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.
The Business Inquirer is brought to you by Domain Magnate.
Investing in online businesses can offer strong yields, upside potential and is a non-correlated asset to add to your portfolio. But statistically, beginners are likely to lose money on their first deal.
This is because online businesses are high-risk assets, where, for example, the wrong kind of SEO applied can lead to large drops in organic search traffic after Google algorithm updates.
Domain Magnate has been buying businesses and doing deals for the past 15 years, and have developed their own private deal flow.
They have a weekly newsletter where they offer industry news, podcasts, case studies, and their own off-market deal flow. They also offer investment services that offer a hands-off approach to ownership, such as their buy & manage service and fund (open to accredited investors). Subscribe to learn more.
Iain Paulson of WP Trends writes about all things WordPress. In the latest issue, he discusses the future of WordPress companies and the industry consolidation taking place.
Since I last emailed (yes, it's been a while) things have gotten even crazier in the WordPress acquisition space. We've seen some big ones:
Yoast bought by NewfoldDigital
LearnDash bought by StellarWP (LiquidWeb)
Sandhills Dev (EDD, AffiliateWP etc) bought by Awesome Motive
Pagely bought by GoDaddy
Modern Tribe (WordPress agency) bought LiquidWeb
There's been a lot of chatter in the community about how the market is being consolidated rapidly, moving towards an ecosystem that's dominated by 4-5 big players, and it's generally viewed as a bad thing.
At the bottom of the newsletter, he talks about a recent Flippa listing that turned out to be fake. A quick reminder - most marketplaces do not vet their listings. Regardless of what they say, there is minimal vetting. Do your due diligence.
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John Tough writes a short article about how sales efficiency is a big driver of valuations. He mainly talks about public companies but it’s something to think about for private valuations as well.
This week I saw a great report from Guggenheim on the correlation between valuations and growth efficiency.
On page 1, we find that sales efficiency, specifically the magic number (the ratio of new revenue generated to Sales & Marketing spend) has a strong correlation to valuation. The more efficient the sales motion (higher the magic number), the greater the valuation.
Not sure if it’s a coincidence but Bloom Equity Partners wrote about this exact same thing last week.
As an investor ensuring that a SaaS co has (or will have in the near future) sales efficiency is critical for valuing an investment. Below are several related metrics that can be analyzed to help give a better picture of sales efficiency:
CAC (Customer Acquisition Cost): CAC encompasses all the sales and marketing expenses that a company has to incur in order to gain new customers.
CAC is the baseline metric that is calculated to ensure sales efficiency. This figure is worthless if not analyzed against other metrics which will give a better understanding of sales efficiency. This will be touched upon later in this section.
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FE International writes about the 9 things you need to know when starting an e-commerce business. A pretty good read that’s applicable even if you’re already running an e-commerce business.
With the help of Arthur Bradley, an e-commerce entrepreneur FE International recently worked with, we have pulled together a list of key considerations for e-commerce entrepreneurs at any level. Bradley is also an author and NASA Engineer and has extensive experience in the e-commerce space.
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A member of the Trends Facebook group posted two great checklists to help SaaS and e-commerce founders prepare for Black Friday. Too late to implement these today but you can save them and use them next year.
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OpenView has released their fifth annual Financial & Operating Benchmarks Survey that’s a deep dive into successful SaaS companies.
This year’s report revealed surprising insights about the distribution and flows of capital within the public B2B SaaS landscape, what investors are rewarding in company performance, and the prevalence of product-led growth (PLG). According to the findings, the best-performing companies are driving outsized spending on R&D, which ties directly to PLG. In fact, PLG companies generate 1.7x more gross profit for every dollar of sales and product spent.
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After writing multiple articles demonstrating how COVID accelerated e-commerce penetration, Marketplace Pulse now says - nope, it didn’t.
The lockdowns of 2020 led to a lot of forced e-commerce and online grocery adoption, and a lot of growth was pulled forward. Online spending in the second quarter of 2020 was up more than 40%, the fastest growth in decades. But as offline retail recovers, the e-commerce role in U.S. retail seems to be falling back.
Seeing the same thing at DueDilio. A lot of demand to close deals by EOY…
Having an edge is key in anything you do…
Lessons from owning an ice distribution company…
Good take but IRL it’s not as black and white…
Codie Sanchez 💥 @Codie_SanchezWhat is the best investment you can make? In my opinion, it's cash-flowing businesses that most people think are boring
As they say - you name the price, I set the terms…
Some good cold e-mail pointers in this…
🤔 Thoughts & Commentary
Boston Happy Hour 🍻
If you’re based in Boston & surrounding areas, join me and a few others in the SMB/entrepreneurship space for networking and drinks next week.
Grab a free ticket here: Boston Small Biz Meetup Tickets, Thu, Dec 2, 2021 at 4:00 PM | Eventbrite
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Twitter Open for Business
I recently came across the announcement that Twitter has opened back their API. Early Twitter had lots of APIs, and it closed most of them down in an attempt to get control of the UX and the ad model. Now, it says it will open things back up. I’m excited to see what startups evolve from this. I talked about this previously but I’ll say it again - no one is doing Twitter content curation properly. I’d love to see some sort of NLP driven Twitter curation tool.
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BizNexus is a business marketplace that has proprietary deal flow, an aggregator, and a business exit prep service. They’re based here in Boston. They’re offering 60% off their annual premium subscription to the marketplace. Offer is valid until EOD Sunday OR until the first 50 redemptions, whichever comes first.
Discount Code: “BLACKFRIDAY”
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I want to provide a bit more detail about the sponsor of today’s newsletter - Domain Magnate.
We are a Private Equity firm with a 15-year history of buying, optimizing, and selling profitable online businesses. Over the years, we have built an ecosystem made up of hundreds of deals under our portfolio and a valuable network of connections. Our team has facilitated over 300+ successful deals and helped hundreds of sellers exit their businesses fast. Our investors get access to our decades of expertise and high-quality investment deals from our private network.
We offer the following services:
Fund — Opportunity to invest into a diversified basket of online businesses – for accredited investors only.
Group Buys — We have several exclusive and very promising deals in mid 6 figures to low 7 figures and planning to organize group buys.
Buy & Manage — Our Business Buying and Management Service is an opportunity for you to partner with a well-established player in the market and benefit from our expertise, network, and systems.
🛠 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 - Proprietary deal flow, deal aggregator, 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.