in that case you might be

00:09:20.620 a bit more conservative with the valuation or the fee structure or just

00:09:25.260 setting expectations will always be straight up we never say yeah we're

00:09:29.040 gonna sell it this year and ten million dollars in three weeks yeah we're always

00:09:33.420 honest and I find that it's not charging people any money as long as you're honest

00:09:37.920 and upfront they can make do some real work to get it ready for marketing right so like you got

00:09:43.400 to create yeah we have a so we have a team of like nearly 45 people ask for them to give you

00:09:48.040 an exclusive so that so we do ask for exclusivity um we don't ask for any retainer and the exclusivity

00:09:54.000 starts once the business has been listed but no we have a team of 45 people and publicly you would

00:10:00.760 maybe only see five of those people the vast majority of the work is behind the behind the

00:10:06.340 it's a valuation team who are building valuation models to make sure that if we tell you your

00:10:12.520 valuation is x that x is accurate if we value it too high the business isn't going to sell

00:10:18.600 if we sell it if we value it too low then you're going to be frustrated if the business sells in

00:10:23.200 30 minutes with 20 bids so it's a bit of a balancing act between too high too low and

00:10:29.680 just right and people hire us because actually want to sell we're definitely not the company

00:10:34.540 you come to if you want to send it to five companies and see what happens we're a hire us

00:10:39.800 we will sell your business yeah we will be honest with you up front probably not going to get 50x

00:10:45.320 but you're also not going to get 1x yeah um no so we invest a huge amount in the process um we have

00:10:51.140 a 94.1 success rate for businesses we take on so it's very rare for us to get it wrong how do you

00:10:58.440 generate demand or how do you create the market for companies like if i'm a founder and i'm like

00:11:06.240 okay i want to sell my b2b sas company you know i don't even like most of them wouldn't even know

00:11:11.700 where to start finding people that buy these things how have you guys done that and like what's

00:11:17.880 the promotion like is it you know i think of real estate right real estate similar where they like

00:11:21.400 package up the house and they have real estate listings and stuff like what is your what do you

00:11:25.020 guys do obviously you have like your own list and audience and stuff but like what is the process

00:11:30.240 of promoting marketing uh yeah so as we're going through the process of preparing the business for

00:11:36.340 sale our m&a team who affects you the sales guys it's their job to go out and find the buyer and

00:11:41.820 sell the business to them as we're going through the process they go cold to companies to some

00:11:46.860 extent so i'll go through the process um so they will be building out a ideal target demographic

00:11:52.000 who's going to acquire this business and that will not just be one buyer profile that'll be

00:11:56.300 lots of different buyer profiles that might be private equity firm looking for b2b sass doing

00:12:01.540 million dollars aor which is quite a generic criteria that hundreds of p's will have um it

00:12:07.820 might be the individual who's saying um i want to buy business i'm going to use a sba loan so we'll

00:12:14.540 narrow it down and then of our network at the moment we have about 41 000 buyers in our data

00:12:20.460 or network, we will then narrow that down

00:12:23.780 on a particular business usually to about 1% of that to 2%.

00:12:27.540 So it's usually 400 to 1,000 buyers

00:12:30.960 that we've said based on the criteria they've provided to us,

00:12:34.340 whether that's budget, business model.

00:12:36.780 Can people get added to that list on your website?

00:12:38.960 Yes.

00:12:39.460 So anyone can come onto a website,

00:12:40.880 and you can sign up to get our listings, which are just

00:12:43.600 generically sent to you.

00:12:45.320 You get a weekly newsletter.

00:12:46.640 That's a very passive, passive form of marketing

00:12:50.660 from our perspective.

00:12:51.700 And then there are various email flows and call flows

00:12:55.320 that if you want a better chance of buying a business,

00:12:58.580 you should get in touch with someone on our team,

00:13:00.540 provide them more information, and make sure you're qualified.

00:13:03.660 Because then, effectively, the way the process works is-

00:13:05.760 Those people get the first stab.

00:13:06.960 Yes, so we go out in three phases.

00:13:09.240 We go out in what we call pre-marketing phase,

00:13:11.760 which is two weeks of an extremely segmented list.

00:13:15.880 And that's where we start the strategic outreach as well.

00:13:18.840 So it might be here are 50 PE firms we've identified that might be interested.

00:13:23.800 A lot of clients come to us and they already have some interest.

00:13:26.620 What would the email sound like if you sent it cold to a PE firm or to a strategic company?

00:13:31.700 So if it's cold, it would usually just be something as simple as, hey, and then with an introduction,

00:13:36.340 I'm Thomas, founder of FEE International.

00:13:38.820 We're representing a business that, based on your criteria, I think might be a good fit.

00:13:43.320 Here is the teaser.

00:13:44.060 so in that case we would attach a one or two page pdf which is a very prospectus ish

00:13:50.180 so it'd be a very anonymous high level so it might be this is the industry this is the high

00:13:56.940 level financials if you want more information they then have to sign a confidentiality agreement with

00:14:01.780 us at which stage we would send them a prospectus which is usually 40 50 pages for the average

00:14:07.460 business we represent that will get sent across um and that's also what the people who are in our

00:14:12.660 pre-marketing they get that yeah okay so they skip the whole thing because they've already

00:14:17.980 qualified themselves who even give us that information so we we know they have the money

00:14:22.060 we know they're ready to go we know they're going to keep it confidential um so we start with that

00:14:27.340 process two weeks after that we almost always have a bid or multiple bids depending on the size of

00:14:34.740 the business if it's relatively small so let's say it's a hundred thousand dollar business

00:14:38.900 probably already sold if it's a 10 million dollar business you're probably starting to get indication

00:14:44.120 of interest which is usually something you send before a letter of intent and then we'll work

00:14:49.220 through that process two weeks after it goes out to everyone so that's where you might if you're

00:14:53.020 on our generic email list you'll see it hey hey Dan here's a new listing a couple of bullet points

00:14:58.660 uh fill out this form if you want a little bit more information so that stage you get that um

00:15:04.040 and then beyond that we also use a bunch of third party sites which are very similar to

00:15:08.560 real estate which affects you like mls um for us that very rarely finds a buyer for that business

00:15:13.840 that's really just network building for us it's people who are browsing to buy businesses we want

00:15:19.720 them in our network they might buy in two years time yeah but the only way you find these people

00:15:24.320 is if you're actually selling the business in the first place it's a little bit chicken and egg and

00:15:28.000 i know strategic can can range but like somebody's got a million arr sas company looking to exit

00:15:33.560 What's the multiples looking like in the market today?

00:15:36.320 So on a SDE basis, so that would be your net income minus what you're paying yourself.

00:15:42.380 So explain SDE because most people don't.

00:15:44.240 Yeah, so it's effectively your, depending on the size of your business,

00:15:47.120 it's probably seller discretionary earnings or income or cash flow.

00:15:52.340 So it could be, all those things are effectively the same.

00:15:54.520 So effectively, what your business makes on an annual basis, net, pre-tax.

00:15:59.200 Minus your salary.

00:16:00.380 Minus your salary, minus any other benefits you take.

00:16:03.000 So it might be a car, conference travel.

00:16:05.780 Things that are not core to the business

00:16:07.080 that you just decided were business expenses.

00:16:08.720 Yes, and then, and everyone does this.

00:16:10.540 So it's nothing to...

00:16:11.680 I know, I talked to a guy once.

00:16:12.860 He said there's, every business has two sets of books.

00:16:15.480 Yeah, so there's no shame in that.

00:16:18.200 Everyone does it.

00:16:19.020 I always say to people like,

00:16:20.320 treat us like you would with your attorney.

00:16:21.800 Give us the, we will help you

00:16:23.640 if you give us the information.

00:16:24.900 A lot of people are super sketchy

00:16:26.160 and they'll say, oh, like,

00:16:27.200 actually my business makes millions,

00:16:28.760 but it doesn't show any profit.

00:16:30.420 it we won't work those people because you can't disclose it yeah you ask like how we vet people

00:16:36.080 part of it is if we think in any way they're acting dishonest in the process we just kick them

00:16:40.280 up yeah and we have we will do that to people on both sides a long way down the process i don't

00:16:45.240 care if they're three months into the process and we've spent tens of thousands in team overhead if

00:16:50.320 we don't think they're honest that's going to burn our reputation down on them so yeah we just

00:16:55.000 kick them out and i guess that's the fun part of being a founder or my business partner ceo

00:16:59.300 he'll handle that um so those hard conversations sometimes have to happen um yeah so from

00:17:06.380 that and then you also might adjust out any one-time expenses so for example if you've gone

00:17:12.040 through a rebrand you spent 100 grand to redesign your site and that's something you haven't done

00:17:16.920 for five years we might be able to adjust out that yeah um anything that is not reasonably likely to

00:17:22.900 be recurring yeah this is definitely sort of a bit of a subjective everyone will argue like

00:17:30.340 this is too high this is too low you can't include this you can't so the way we do it is we're just

00:17:34.920 transparent with what we present we say well this is SDE if you make an offer on a business we'll

00:17:39.640 then share all that information with you if you're not happy with it then you can push back and say

00:17:43.480 well I don't believe that this is an ad back so it's always a little bit of a discretionary

00:17:48.620 process, which I guess is

00:17:50.120 quite an ambiguous term.

00:17:52.340 But eventually, that's where you're hiring us. We're going to present

00:17:54.500 your financials in the best way possible

00:17:56.720 and then it's our job to negotiate with buyers

00:17:58.640 why that's justified.

00:18:00.140 So let's say millionaire are, you know,

00:18:03.400 SDEs usually look

00:18:04.600 like what? I'd say you're probably

00:18:06.540 going to be 400 to 500

00:18:08.380 on the average SaaS we see at that size.

00:18:11.200 Multiples are going to be anywhere from

00:18:12.600 3.75 to

00:18:14.460 4 up to 10

00:18:16.580 depending on the business.

00:18:17.760 So 3.7, even that 3x, you're at 1.5 on a 500 SDE.

00:18:24.480 I feel like most SaaS company founders think that they're worth more.

00:18:28.140 Yeah.

00:18:28.460 So the key variable is really growth.

00:18:33.020 So growth rate is super important.

00:18:34.040 So the 3.7 upward, what's impacting the?

00:18:37.960 Growth rate is probably the main one.

00:18:39.720 And what would get you a 10x?

00:18:43.680 I'd say at least 100% year on year.

00:18:45.780 For three years?

00:18:47.760 Well, just in the last 12 months will be fine.

00:18:49.920 Depending what's happened to achieve that.

00:18:52.120 Okay.

00:18:52.320 If you've paid a lot of money on ads.

00:18:54.360 Let's say you've just launched a new version

00:18:55.720 and a bunch of people are signing up because it's great.

00:18:58.900 Probably not.

00:18:59.920 If it's sustainable and...

00:19:04.180 So the other key is expansion revenue.

00:19:06.260 If you can show that negative churn,

00:19:08.340 you can show that your expansion revenue

00:19:10.280 is surpassing anything you're losing,

00:19:12.800 then that's extremely powerful.

00:19:14.340 So we're working on a business at the moment,

00:19:15.460 which is mid-five-figure deal he does in the region of $4 million to $5 million ARR,

00:19:23.260 extremely profitable, runs over a 50% margin.

00:19:26.820 The multiple on that is nearing 10.

00:19:30.180 Okay, so he's at $5 million ARR, let's call it, $2.5 million in profit,

00:19:35.120 and you're looking at a 4X.

00:19:36.640 Is it because of the expansion revenue?

00:19:38.160 He's significantly higher than that.

00:19:40.020 So that valuation is north of $30.

00:19:42.800 Okay, wow.

00:19:43.540 So that business is growing very consistently in the 3% to 5% month-on-month level, has a lot of enterprise clients, has a huge amount of room for expansion.

00:19:55.180 And in his business, and this would be relatively rare, I guess the kind of people who are listening to you are probably not going to fit this dynamic because he doesn't spend much time in the business.

00:20:05.060 He sits back, works a few hours a day, isn't really that proactive.

00:20:09.300 He just happens.

00:20:10.220 He's a serial entrepreneur.

00:20:12.580 fantastic no he's not a serial entrepreneur at all he actually does a lot of local politics but

00:20:17.700 the business he he runs he's an extremely good developer built a good product found market fit

00:20:23.540 years ago and has signed up some really big enterprise clients who love the product so much

00:20:30.820 they keep expanding revenue without him having to do a huge amount so he fundamentally built

00:20:34.980 a good product that's i'd say in the world of bootstrapping that's my version of a unicorn

00:20:40.580 I do not see businesses like that.

00:20:43.520 But I mean, those multiples can happen

00:20:45.400 if you have that expansion revenue,

00:20:47.540 if you have that consistent growth,

00:20:49.180 and if you have a huge amount of potential outside of that.

00:20:52.580 So the buyers for that business are a multi-billion dollar fund.

00:20:56.100 And that's the thing, right, is that there's more buyers.

00:20:58.540 People don't realize that, you know,

00:21:00.280 there's no lack of capital in the world.

00:21:02.180 There's just lack of big enough opportunities

00:21:03.920 for people to deploy capital.

00:21:05.760 Like, they don't want to write little checks.

00:21:07.620 Yeah, so we don't, we haven't added up

00:21:10.480 recently how much investable capital our buyer network has but it would be safe to say it's in

00:21:14.880 the trillions of dollars there's a huge amount of money out there and funds contrary to popular

00:21:20.860 belief want to deploy that capital they have to deploy that capital to generate returns for their

00:21:25.700 investors so if there's a good business so on that that business i believe we had over 10

00:21:32.200 bids which were all qualified bids good bids so that was extremely popular for a business that

00:21:38.060 It's actually mid-eight figures.

00:21:40.280 So most people think the bigger a business gets,

00:21:43.420 the less buyers there's going to be.

00:21:44.980 In reality, once you get,

00:21:45.880 I'd say 1 million ARR probably is a reasonably good indicator.

00:21:48.080 Yeah, it's the beginning, but 5 million plus.

00:21:49.920 Once you get above that,

00:21:50.720 you definitely start to get some bigger fish.

00:21:54.080 And then once you get to 5 million and above,

00:21:56.220 you start to get to the next level.

00:21:58.900 So in this case,

00:22:00.140 it's a multi-billion dollar fund making acquisition.

00:22:03.240 This would probably be one of the smallest deals

00:22:05.220 they've ever done.

00:22:05.900 when the deal gets announced

00:22:08.480 some of their other portfolio companies

00:22:11.060 are household names you would have

00:22:13.000 read about in TechCrunch when they did

00:22:14.860 their deal

00:22:16.220 so in that situation

00:22:18.640 those multiples do happen

00:22:20.220 the average slow growing million dollar

00:22:23.300 ARR business

00:22:24.960 is probably not going to be at that

00:22:26.340 probably going to be in that 4 to 8 times range

00:22:29.540 and that's why right at the beginning

00:22:31.000 we talked about valuations

00:22:32.620 that's why we do a valuation early

00:22:34.200 we don't commit you to an engagement agreement

00:22:36.880 because most people assume their valuation

00:22:39.840 is much higher than it actually would be.

00:22:44.160 But the truth is SaaS is in the unique space

00:22:48.080 of having higher multiples than restaurants, agencies.

00:22:52.720 Like, it's a cool business.

00:22:54.180 Yes, I mean, if we were comparing

00:22:56.000 compared to their content or any commerce-based business,

00:22:59.140 the valuations on average are almost double.

00:23:02.440 So the valuations are definitely higher.

00:23:05.920 I guess the trouble in the world of SaaS

00:23:07.800 is everyone knows someone who's had an exit

00:23:09.520 which was at 20 or 50 times,

00:23:11.940 so they assume they can have that same exit.

00:23:13.860 So they can have the same thing.

00:23:14.480 The reality is if that is going to happen to you,

00:23:17.660 you're probably not going to be listening to you

00:23:19.080 or listening to me

00:23:19.760 because you're going to have someone

00:23:21.180 knocking on your office door

00:23:22.360 or cold emailing you

00:23:24.140 who legitimately wants to acquire at that level.

00:23:27.480 So we don't see those too often.

00:23:29.040 but for 95% of founders

00:23:32.400 that isn't going to happen

00:23:33.280 that's why they hire us

00:23:34.700 and that's also why we don't hard sell people at any stage

00:23:37.700 because you have to get comfortable

00:23:39.560 with the fact that the valuation we tell you

00:23:41.400 you might not like it

00:23:43.320 but that is the reality

00:23:44.500 and ultimately if there's a

00:23:47.100 94.1% chance of you getting a check

00:23:49.580 at the end of it

00:23:50.140 for some people

00:23:51.460 if it's a big enough amount

00:23:54.000 you might never need to work again

00:23:56.520 what's the hardest part about what you do?

00:23:59.040 like personally what do you find so personally like on a personal level i travel a lot i work a

00:24:06.200 lot the nature of entrepreneurs is entrepreneurs work all the time our clients are entrepreneurs

00:24:10.500 and they're based all over the world so we have particularly the senior members of our team we

00:24:15.680 travel a lot we're working with people constantly weekends evenings mornings emails all the time

00:24:21.180 hundreds of emails a day for all of us um on a deal by day deal basis i'd say the value you don't

00:24:28.340 realize that the m&a firm brings is every deal at some stage will have some form of problem

00:24:33.680 selling a business is an emotional process buying a business is an emotional process

00:24:39.280 is our job to manage that and make sure that assuming both parties are acting in good faith

00:24:46.240 if there's anyone who's trying to misrepresent or defraud or we think there's a problem we'll

00:24:51.580 we'll just draw a line under it and say hey we're not proceeding with this at all um so

00:24:56.520 for us, we have a

00:24:58.680 good reputation for selling businesses

00:25:01.140 but day to day

00:25:03.000 we have to have a lot of difficult conversations for people

00:25:05.000 to say no.

00:25:06.760 So we get a lot of inbound complaints from

00:25:09.000 people where they're saying, well, I wanted to

00:25:10.940 buy this business and you wouldn't let me. That's not fair.

00:25:13.720 Well, our client is the

00:25:14.780 seller. We don't represent the buyers.

00:25:16.900 And what are you saying to them? It's just the bid

00:25:18.960 they offered or the terms they were...

00:25:20.780 There's lots of different factors. I mean, ultimately

00:25:22.420 we're hired by a seller to sell their business

00:25:24.960 and we have to make a recommendation which is multifaceted that's how good their bid is how

00:25:31.100 likely we think they are to complete what we think they're going to be like to work with post-sale

00:25:35.620 and then we let the seller make a a judgment call from there but they very much lean on our

00:25:40.340 our expertise so buyers often get frustrated because they're like well i why did you i made

00:25:44.900 the high i made the highest bid or like i emailed you back the fastest um and generally if people

00:25:51.180 are going to be combative at that stage,

00:25:53.840 then they're probably going to be awkward at other stages

00:25:57.160 in the process.

00:25:58.020 And it's our job to balance all of those different factors

00:26:01.700 and make a recommendation.

00:26:03.480 How often do you go to sell it, and then the seller

00:26:06.020 is having seller's remorse?

00:26:10.000 I would say everyone will have a form of remorse

00:26:12.840 at some stage.

00:26:15.860 Part of the reason why we don't hard sell people up front,

00:26:18.160 We want them to effectively come to us and tell us why we represent them.

00:26:22.480 So essentially, if you did get them hard sold up front,

00:26:25.400 then you're just going to deal with the repercussions down the road.

00:26:27.520 Yeah, it gets much worse.

00:26:28.540 Yeah.

00:26:29.040 So we want you to come to us and be like, hey, I'm ready to process.

00:26:32.560 I've spoken to my personal stakeholders.

00:26:34.840 So I've spoken to my husband, wife, kids, whatever it might be.

00:26:38.860 Spoken to our shareholders, investors, business partners, key executives

00:26:43.540 in the company.

00:26:44.900 We're ready to go.

00:26:46.500 i'd say there's always some form of remorse once you sell because for a lot of people we work with

00:26:51.380 they don't necessarily have they don't know what they're going to do next they might say well i'm

00:26:55.940 going to bank the 10 million bucks and then i'm going to take a year off and figure it out so

00:27:00.900 remorse is not a bad thing i think i'd say one of the things i've learned over the course of 750

00:27:07.700 transactions is you can't fight against things like that so we just have to kind of roll with

00:27:13.620 it we know it's coming and it's just managing that at the time but ultimately part of the reason we

00:27:19.160 have such a good reputation is we don't force people to take a deal if you really want to walk

00:27:23.400 away last minute you can we don't then send the attorneys after you with demand letters or

00:27:29.820 nothing like that if you want to walk away you walk away we want you to sell kind of in good

00:27:34.540 faith and happily and not be in a position where you're like yeah they sold my business but they

00:27:39.100 kind of like put a gun to my head and make me take the deal we don't do that that does mean

00:27:43.300 sometimes we lose out on revenue yes we could put retainers in our agreement we

00:27:47.620 could put all sorts of termination clauses but we've always felt that not

00:27:53.020 having that builds a huge amount of brand goodwill long term which is

00:27:57.480 something that marketing dollars couldn't buy yeah really can't buy so

00:28:02.200 it's always worked well for us attorneys will look at our agreement and be like

00:28:05.360 guys this is stupid you have a two-page agreement for a 30 million dollar

00:28:10.000 business why don't you have all these other provisions in there but also we

00:28:16.060 want our clients to be happy when they sell and if they're not contractually

00:28:20.020 you can walk away it's our job to expect that to happen throughout the process

00:28:25.240 and just be ready to deal with it so that's that's the hard part is knowing

00:28:28.240 that there's gonna be issues coming up on every deal every day every single

00:28:31.900 every deal most deals okay there's always get every single deal we do

00:28:35.260 there's always can be a difficult conversation someone has to have with

00:28:39.100 one party sometimes that's multiple conversations sometimes that might be jumping on a plane

00:28:43.720 depending on the complexity of the deal and the bigger deals get they get complex there's lots

00:28:50.960 of things that will be challenging in that transactions there's lots of things to balance

00:28:54.780 it might be accounting technical legal there's lots of different things we're trying to trying

00:29:00.660 to balance and while the seller is our client we very much do try and create balance so if we're

00:29:07.080 representing you we don't then turn up with a one-sided contract when we're

00:29:12.240 speaking to the buyer or refuse any due diligence questions they have we're very

00:29:17.160 much saying well we think this is reasonable what what matters to you do

00:29:21.360 you care about transition period do you care about valuation do you care about

00:29:25.140 would you would you care about most and then we'll balance that we say to the

00:29:28.340 buyer okay well I think all negotiation is a is a balancing act I think people

00:29:33.980 who are bad at negotiating think you have to win every single point.

00:29:38.040 It's like, yeah, I want his 10 things I want, his 10 things you want.

00:29:41.900 I want my 10, you're not getting any.

00:29:43.840 I like to think it's a balancing act.

00:29:45.120 It's like, okay, well, I want these two things.

00:29:48.260 Maybe you can have these eight things.

00:29:50.060 Maybe you can have all of your things, but this is important to me.

00:29:54.280 And that balancing act then creates a situation where at the end,

00:29:57.340 everyone is happy.

00:29:58.840 Yeah, and that is why people work with an M&A firm,

00:30:01.740 to be able to get through that a have these negotiations without frustrating the buyer

00:30:07.420 because if you're the one negotiating that's yeah you end up paying and they end up paying you yeah

00:30:12.340 so we hope that if if they hate anyone they hate us yeah you'd be the bad guy the bad cop um we're

00:30:17.820 starting a new sass company what needs to be true like we're starting the best sass company thomas

00:30:23.100 what are the characteristics of this business so you have to have absolutely maybe not when you

00:30:29.460 launched but some we're doing this is real let's say we what are we doing absolutely have to have

00:30:34.120 a pricing model which has expansion revenue um i also like products that this is the first thing

00:30:40.460 you're saying is we need to figure out how to make so the product has expansion right you have to

00:30:44.160 you've hopefully spoken someone like patrick campbell read what read watch his his stuff

00:30:49.460 yeah he's i guess the godfather of yeah don't know if i'm allowed to say that but he's he's the guy

00:30:53.940 you speak to about value price pricing you want value pricing you want expansion revenue doesn't

00:30:59.180 matter where that comes from but you want that I would say the best SaaS businesses we see target

00:31:05.840 I like say beta small B and above so that might be customers that have at least like a mid-market

00:31:12.680 10 to 25 employees I do not like businesses where their biggest cohort is freelancers individuals

00:31:20.900 yeah consumers so we're going to mill revenue type businesses and yeah I'd say like a million

00:31:26.360 above would be a nice target. Anything that has employees and is going to consistently need your

00:31:30.380 product. Also, I think the product has to fundamentally solve a need that that business

00:31:36.620 will always have and be something that, if the worst thing happens to that business,

00:31:43.400 you're not the first thing they cancel. So for example, marketing tools can be fantastic,

00:31:50.560 high growth super popular but they tend to trend in and out and if a recession

00:31:57.220 comes do you cancel your new marketing fancy new marketing tools description or

00:32:02.680 do you cancel your slang that's monitoring your server on the back end

00:32:07.000 you want I always think that the best companies are those that if you describe

00:32:11.320 it to someone the average person on the street they have no idea what you're

00:32:15.120 talking about and they think it's super boring if people think it's cool or

00:32:19.000 sounds fun really interesting it's probably probably not gonna make a

00:32:23.500 good business long term you want something that's a deep part of that

00:32:28.480 company's in core work and core structure and will forever forever be

00:32:33.240 that and I'm boring like people is one of the most common questions I get when

00:32:37.960 I'm interviewed is hey it's almost like what's hot right now what should we build

00:32:41.620 what should we do like what industry should we go after yeah and this

00:32:44.980 crypto we just have yeah we avoid stuff like that and i say well if it's still popular in five years

00:32:50.840 yeah we'll pick it up but you won't see us and selling the biggest trending business we're usually

00:32:56.380 selling boring b2b sass it's been around for ages it might not have a fancy looking website

00:33:02.440 it might not have a fancy sales team it's probably just a good product where people like it i think

00:33:10.080 a lot of people talk about product-led growth i like businesses that fundamentally have that

00:33:16.080 if you're a business where it's similar to what i've built in a service business it's

00:33:21.000 if you have a good product and a good service i don't need to be the best sales guy in the world

00:33:25.480 for people to want to work with us they come to us based on a reputation and based on if you want

00:33:30.560 to sell a sas company for 10 million dollars hopefully you realize that we are your your

00:33:35.340 best option yeah you can speak to lots of people but hopefully you come back to us and that same

00:33:39.360 if you're building a SaaS product,

00:33:41.360 you want something where you are the top of mind

00:33:45.240 in your industry if anyone's saying,

00:33:47.240 hey, I want the X for Y.

00:33:49.360 And what about the niche?

00:33:50.440 Do you think that's really important initially

00:33:52.040 when you're building that, this B2B?

00:33:53.840 Personally, no.

00:33:55.000 Okay.

00:33:55.680 I mean, I would say just general advice

00:33:57.640 for founders when they're starting out.

00:33:58.900 I think you need to be interested in that industry and niche.

00:34:03.120 And I think in my business, for example,

00:34:05.860 i read absolutely everything that happens in the industry very related and even slightly

00:34:12.780 broad on that because i'm generally interested in it because i'm getting paid to do that or

00:34:17.460 because because i'm told i have to i'm generally interested so like if i wasn't and you said oh

00:34:23.200 what do you think about this ipo or what do you think about this product what do you think about

00:34:28.400 this person it's important you have a fundamental understanding your industry and if you're not

00:34:33.660 interested that's not gonna work um i know a lot of people say you don't necessarily have to launch

00:34:38.440 a business that you're personally interested in i don't really think that's true yeah particularly

00:34:43.680 if you're gonna be in business for 10 years or 20 years or 30 years it has to be something you're

00:34:49.820 truly interested and passionate in at least somewhat related to that somebody's looking

00:34:56.120 to buy a company i get asked this all the time non-sass people come across the founders got a

00:35:01.760 wants to sell what should he what should they look for what are the things they're supposed to be

00:35:05.960 doing in due diligence so the first thing you should do before you even get to due diligence

00:35:09.200 is establish what are you good at what are you good at what's your what's your value add if

00:35:14.360 there's three things in the world you'd say you're best at or top percentile what is that is it sales

00:35:22.700 is it marketing is it design is it development and then you want to find a product which is

00:35:28.600 usually lacking in those areas doesn't necessarily have to be like terrible in

00:35:34.520 those areas we want a business where you know you can go in there and improve it

00:35:39.100 and often it'll be difficult to know what that might be so maybe their

00:35:42.900 homepage converts at five percent you're not gonna know if you get that's gonna

00:35:47.300 go to seven or fifteen but at least if you're say a CRO expert you might kind

00:35:52.760 of say well I'm pretty confident with some good split testing and AB testing I

00:35:57.600 can improve that or it might be that a lot of sass companies particularly b2b companies we see

00:36:04.100 are terrible email marketing they don't they might send emails but that's about it they don't do

00:36:09.440 converting people from free trial to paid that's part of their flow it's usually quite bad recovering

00:36:15.780 cancelled accounts usually never happens encouraging people to upgrade usually never happens so if you

00:36:22.740 spot companies like that and you're good at email marketing and you understand the customer journey

00:36:27.500 those can be fantastic businesses and then again I definitely think you want

00:36:32.360 saying that play to your strengths you want saying you're at least interested

00:36:35.900 in I mean not deep domain the way I look at it is even if even if you're

00:36:41.240 acquiring this business I say you have investors you're not gonna be the one

00:36:44.180 wanting it day to day every business at some stage has a problem that happens at

00:36:48.860 10 p.m. on a Sunday or 4 a.m. on a Wednesday whatever it is you have to

00:36:55.100 have a business where you're not gonna hate it or yourself if you have to make that personal

00:37:01.420 sacrifice to handle it so the way i look at it is like if you're on vacation if this business

00:37:06.320 interrupts you for the entire vacation and you lose your one week of vacation you have per year

00:37:11.040 are you going to end up resenting the business or the team or whatever if the answer is yes then

00:37:18.300 maybe firstly you should probably not be buying a business at all and you probably should not be

00:37:22.620 buying that business and then in regards to the due diligence of like here's the things to go look

00:37:28.860 for you know to make sure that you're not buying a dud if you're not working with an mna expert

00:37:33.700 what are those what's that checklist yeah so i'd say firstly hire people to help you in that

00:37:38.180 process don't try figure it all out yourself um even if it's me doing an acquisition i would

00:37:42.860 definitely be calling in favors or hiring people who like i can't buy any code what are they gonna

00:37:47.740 to do yeah I can't I can't I can't write code so I'd hire a developer friend or agency to go through

00:37:53.260 the code and the way I like to do it is don't it's the same with valuation companies there's

00:37:57.800 companies out there that will provide valuations and you can pay them 10k to do a valuation but

00:38:02.980 then they won't actually sell your business you can find companies out there that will do due

00:38:06.440 diligence but they won't actually then run your business so I like to hire companies to give you

00:38:13.540 a scope or a quote and say, Dan, you have a marketing agency.

00:38:18.480 I have a $10,000 a month budget.

00:38:20.800 What would you do with this business?

00:38:22.160 Well, that's smart, though.

00:38:23.420 Because then from there, you can say if they miss stuff

00:38:26.300 or they have no incentive to bullshit in that process.

00:38:28.780 But for the most part, they're going to do this for free

00:38:31.980 because it's a statement of work.

00:38:33.300 Yeah, so firstly, you're entering that in good faith.

00:38:36.860 You can say, hey, look, I'm looking at acquiring this company.

00:38:38.780 If I do.

00:38:39.160 Can you go in?

00:38:39.860 Yeah, if I do and I give you $10,000 a month, $50,000 a month,

00:38:43.520 million dollars a month doesn't really matter what that number is what would you do for me

00:38:47.340 they're gonna I can promise you they will dig deep into that business to tell you what you need to

00:38:51.600 ask what you need to look out for um if you just hire someone to look at it anyone can give you an

00:38:56.660 opinion like yeah that business is great buy it but are they actually gonna own it after are they

00:39:01.860 the one writing the check are they the one who's answering the phone at 10 p.m on a sunday are

00:39:05.940 they the one who's giving up their vacation if it goes wrong so be very careful the people you're

00:39:11.160 in due diligence are they gonna help you post sell you do need to understand as

00:39:15.780 well if you're gonna write right check ultimately you are the one probably you

00:39:20.340 are the one who's responsible for that so yes you should hire people and bring

00:39:24.420 in experts in the process but ultimately the buck stops with you you have to make

00:39:28.440 that decision if you don't understand or you don't know like make sure you do

00:39:34.320 yes I like to bring in experts to kind of understand different parts process

00:39:37.740 the fundamental thing to ask yourself is if I buy this business today do I have everything I need

00:39:45.620 to continue running their business assuming the founder or the founders disappear on day one

00:39:50.460 you just assume that it's so in reality it basically never happens but it's good but you

00:39:57.180 have to work work on the assumption what do I not know if that founder disappears and then hedge

00:40:02.720 against that that does not mean and again the arts of negotiation is creating a balance so

00:40:07.600 there's very rarely a situation assuming there's not been any misrepresentation where that makes

00:40:15.160 it a no-go due diligence is always a balancing act find a problem hedge against that problem

00:40:20.900 so it might be oh if the founder left the code is not really documented because he's written all from

00:40:27.180 from day one so contingent on the deal instead of saying oh this is too risky we're out

00:40:32.660 which is very much a first time buyer a lot of our job is that's why we like to

00:40:37.640 work with buyers who are experienced because they don't walk away when

00:40:41.060 there's that that issue so in that case you might say okay well I want the owner

00:40:46.820 to fully document or spend a hundred hours doing it before we'll release any

00:40:51.320 funds from escrow or maybe instead of a three-month training period you want six

00:40:56.360 months but you'll do things to create incentives and keep it fair it wouldn't

00:41:00.980 be I'm not paying you 10 million dollars for business anymore it's now five it's not it's not

00:41:07.020 proportionate to what you're asking I think one of the challenges with and I don't watch a huge

00:41:11.820 amount of TV but the challenge will of like business shows on TV and anything that shows

00:41:17.440 negotiating on TV I always feel like is over dramatized to the stage where people think

00:41:22.400 negotiating is all about screwing the other person over and cutting the number in in half

00:41:27.720 if you're in a process and you cut the valuation to 5 million from 10 million because there's

00:41:33.860 the code's not very well documented that's just stupid so be careful of what you have seen

00:41:41.420 elsewhere like negotiation is a balance negotiation isn't all about who's like the

00:41:45.700 the loudest or the or the the smartest in the room it's always about creating that balance

00:41:52.020 so be practical in the process and also don't be don't be afraid to ask if you're working with

00:41:56.420 us in the process and you're the buyer and there's something genuine you've spotted or identified that

00:42:02.680 makes you uncomfortable bring it up the worst thing is if you have all these things start

00:42:08.760 building up and you say hey I'm out or I'm just not comfortable almost everything can be

00:42:14.520 be hedged and sellers we work with we're very we don't hard sell them on the process

00:42:19.440 most people spend many years or months researching how the process works they will probably and we

00:42:26.020 probably do not know about this they will probably speak to other people who have

00:42:29.940 worked with us before and been like what's the bad stuff i need to know and that's usually in

00:42:35.940 due diligence stuff will come up expect it and we will train them through the process that this is

00:42:40.980 going to happen but you don't always know what that is and depending on the on the buyer you're

00:42:45.780 working with what they might spot and what might be an issue to them might mean nothing to you so

00:42:51.140 So if you're a developer and day to day you've spent the last 20 years looking at code every single day and someone says, oh, I'm a bit uncomfortable because code's not well documented, you might think, oh, that's stupid because it's easy to understand.

00:43:05.180 So in that case, it's like, well, why not offer them 100 hours of this or 500 hours, whatever it might be.

00:43:11.420 So create a balancing act.

00:43:14.060 As a buyer, don't be afraid to ask for things,

00:43:15.940 but avoid the drama in the negotiation

00:43:21.320 and make it proportionate.

00:43:23.240 And that way, you're going to end up in a situation

00:43:25.160 where, even if you sign a contract and buy someone's

00:43:27.860 business, if you've kind of screwed them over at the end

00:43:30.480 and you know they have to sell the business because they

00:43:34.780 have to sell, and you put a gun to the head,

00:43:37.240 then once you're outside your contracted support period

00:43:40.660 in say 12 months time don't expect them to pick up the phone when so I think

00:43:47.160 it's very well just in business in general like yeah you can go to a huge

00:43:51.220 number of conferences events you can read blogs it's seemingly tens of

00:43:55.880 thousands of people out there but the one thing I've learned over the years

00:43:58.880 is actually the industry is regardless of entry and is actually very very small

00:44:03.000 and there are usually a very specific group of people that influence the

00:44:07.960 influence whether people like you or they don't like you and it's important

00:44:12.620 not to screwing people over just for your own good. I call these invisible doors.

00:44:17.020 Essentially there's doors that you don't know that might be closed because of

00:44:20.140 something you did to a person. Don't screw people over, be honest

00:44:25.020 throughout the process. I'd ultimately realize that our job is to have

00:44:29.620 difficult conversations. Our aim is at the end of the process if you sell your

00:44:33.640 business you have a great relationship with the buyer and the seller has a great relationship with

00:44:38.920 the buyer everyone has a great relationship but if there's any sort of like ill will that's towards

00:44:44.460 us we're the ones who effectively throw ourselves under the bus to get a deal done it was like

00:44:49.100 something was forgotten or i mean do it or or misplaced in the in the in the process as long

00:44:56.660 as we don't think there's anything malicious we might say well oh yeah we we mislaid this file

00:45:01.140 or that's on us or sorry, we miscommunicated.

00:45:06.080 That's why, I mean, from a marketing perspective,

00:45:09.560 we have a difficult business to market beyond just reputation.

00:45:13.440 It was when deals happen, we can't publicize them all the time.

00:45:17.140 Usually they're private.

00:45:18.380 Very rarely get on the buyer and seller up on stage at a conference

00:45:22.100 talking about how they sold their business.

00:45:24.620 Here's a term sheet, here's a contract.

00:45:26.520 It just never happens.

00:45:27.200 um over the last you know decade you've been building this business thomas i'd love to ask

00:45:32.900 uh who have you be who have you had to become to continue to grow this kind of company

00:45:38.200 so i think at a fundamental level you have to be a good negotiator to sell businesses day in day

00:45:45.680 out there's no way to get around that and that means done that for yourself i think the big

00:45:50.640 thing for like i'm naturally introvert i think and i naturally avoid confrontation the big thing

00:45:56.020 for me was not learning to be confrontational but learning when to push when not to push

00:46:02.220 learning when you have leverage when you don't have leverage

00:46:05.240 learning to have that make that difficult phone call no one likes making difficult phone calls

00:46:10.580 the nature of my job day-to-day is it has to happen our team have to do that we train them

00:46:16.060 as they get more confident do more deals that becomes more more natural and you realize that

00:46:20.180 ultimately we're doing it for the good of the client and the good of the deal um another thing

00:46:25.700 you realize is that if you feel uncomfortable doing something you have to tell people we never

00:46:31.900 do things put this way I've never done anything where I've gone to bed at night saying I think

00:46:37.100 that person got screwed over or we made a we made someone do something that they shouldn't have done

00:46:43.020 never once gone to bed and and felt that so I think it's super important to do the right thing

00:46:48.720 even if that's not something that financially benefits you it might be with a deal recently

00:46:56.980 eight-figure deal the client towards the end of the process was beginning to feel a little bit

00:47:02.000 uncomfortable and she said hey Thomas I'd like what happens if I want to walk away you're gonna

00:47:07.000 like come after me and we'll say well no absolutely not if you're comfortable walk away

00:47:11.520 um in the end it worked quite well because I said to the buyer hey look so I was no longer

00:47:15.440 comfortable with your terms that you've been gradually changing therefore take it or leave it

00:47:21.840 and the buyer took it so that worked well um but if i was not willing to have that conversation and

00:47:27.760 say well of course you can walk away that never would have happened so i could have pushed her

00:47:32.480 into it and said oh well we spent all this time all these flights i've been on and late night

00:47:37.200 phone calls it's not fair like it's got this ten thousand dollars yeah so never do anything that

00:47:41.120 that makes you feel uncomfortable or bad if you do you should probably be in a in a different

00:47:45.240 business we work with a lot of people who leave the banking industry and they then want to launch

00:47:51.200 a private equity firm or buy a business and for a lot of these people their stories are just how

00:47:55.580 they hated their job because they're made to sell things they do not believe is in the best

00:48:00.300 interests of their client and you're in a position of power if I say to you hey your business is worth

00:48:04.760 a million dollars and it's actually worth 10 and then my buddy's buying that business off of you

00:48:10.020 that that can like yeah i'd probably get away with it but it doesn't really do any good in the

00:48:15.880 long run so i say learn to be a good negotiator learning just uh learning that things as a

00:48:22.360 business owner in general things will go wrong every day there'll be new problems so i don't

00:48:28.440 think there's ever a day in my life where i get up and there's not something has gone wrong you

00:48:33.360 just ultimately have to realize that as a business owner i'm lucky that i have a business partner he's

00:48:37.360 CEO. So between the two of us, we both have completely different skills. We are quite

00:48:43.880 different personality-wise. So that means day-to-day problems, we can usually separate them out

00:48:48.740 and say, okay, well, I'll deal with this. You deal with that. And that works quite well.

00:48:53.500 I think you do need to have that someone to fall back on and that kind of mechanism. It

00:48:58.720 doesn't necessarily have to be a business partner. It could be a key executive. But

00:49:03.480 having that support network is important because as a business scales what you realize as well

00:49:09.400 and this is probably the big fundamental change that happened for me beyond just refining my

00:49:14.880 skills you realize as a business grows your responsibility is no longer your book your

00:49:20.980 goals become a lot less selfish when i started out i was like well my biggest goal is to

00:49:25.660 become a millionaire kind of did not come from a background of money a millionaire to me was

00:49:31.340 of unachievably large amount so i was like okay well millionaire and then you get there and you

00:49:39.240 realize that you want 10 and you think well you get there and you think well that can just keep

00:49:44.640 going but actually what happens is your responsibilities completely change like when

00:49:50.000 i started the business i was young free single had no okay in the world i'm now married i now

00:49:55.980 have considerations in that part of my life from a business perspective we have a team of 45 people

00:50:02.440 they have kids mortgages dreams ambitions they want to do well so you realize that

00:50:10.440 a lot of the selfish goals i had starting out were not really what i think about now day to day it's

00:50:16.140 all about serving clients but also the team i don't want to be in a position where someone says

00:50:21.000 uh thomas and ismail my business partner ceo well they ran the company into the ground because they

00:50:26.640 were paying themselves all the profit driving around in like fancy cars buying nice apartments

00:50:31.780 going on vacation all the time didn't take it seriously um so that's one thing i say to

00:50:36.880 entrepreneurs really early on if you can learn one thing is before you hire maybe first couple

00:50:43.760 of people doesn't matter if you actually want to hire people and grow your business you have to

00:50:48.700 realize that once you hire people that you their life is in in your control unless you're a

00:50:55.580 sociopath you probably don't want to be in a position where you're responsible your bad

00:51:01.180 decisions are responsible for pain in their world people not being able to pay their mortgage or

00:51:05.480 people losing their job or well i've fortunately never been in a position where so i've let had to

00:51:12.000 let people go over the years unfortunately i've never been in a position where i've had to let

00:51:16.340 anyone go because we've overhired or something something's not working it's always been kind of

00:51:23.900 in good faith it's okay it's not working out um so that's a big thing to realize that your goals

00:51:29.320 when you start your business will almost definitely be selfish as you grow becomes much more about the

00:51:35.560 people you can't just walk away like you are responsible to those people and if you're not

00:51:40.880 willing to take on that responsibility don't start a business or keep it small don't grow

00:51:45.240 Hire two people, hire freelancers, work from home, do we want.

00:51:49.680 Everybody should check out your blog, FI International.

00:51:52.120 You've got a lot, a lot, a lot of great content on buying, selling, all the whole process.

00:51:56.840 Where do people find you online, Thomas?

00:51:58.960 So if you can't find me at a conference, then you'll find me online.

00:52:02.840 All of our social media channels are super active.

00:52:04.880 So Twitter, Facebook, Instagram, LinkedIn, find me there.

00:52:09.720 What's your favorite LinkedIn right now?

00:52:11.200 I'd say I'm usually on Facebook the most.

00:52:13.800 um you can always email me i would say in general we've very intentionally built a really good team

00:52:19.360 of people who are good at their jobs and they're better at their job than i would be at their job

00:52:23.980 therefore if you have a specific question yes you're welcome to reach out to me but generally

00:52:30.260 the team if you're looking to sell a business we can give you a valuation probably not talking to

00:52:35.080 me want to buy a business speak to that team they're good at their job so you're welcome to

00:52:39.840 Seek me out, but I'd always encourage you to thomas.feinternational.com.

00:52:43.860 Perfect.

00:52:44.360 So you can always email me directly, but the team are great.

00:52:47.100 They're the ones that are going to help.

00:52:48.300 And they're in the office every day.

00:52:49.440 I'm usually at a conference.

00:52:51.220 Dude, everywhere I go, you're there.

00:52:52.740 Really appreciate it, Thomas.

00:52:53.780 Thanks, Dan.

00:52:54.240 Thanks so much.

00:52:55.420 Cheers.

00:52:55.760 Awesome talk.

00:52:56.440 Thanks for watching this episode of Escape Velocity.

00:52:59.660 Be sure to like and subscribe and leave a comment with your biggest insight from our conversation.

00:53:04.720 Be sure to check out the next episode.

00:53:09.840 Amen.

Dan Martell - February 27, 2020

What Buyers Look For in a SaaS Business with Thomas @ FEInternational.com - Escape Velocity Show #22

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