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
Rex Woodbury publishes the Digital Native newsletter about tech and culture. In the latest issue, he digs into the latest trends in commerce that are changing the sector. This is going to be a two-part issue. In this first part, he talks about the emergence of livestream commerce, social commerce, new customer acquisition channels, creator-powered commerce, and creator-led commerce. With the cost of online advertising increasing, these new trends are important to keep an eye on. For me, livestream commerce looks to be the most interesting as it’s disrupting the established players like QVC which did $12B in revenue last year. It’s also taking a distribution channel that’s been proven and wildly successful in Asia and introducing it to the US consumer.
I’ve mentioned SMBash a few times in previous newsletters. It was an event for business owners, operators, and investors. I thought Axial did a nice job of providing some highlights from the event. One quick note - while this talks about SMB ownership, it really doesn’t matter if you’re buying a landscaping business, a portfolio of content websites, a manufacturer, an e-commerce brand, or a Saas. Many (not all) of these concepts are still relevant.
6 Tips for Soon to be SMB Owners
The event was jam packed with educational content for owning and operating SMBs. Here are six of my top takeaways for anyone looking to dip their toes in the SMB waters:
Sellers of SMBs are looking to sell to individuals they can relate to, above all else. One investor I spoke with told me that the owner of the company he purchased mentioned not wanting to sell to a “suit.”
Buyer credibility comes more from values than experience. While you need to obviously have some baseline ability to run a business, good stewardship seems to be the value that stands out most to owners. These businesses are webs of relationships, not just financial assets. Nobody is going to sell to a buyer that gets in the way of those relationships.
Financing a deal with debt and equity is key. Debt, on the one hand, allows for maximum ownership and is fairly accessible in today’s economic environment. However, equity allows for a true partner to come into the business – someone that can hopefully provide valuable guidance, connections, and capital along the way – and minimizes the amount of cash leaving the business.
When you do ink your first SMB deal, do no harm. Be intentional about introducing change. Be patient. Honor how the business was run before you, and respect the culture that the owner left behind. Focus on smaller changes that can improve employees’ lives in the first 3-6 months… a new website, technology to reduce manual labor, etc. And, as much as possible, consult with your new employees. This allows them to feel a sense of agency in driving positive change, while believing that you, the new owner, has the judgment to know what should or should not change.
Think thoroughly about the plans you present to your new company right after the acquisition. Expectation setting is vital. Anything you say, you have to deliver on, quickly, or risk losing credibility.
Build as many relationships as you can with people other than the owner prior to day 1. Once you’ve made the acquisition, take the time to get to know people personally. Spend 3x the amount of time you originally thought to make employees know you care about them. Casual interactions like driving with them, walks, lunches, coffee, etc. are the best ways to build trust, and create venues to give and receive feedback organically, early on.
EADS Bridge Holdings had a Q&A with Kirsta Todd, the CMO of NortonLifeLock. Krista talks about what marketing really means and how entrepreneurs and SMB owners can take actionable steps to improve.
[MV] There are more marketing channels now than ever before. How should a business owner determine where to spend their time and money?
[KT] Identifying how your current customers discovered you certainly helps you continue to build upon any current marketing channels. For example, if you are being found via search engine optimization, keep your content flowing, it means you are being ranked by the search engines which increases your chances of higher visibility.
Embracing a test-n-learn mindset is a part of every marketer's approach and there is no need to break the bank in doing so. You can test out social media advertising for just a couple hundred dollars to start if you have your content built and you know who you want to target. Search engine marketing is another great way to test affordably and learn a lot.
Spending time on your website, user-experience journey and eCommerce experience is something you are in complete control over and is your one-stop-shop for your customers to understand who you are, what you do and how you can help them in their lives – so your website is incredibly important.
I’m also a big fan of driving meaningful stories by leveraging public relations or media relations. This takes time to develop the right relationships, but trade publications are an easy place to start.
If your company is in a category where ratings and reviews matter – focus on responding to customer ratings, trying to improve the ones that may be negative and celebrate when you’ve hit 5 stars. As for reviews, if third-party editorial sites are interested in reviewing your product or service those are also very influential when it comes to purchasing decisions. Be proactive, don’t wait for them to come to you.
There’s been a lot of price volatility in the public market especially in software, data, and broadly, technology. Axial hosted a roundtable with five experts in the software M&A space to discuss how public market volatility is impacting private market M&A.
Nat Burgess, Techstrat: There is a lot of skepticism about software companies on the periphery trying to access public markets – the opportunity excitement within this range is sloping downward, however lower middle market enthusiasm is still high despite volatility.
There is also a time lag between what happens in the lower middle market and public market trends, so there has not been any significant change in broker strategy in terms of valuing private software companies.
For the first time in history, offline retail grew faster than e-commerce according to Marketplace Pulse.
According to the Department of Commerce, e-commerce represented 13.2% of total retail spending in 2021. Down from 13.6% in 2020. Despite online shopping increasing to $870 billion from $762 billion, e-commerce market share instead decreased because offline retail sales grew faster. That never happened before.
Event: Risk & Opportunity When Buying & Selling Companies Ted Leverette of Business Buyer Advocate is hosting a free Zoom webinar on Feb 24th.
Feb. 24 Zoom event - Bridging the Gap: Risk & Opportunity When Buying & Selling Companies Panel of experts. Open Q&A. (Legal, dealmaking, sourcing, brokerage and more.) They have it. You want it. Explore ways to make the exchange during these unsettling times. We'll talk reality, about what we’re seeing, experiencing. And what we can do to increase our opportunity and mitigate our risks.
Stack Acquisitions Jon Stoddard continues to put out some great content over at Stack Acquisitions. Whether it’s his podcast or the free webinars, there’s tons of value. I highly recommend his free webinar about sourcing off-market deals using LinkedIn on March 3rd.
How to Use LinkedIn for Off Market Acquisition Deal Flow. Register Below
A 9 step approach for deal flow outreach that will fill your acquisition pipeline, provide you with more opportunities to make more offers to acquire a business than you thought possible.”
Who this training is for: 1st AcquisitionIf you are new to the M&A game,you will learn how to create and fill your pipeline with business owners who want to sell their business.
10th + Acquisition(s)If you have years in the M&A world you will add another unlimited source to your deal flow.
Event: Buying & Operating a SaaS Business Searchfunder is hosting a webinar with Alex Mears and Steve Ressler on buying and operating a SaaS business as a search fund - March 10th.
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.
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.
