What I Learned Last Week curates the most interesting content relating to business acquisitions, operations, entrepreneurship, finance, and more. WILLW is a publication of The Business Inquirer.
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📰 Articles
IndieHackers is a community of builders and entrepreneurs. A member posted an interview with Norbert, owner of AutoForward SMS. Norbert purchased the mobile app from Flippa for $10k while it was generating around $700 in MRR. In 15-months he was able to grow the business to over $8,000 in MRR. It’s a good interview that covers Norbert’s entrepreneurial journey and learnings along the way.
I chose this listing because out off all the options it had a reasonable valuation and was in a price range that made sense for me. It was small enough to not hurt badly if I fail but also big enough so that any future return would make a difference.
I could also foresee it grow to replace my 9to5 job income relatively quickly. (which it did). From a personal perspective, I also really liked the seller (Australian) - She was nice and absolutely open about her motivation to sell, opportunities for growth and where the pain points were.
Also, the income was stable (even slightly ticking upwards) - which is uncommon on Flippa. Many ppl sell of their projects when they are in free-fall.
In The Trenches is a blog and podcast that talks about buying and operating an SMB. Their latest blog post is a great discussion of how to capitalize a business post-acquisition. It’s a long, detailed post about aligning strategy, raising debt, and lessons learned.
Capitalization decisions ARE strategy decisions. Capital structure drives strategy, and strategy drives capital structure. As an acquiror, it’s not enough to simply identify an otherwise attractive company and take comfort in the fact that there are dozens of potential value creation levers for you to pull: This “wide net” approach risks over- or under-capitalization, and is often indicative of a lack of clarity on the part of the acquiror.
A bit off-topic but I thought this was interesting nonetheless. Marketplace Pulse talks about unbundling eBay. It’s part of a wider trend of disaggregating large marketplaces.
eBay intended to remind how big it still is even compared to competitors combined. And that perhaps eBay should be valued more. But it showed how many companies took parts of it and made them better instead. In the last decade, eBay gave up innovating on most consumer-to-consumer categories like sneakers or event tickets. Its competitors doubled down.
Buy Then Build author Walker Deibel has a great video and write-up on the differences between an asset sale and a stock sale.
One of the biggest conflicts that exist within transactions is the type of deal you’re doing – asset sale or stock sale. Buyers typically prefer assets and sellers prefer stock sales. The key for any acquisition entrepreneur is understanding the big differences between both these types of sales.
DueDilio has a similar write-up as well as many popular document templates in the resources section.
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Buy Small Sell High writes about the search process and how to increase your odds of finding an acquisition target.
TLDR: Searching is a volume game. Use the widest possible criteria to increase number of potential companies. Use low cost (time and money) channels like brokered deals, when possible. Searching is a combination of sourcing and closing skills. You get better with reps and by learning from successful searchers.
After understanding how the search fund model works, the immediate next question for most people is: what are my odds of actually buying a company in a 1-2 year time window?
XO Capital talks about the challenges of doing tech due diligence over Zoom. They’re trying a different approach. They are asking sellers to record a video, at their convenience, that would answer a list of tech diligence questions. Jury is still out if this method works. Check out the article for a list of the tech diligence questions they ask.
The goal here is that we as the new owners would be able to watch this video and reasonably understand how to add a new feature, build, and deploy it to production.
Axial sat down with five deal experts within the manufacturing sector to discuss trends, the impact of the Ukraine war, and supply chain issues.
Manufacturing business owners understand better than most the importance of anticipating problems. Mechanical issues, raw material sourcing, labor shortages… not having a contingency plan for the inevitable malfunction in any of those categories can be the difference between profitability and insolvency. The events that have unfolded so far in 2022, have made those anticipatory skills infinitely more important.
Earlier this week, we sat down with 5 manufacturing-focused deal professionals to discuss the state of M&A in manufacturing. Topics of discussion included things like the ripple effects of the war in the Ukraine on global trade, sustained supply chain congestion, and how those events are impacting manufacturing operations and M&A activity in the Lower Middle Market.
Bain recently released their Global Private Equity Report 2022. Clearly this addresses the upper end of the market. I think it’s still an important read to understand overall trends.
Clubhouse Remember the Clubhouse app that was popular at the height of the pandemic? It was valued at $4B last year. So many ways to caption the charts below.
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Message from Arnold This one is completely off-topic for this newsletter but I have to share it. A powerful message from Arnold Schwarzenegger to the Russian soldiers attacking Ukraine. Well said and well done.
These are tools & resources that I personally use or have used. They may contain affiliate links so I’ll get a few pesos if you sign-up.
Cerebro Capital - Cerebro has a network of 1,500+ lenders who can provide debt financing for your acquisition, refi, etc. $500k minimum.
X5 Deals - Proprietary deal sourcing. They do the outreach and send you relevant, actionable deals directly into your inbox.
Curators - Proprietary deal sourcing. You need targets that fit your investment criteria, and Curators delivers week after week - we even update your personalized database on a daily basis with new information on best-fit targets.
BizNexus - Proprietary deal flow, deal aggregator, and exit prep.
PrivSource - Deal aggregator for lower and middle-market listings.
Calendly- Leading scheduling platform to easily schedule meetings without the back and forth. I’ve been using it for several years now. Free 14-day trial.
ProjectionHub - Access to 50+ CPA-developed financial projection templates. 25% discount using code “duedilio” at checkout.
Logology - Best automated logo & brand identity tool I’ve come across.
DeepBench - Access a cutting-edge expert network. $200 discount.
OpenPhone - The best business phone solution that I have found. $20 credit.
Eloquens - Knowledge marketplace. I’ve bought a few guides and templates here.
Important Disclaimer: This newsletter is provided for informational & educational purposes only, and should not be relied upon as legal, business, investment, or tax advice. This newsletter may link to other websites and certain information contained herein has been obtained from third-party sources. While taken from sources believed to be reliable, it has not been independently verified. The Business Inquirer makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. References to any companies, securities, listings, investments, or digital assets are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any business, tax, or investment decisions. Content in this newsletter speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.
