🧐 What I Learned Last Week
Week ending Friday November 12, 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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📰 Articles
The Guardian writes on why South Dakota is the great American tax haven loved by the super-rich. South Dakota has no income tax, no inheritance tax, and no capital gains tax.
It’s known for being the home of Mount Rushmore – and not much else. But thanks to its relish for deregulation, the state is fast becoming the most profitable place for the mega-wealthy to park their billions.
The great American tax haven: why the super-rich love South Dakota
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Kyle Poyar writes about the rise of usage-based pricing in SaaS. I personally don’t believe this model is right for every SaaS startup. Usage-based pricing forces the customer to constantly be asking “how much will this cost me?”. It feels to me like it creates friction.
Usage-based pricing is, frankly, trendy.
45% of SaaS companies now have some form of usage-based pricing (UBP), up from 34% last year, according to new data from OpenView’s State of Usage-Based Pricing Report (spoiler alert: I wrote it along with my colleague Sanjiv Kalevar).
The TL;DR:
We’re in the end user era of software buying
The seats are empty
Usage-based companies have better financial performance than their peers
Investors are not only getting more comfortable with usage models, they now prefer them
Usage-based pricing sends an incredible message to customers that’s hard to replicate
Why is usage-based pricing on the rise?
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Wonderkid Andrew Gazdecki launched the MicroAcquire Academy. It’s a series of 14 video courses on subjects including attracting offers, preparing for an acquisition, negotiating and closing, legal, and life after exit.
My goal is to equip you with the knowledge needed to get your startup acquired quickly and easily, without all the headaches most founders suffer.
So... You're probably wondering what's on the itinerary, right?
Well, you're going to learn everything from startup valuations to due diligence, from negotiating an LOI to transferring assets, from attracting offers to deal structures.
In other words, everything you need to know to get your startup acquired.
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@SMB_Attorney continues to add tons of value to the business acquisition community with his free Legal M&A Masterclass. Session #5 has just been released and it’s all about preliminary documents - NDAs.
A confidentiality agreement, often referred to as a non-disclosure agreement (or NDA), is typically the first agreement to be executed in the M&A process.
This makes sense! An M&A transaction requires the seller (and sometimes the buyer) to disclose sensitive, confidential and/or proprietary information with the prospective buyer, and preventing the sharing or misuse of that information is of critical importance.
Session #5: Preliminary Documents - Confidentiality Agreements (NDAs)
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Research & Markets published an updated dropshipping market research report.
The Global Dropshipping Market size was estimated at USD 72.12 billion in 2020, is expected to reach USD 76.88 billion in 2021, and projected to grow at a CAGR of 6.93% reaching USD 107.86 billion by 2026.
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Lenny’s Newsletter has a guest post by Elena Verna on when to hire your first full-time growth person.
Do you have strong product-market fit and feel ready to ramp up your investment in growth by hiring your first full-time growth person? Unfortunately, some of the first set of decisions that founders make when embarking on this journey are flawed. The most common mistakes they make are:
Hiring a growth generalist without understanding what growth means for your company
Building a growth team before a data team
Prioritizing Head of Growth as your first growth hire
Hiring the wrong type of growth profile
Chasing after external talent
Putting growth in the wrong department
Six rules of hiring for growth
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GLC Advisors & Co published their 3Q21 M&A Update. A lot of great data in this one.
Middle Market M&A Update Q3 2021
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A user on Searchfunder had a great post about the lessons he learned from a failed SBA financing. Long post with good real-life experience.
I’m early in my search so some of these lessons below might be obvious to grizzled veterans, however I wanted to share my story so that other new searchers (and prospective searchers) can learn from my experience. Plus I think we need to share more failure stories as a search community; we’re already really good about sharing and celebrating successes (which is amazing!)
Lessons learned from failed SBA financing
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Eyal Toledano runs MicroAngel and documents his journey of buying, operating, and exiting a portfolio of SaaS businesses. I really enjoy reading each free update as it provides a lot of insight into the operation.
A spooky month of large refactors, churn & support team tooling. Reached $100k+ Cash on cash. Closing MRR: $24.02k
MicroAngel State of the Fund: October 2021
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Alternative Assets is the Motley Fool of…alternative assets. I’ve been a long-time subscriber and highly recommend checking them out. They recently introduced a new asset class: Startups.
While we currently analyze micro-saas and other website opportunities, until now venture & crowdfunded startups have not been part of our mix.
Between AngelList, Republic, WeFunder, StartEngine, SeedInvest, and probably a dozen other platforms, there is certainly no shortage of deals out there.
The fact is, for all of the junk on these platforms (and there is certainly lots of junk), there are also some potential gems hidden in the mix. As always, our goal is to find these gems, bring them to you, and give you our unbiased analysis & recommendation.
And to kick things off, today we’re analyzing a startup called Swapstack — a platform that connects newsletter creators with brands & advertisers.
This first issue of Startup Analysis is free for everyone.
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Common Thread Collective wrote a very exhaustive article on iOS 14 changes and some of the early data they are seeing. It’s actually an article that they update weekly as they get data from their ~200 e-commerce clients. The takeaway is what you would expect, costs are up, ROAS is down.
iOS 14.5 Effect on Facebook Reported ROAS
Pre-iOS Facebook ROAS (Jan.–May): 2.13
Post-iOS Facebook ROAS (June–Present): 1.46
Pre vs Post Facebook ROAS %-change: -31.56%
Facebook Ads, iOS 14 Changes & Ecommerce Data: How Apple’s ATT & IDFA Update Affects Advertising
🧵 Twitter
Great guide for anyone running a local business…
Discussion of IRL multiples that people are seeing in the HVAC space…
DTC is getting more expensive. See a few of the articles I highlighted above…
The good and the bad…
Vendor management-as-a-service…
🤔 Thoughts & Commentary
Discounts
Everyone loves a good deal, amirite? I want to share a few ways I’ve found to get discounts on software, tools, and services that are useful. Some of these require you to join a platform or be a member of an organization.
Silicon Valley Bank - discounts on business tools
Mercury Bank - discounts on business tools
Secret - discounts on a wide variety of software
Trends by The Hustle - discounts from members of the community
Searchfunder - discounts on Pipedrive, DealStats, and other tools for searchers.
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Labor vs. Capital
The clearest cycle in human history is the power of labor vs. capital. We’re clearly in the early innings of wealth redistribution from capital into labor. As an example, WSJ wrote about striking Deere workers rejecting a second contract offer. This rejected offer included an immediate 10% pay hike plus an $8,500 bonus and a 5% raise in 2023, an additional 5% raise in 2025, and 3% bonuses in 2022 and 2024. That’s a 25-35% combined wage and bonus inflation over the next four years that apparently wasn’t enough to satisfy the bargaining power of workers. Maybe not too surprising. If the cooked CPI is +6.2% y/y then real inflation must be +20-30%.
🛠 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.
BizNexus - Deal aggregator, proprietary deal flow, and exit prep.
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.
Deal Flow Scout - peer-to-peer deal flow exchange. Free, open, transparent.
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.