🧐 What I Learned Last Week
Week ending Friday January 14, 2022
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
Twitter’s most famous (or infamous) anonymous attorney has published Session 9 of their Legal M&A Masterclass. This latest installment was guest written by…🥁🥁…me and talks about the topic of due diligence.
As a buyer, you will use the information gathered during the due diligence process to negotiate contractual protections, adjust the purchase price (or valuation), and provide information to lenders or other representatives.
The goals of due diligence are typically the following:
Understand the target business
Understand how the target business would integrate with existing businesses, if any
Identify issues that would affect valuation
Understand the risks associated with the target business in order to negotiate and draft the purchase agreement (including reps & warranties and indemnification)
Identify any events that need to occur prior to closing (typically referred to as “conditions to closing”)
Identify any actions that need to occur (or not occur) prior to or after closing (typically referred to as “covenants”)
SMB Twitter Legal M&A Masterclass - Session #9 (w/ Special Guest!)
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Patrick Dichter is an SMB growth expert and just closed an acquisition. He has an excellent blog that I recommend you check out. One of the latest articles talks about the importance of continuously monitoring your financials and not simply waiting until tax time.
Too many owners really only look at their numbers around tax time. Or they have bad bookkeeping that’s months behind and inaccurate. And even if their books are solid, that’s still a 30-60 day LAGGING indicator.
But a few months of bad margin, slow production, or poor cash flow can put you in a world of hurt.
LEADING indicators to the rescue! Frameworks such as Traction/EOS, Four Disciplines of Execution, OKRs, etc all emphasize the importance.
Why You Need Leading Indicators in SMBs
Patrick also just purchased an accounting firm and he discusses the “why and how” in the latest blog post.
Why I Bought a Bookkeeping Company
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Barlow & Williams is a law firm that has a focus on SMB M&A. They published an article on how to think about purchase price adjustments in the context of an asset purchase agreement.
The first thing most people look for in an asset purchase agreement is the total purchase price. This is the headline number, but in many transactions this number is subject to post-closing adjustments. There can be earn-out provisions that vary based on how the business performs in the months or years after closing, there can be indemnification claims that reduce the amount the seller receives from any holdback, and there can be purchase price adjustments based on working capital. This article describes the purpose and mechanics of working capital purchase price adjustments, as many first-time sellers are unfamiliar with them and the effect they can have on the overall deal.
Purchase Price Adjustments in SaaS and E-Commerce Asset Purchase Agreements
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I received an invite to check out a new magazine that just launched - Acquisition Aficionado. Not sure what to make of it yet but I think it has potential.
Acquisition Aficionado Magazine speaks to acquisition entrepreneurs, wherever they are on their business acquisition journey. Our magazine features in-depth interviews and stories from leading experts in the business acquisition industry.
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Jon Stoddard of Stack Acquisitions is hosting another webinar about sourcing deal flow using LinkedIn. I attended the first webinar he hosted and it exceeded my expectations. There are very few webinars I’ve found valuable and this is one of them. Tons of value here and it’s free.
This training you will Learn how to increase your acquisition deal flow using LinkedIn!
We will show you How and Why you need to...
1. Create a great profile
2. Get on LinkedIn Sales Navigator Now
3. Launch a new company
4. Post Classified Ads in your feed
5. Post in, Network in Groups
6. Create Content Regularly
7. Follow, Like, Comment other people
8. Getting on Podcasts
9. And finally, Create an Event to Share Value
How to Use LinkedIn for Off - Market Acquisition Deal Flow
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OpenView published a guide on understanding and calculating your Customer Acquisition Cost (CAC). It’s a good quick read.
As the old adage goes, you have to spend money to make money – SaaS businesses are no exception. Arguably the most important spend decision SaaS operators make is focused on acquiring customers. Collectively, these expenses are referred to as Customer Acquisition Costs, or CAC for short.
CAC encompasses all of the sales and marketing costs that a business has to shell out to land a single new customer (calculated as total sales & marketing expense in a period / total customers acquired in a period). This includes expenses like ad spend, creative development, and commissions along with more substantial overhead expenses such as salaries and rent. While CAC is accepted as a cost of doing business (you have to spend money to make money), it should not be a blank check for your sales & marketing team.
CAC Payback Basics: What It Is, How to Calculate It and Why It Matters
On the same topic of CAC - The SaaS CFO hosted a webinar on how to calculate your CAC. You can find the replay here.
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Mercury Bank is hosting a webinar with Capchase about the various financing options available to SaaS founders outside of equity. I don’t think you need to be a client to register.
Join Immad Akhund (CEO & co-founder, Mercury), Miguel Fernández (CEO & co-founder, Capchase), and Jason Garcia (Head of Capital, Mercury) at our virtual event Growth funding for SaaS founders. They’ll share insights on choosing financing options outside of equity, balancing different types of funding with traditional venture capital, and scaling—no matter how your startup raises money.
Growth funding for SaaS founders
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There’s a good thread on Indie Hackers about cognitive biases to keep in mind when marketing and pricing your product/service.
6 Cognitive biases in marketing & copywriting to help you make a few extra bucks in 2022
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Andrew Swiller was on the Domain Magnate podcast to discuss how he acquired an off-market SaaS business. Great episode. I’m still waiting on Andrew to reply to my e-mail with his Barcelona recommendations 😉
This week, Michael speaks with Barcelona-based entrepreneur Andrew Swiler who just acquired a $2.5M private SaaS business. They discuss how Andrew was able to finance the American-based business while living in Spain.
Also, the two discuss numerous other opportunities in the online business space, including content sites in other languages.
EP50: HOW ANDREW SWILER ACQUIRED A $2.5M PRIVATE SAAS BUSINESS
🧵 Twitter
Good lessons on fundraising…
The barriers to angel investing have dropped significantly. Here’s a good thread on how to find your first deal flow…
Great thread on how to lower your shipping costs…
Hopefully, it’ll become easier to get a mortgage for the self-employed. For now, here’s a good explanation of why it’s difficult…
Yes, Search Funds can and should go after software deals…
Hire an advisor or sell the business yourself. You shouldn’t do both…
The CIO Survey is a great way to measure the pulse of the IT market…
Really great summary of key lessons of Build Once, Sell Twice…
🤔 Thoughts & Commentary
🛠 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.
Cerebro Capital - Cerebro has a network of 1,500+ lenders who can provide debt financing for your acquisition, refi, etc. $500k minimum.
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.
Deal Flow Scout - Peer-to-peer deal flow exchange. Free, open, transparent.
Deal Sourcing Guide - A directory I put together of online marketplaces, brokers, DFY deal flow, and more.
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.