🧐 What I Learned Last Week
Week ending Friday, Sept 10, 2021
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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Hello Friends!
Last week I took a break for Rosh Hashanah but The Business Inquirer is back to its regularly scheduled program. The listings will be coming on Tuesday next week.
What I Learned Last Week is brought to you by DueDilio. DueDilio is the first M&A due diligence marketplace connecting business buyers and investors with quality, verified due diligence experts.
📰 Articles
SaaS Multiples
Quiet Light Brokerage published a guide on how to think about valuation multiples for SaaS companies.
There are four general areas (the Four Pillars of Value) we look at when determining a business’s value. Within each are several specific factors that are important. In this section, we’ll focus on the general Four Pillars, and in the following two sections we’ll dive into the specifics.
The Four Pillars of Value are:
Growth
Risk
Transferability
Documentation
SaaS Companies: Your Guide to Valuation Multiples
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Independent SaaS
MicroConf needs no introduction as they’re the go-to community for independent, bootstrapped SaaS founders. They recently released “The 2021 State of Independent SaaS” report. There are a lot of great statistics in the report and I love how they break out the “expected” and “unexpected” stats.
The State of Independent SaaS Report was generated based on the data of hundreds of non-venture track, revenue generating SaaS companies that we analyzed and turned into an epic report filled with benchmarks, growth rates, demographics, validation approaches, and more.
The 2021 State of Independent SaaS
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Amazon Home Care
Looks like Amazon is entering the at-home care market through its 2-year-old Amazon Care division. Amazing to see the evolution of the online book store.
Amazon Care’s model is based on both a virtual and physical approach, offering in-person visits from medical professionals and other digital services, which are all coordinated through an app.
Amazon Care Reportedly Plans to Expand Its At-Home Care Services to 20 New Cities by End of 2022
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Per Seat or Per Use Pricing
Tomasz Tunguz, a VC at Redpoint offers a quick framework for how to think about per seat or per use pricing. It’s important to think of pricing not just as a monetization strategy but as an acquisition strategy as well. Of course, he’s talking about startups but I think the same thought process can be applied to any type of business.
Per Seat or Per Use Pricing: A Framework for Evaluating the Right Strategy for Your Startup
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NFT’s Aren’t Bubbles
A great read from Red Woodbury who’s an investor at Index Ventures. He argues that while Cryptopunks, Bored Apes, and the like may be an asset bubble similar to Beenie Babies, NFT’s themselves are not. We’re still early in discovering the mainstream use of NFT technology. My summary doesn’t do the article justice so I’d recommend checking it out.
Why NFTs Aren't the Next Asset Bubble
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Late to the SMB Party
Interesting to see two great newsletter writers tackle the same topic this morning. The SMB MBA published “Does Buying a Business Make Sense Anymore” and Big Deal Small Business writes “Is it too late to buy a business?”. They’re hot off the press so I haven’t read through these yet but looking forward to it.
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Compounding
Some crazy charts from chartr this morning showing the compounding growth of lululemon over the last 16-years.
🧵 Twitter
There’s no right way to acquire a business…
Crazy story on how things can go south quickly…
I think he’s the only broker posting SMB listings on Twitter. A few good comments in this thread…
Cheap money lifts all boats…
I’m guilty of this. Paralysis by analysis and asking the wrong people…
Long but super relevant thread on how to learn better, faster…
It’s only funny if it’s not true…and this is true…
🤔 Thoughts & Commentary
Cost of Automation
I’ve been looking at some no-code automation and organization tools to streamline processes for DueDilio. I’ve transitioned my service provider database from Excel to Airtable and I’m looking to explore automation within that space. One tool I’m looking at is Stacker. I think Stacker is interesting. Check them out. I believe they just raised a $20M Series A.
I explored Airtable/Automation experts on Upwork and was shocked by some of the pricing. I see rates of $150, $200, $300 per hour. For reference, a senior full-stack developer is around $35-$40 (overseas). I think this is a great space to get into. Opening up a process automation Agency. Something similar to BuildLab. The high rates on Upwork tell me that you can’t get this talent overseas yet. That will change.
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Twitter Digest
Twitter is an absolute treasure trove of information. There are Twitter lists for any topic you can imagine - SMB, legal, history, celebrity, health, finance, travel, food, politics, space, tech, real estate, etc. Someone should create Twitter Digest. User picks a topic and each week they get all the best (most popular) tweets on that topic. Top 10 or top 5 tweets. I think this type of newsletter would make an absolute killing. I’ve had this idea for a while. It’s the idea behind the section above. I even own twtrdigest.com. For $3k you can buy the full spelling twitterdigest.com. I’ve finally come to the realization that I don’t have the capacity to create this on my own. Juggling too many things. I’d love to get someone on board who I can partner up on this. Is anyone interested? Does this already exist and I’m just unaware?
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One Interesting Deal
Michael Girdley recently launched a Substack newsletter titled One Interesting Deal. Once a week he highlights an interesting SMB deal that he’s come across. I suspect he’s just getting started with the newsletter and it will evolve. Check it out here: One Interesting Deal
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Valuation Matters
A (relatively) famous real estate investor once told me that “there’s never a wrong time to buy, only a wrong time to sell” when it comes to real estate. Does this apply to business acquisitions? I did briefly skim the latest post from The SMB MBA and want to highlight this section that may have an answer:
While Dan Rasmussen now at Verdad Capital worked for Bain Capital in 2012, he worked on a study of returns from Bain and it’s top 20 competitors covering 1700 transactions from 1999-2010.
The goal was to figure out what accounted for the returns. In the end the answer wasn’t industry, management, operational improvements, or even leverage. The factor with the greatest impact on a successful outcome was the multiple of earnings the private equity firm paid for the company. Anything cheaper than 8 times EBITDA had a high chance of generating good returns. More expensive deals did not. The 25% of deals that were the cheapest generated 60% of the returns.
I 100% recommend you read the full post here: Does Buying a Business Make Sense Anymore? - by Alan - The SMB MBA (substack.com)
⚙ Tools & Resources
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.
ProjectionHub - Access to 50+ CPA-developed financial projection templates. 25% discount.
PrivSource - Deal aggregator for lower and middle-market listings.
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 - Marketplace of best-practice knowledge. I’ve purchased a few guides here.
That’s all for this issue of What I Learned Last Week!
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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.