🧐 What I Learned Last Week

Week ending Friday, September 24, 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!

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

Jamin Ball of Clouded Judgement writes about SaaS and cloud stocks. In his latest post he looks back at the 2Q21 earnings season that just ended. Looking at public company trends provides insight into private company fundamentals as well. A few interesting charts are copied below…

Double-clicking one layer further, we can separate the median multiples into different growth buckets. In the below chart I define High Growth as >30% projected NTM growth, Mid Growth as 15%-30% and Low Growth as anything <15%.

This one is interesting as well. The chart shows the CAC payback period. The best of them turn customers into profits within 9-months while the typical public SaaS is around 24-months.

A Look Back at Q2 '21 Public Cloud Software Earnings

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Axios provides a few interesting insights into Intuit’s recent acquisition of Mailchimp from an interview with Mailchimp founder/CEO Ben Chestnut. The interesting points of this article pertain to why Mailchimp never raised VC funding.

The big picture: Mailchimp founder and CEO Ben Chestnut tells Axios that it was all about timing.

  • Mailchimp was founded in 2001, when the country was in recession and the dotcom bust was still fresh. Raising venture capital was hard for most startups, let alone one based in Atlanta.

  • There was, in Chestnut's words, "a whole movement to get real, get pragmatic about things ... a distaste for" venture capital.

Chestnut adds that VCs also questioned why Mailchimp was focusing on the small business sector, which some noted was a nut that only Intuit had managed to lucratively crack.

An inside look at Intuit's Mailchimp acquisition

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Each month Facebook publishes the Global State of Small Business Report where they deliver insights from 35k SMB leaders across 30 countries and territories. There are a lot of great insights on the health of the global SMB market. The link to the latest report is below.
September 2021 Global State of Small Business Report

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A lot of entrepreneurs started their journey by launching an Agency. This can include marketing, web development, or consulting. In some ways, DueDilio is a due diligence Agency. Robin Vander Heyden started the software company manyrequests that provide all-in-one Agency management software. He also publishes a great blog. His latest post provides tips on growing an Agency from $0 to $100k. It’s a quick read and concepts apply to almost any type of business.
How to Grow an Agency from 0 to $100k ARR: 7 priorities

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Behavioral science is all around us. Companies use it to get consumers to open up their wallets. The Game is a Neil Strauss book that taught how to use behavioral science for “dating.” This free guest post in Lenny Rachitsky’s newsletter demonstrates how behavioral science can boost conversation rates. Highly encourage everyone to read this. Doesn’t matter if you’re buying an HVAC, restaurant, or a SaaS business - conversion rates matter.
How behavioral science can boost your conversion rates

🧵 Twitter

Detailed, insightful thread on the dynamic of the BNPL industry and how it’s threatening traditional payment gateways…

After finance, technical due diligence is most requested at DueDilio…

This one has some great mental models…

Great tip on where to start searching for service business ideas…

CPG is a notoriously hard space. Better to create a new category than compete with old ones…

Be memorable…

SMB is not for everyone. Identify your advantage and amplify it…

Great thread on the supply chain issues impacting FBA aggregators…

🤔 Thoughts & Commentary

Newsletter Update
It’s been a minute since I provided a newsletter update. Proud to report that The Business Inquirer recently crossed the 1,000 subscribers mark.

Open rates are hovering in the 50-65% range and CTR is around 20% for TBI and 35% for WILLW. With the new iOS 15 update I think this is the last time those stats have any chance of being at least somewhat accurate.

Thank you for subscribing, sharing, and supporting The Business Inquirer!

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Open to Offers
I’m seeing more and more listings without an asking price. This is common in the SMB space but hasn’t been in the tech industry. Today I’m seeing a total of 1,512 startups listed on MicroAcquire and only 159 of them have an asking price. Initial reaction is that a listing without an asking price is just a fishing expedition. A SaaS or e-commerce store doesn’t take rocket science to value. I’d be curious to get your take on this. Join the conversation here…

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Finders Fee
A subscriber recently asked me about finders fees and how to structure them. I’m not sure there’s a hard rule on this. I did some digging and I found two resources that I think are helpful.

Business Introduction Fee: Everything You Need to Know

Private Equity Finder's Fee Agreement: What is it and Do You Need it

The articles discuss a Lehman Fee structure which was developed by Lehman Brothers. This is the most common fee structure in small company M&A.

A Lehman Fee is calculated as follows:

  • 5% of 1st million of transaction value

  • 4% of the 2nd million

  • 3% of the 3rd million

  • 2% of the 4th million

  • And 1% of the remaining transaction value

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Biz Screener
I’ve been following the development of Biz Screener. It’s a tool that aggregates marketplace listings and assigns a “health grade” to each one. There’s also a Chrome extension that quickly shows you the health of a listing. The goal is to save users time sifting through listings. Love the concept but there’s a lot more work to be done on the execution. Really interested in seeing how it develops. Haven’t reached out to them yet but it’s on my to-do list.

🛠 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 - Knowledge marketplace. I’ve bought a few guides and templates 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.