🧐 What I Learned Last Week

Curated M&A, SMB, and EtA-related content for week ending 3.17.23

Hello Friends!

This issue of What I Learned Last Week is brought to you by DueDilio.

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📰 Articles

Determine If Amazon Listing Conversion Rate Is Bad (And How To Fix)

Good read from Import Dojo if you’re looking at an Amazon business.

Here are actionable takeaways that you can apply to your business today:

1. Every 3 months, benchmark your conversion rate against competitors and determine exactly where you’re falling short

2. Use Search Query Performance regularly to improve your listing SEO and help improve your optimization efforts

3. After evaluating your conversion rate, make a plan to improve on it before your next evaluation.

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The Top 10 Factors to Consider When Buying an Online Business

Some quick due diligence tips from Empire Flippers.

Set yourself some filtering criteria that a business needs to meet before you go further forward with your investigations.

1. Financial History: look for spikes and dips and ask why they happened.

2. Traffic: assess the sources. Check for black-hat SEO or ad violations.
3. Customer Base: how much and how often customers purchase from the business.
4. Brand Reputation: check reviews where the business operates.
5. Competition: see how the business fits into the market—does it have a USP?
6. Operations: see how operations affect the service offered by the business. 
7. Growth Potential: look for scaling opportunities in operations and marketing.
8. Price: valuation formula = monthly profit X multiple (based on biz model)
9. Pros and Cons: of buying a business. Skip the startup phase!
10. Where to Buy: privately or broker — a broker is safer.

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Are You Selling to the Wrong Customers?

Mineola Search Partners tackles an important question for software CEOs - should you be selling your product to SMBs or Enterprise clients?

Among the countless strategic decisions that software CEOs must make, the decision of which end markets to serve doesn’t seem to command the time, attention, and level of thoughtfulness that it probably should. However, in my experience, being thoughtful about these two fundamental questions is likely time well spent.

Though a company can achieve success selling into either SMBs or enterprises, be careful about moving from one into the other, especially if you’re currently selling into enterprises but wish to expand into SMBs.

Similarly, though some software companies successfully sell into multiple end markets simultaneously, it is my opinion that, in the majority of cases, small and perpetually resource-constrained software companies are likely better off focusing all of their efforts selling into a single industry vertical as opposed to diluting those efforts across multiple ones.

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Red Forest Capital - March 2023

Always a great read, Red Forst Capital released its March 2023 newsletter. Too many links and content for me to share here. Go check out the post on their website.

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🧵 Best of Twitter

When’s the right time to tell clients you just purchased the business?

Saumil Jariwala - Search Fund Investor @FetaFund

Congrats! You bought an SMB. When do you tell customers? At Booth, they say as LATE as possible. If they're happy and it's irrelevant, why tell them? Exceptions: - Asset sale - Changing DBA name - Retiring seller is customer point of contact - Contractual obligation to notify

I’m seeing & hearing a lot of these same trends. Good summary…

Josh Levine @levinejm

Interesting moment for the #smb acquisitions space: 1) high interest rates making debt less affordable, as @EndresenHeather implied yesterday 2) expectations for increased seller volume as people who held off during the pandemic more seriously consider retirement

Simple KPIs but important to track. I’m going to be implementing this at DueDilio…

Michael Girdley @girdley

Financial statements have a big problem: They tell you about your company's past. But... How do you predict the future of your business? You need a KPI (Key Performance Indicators) system. Here’s how I do them.

Reach out to @Dave_Gilbert if you’re in the market for fencing or accounting firms…

Dave @Dave__Gilbert

I’ve got a few off SMB market deals. Who’s looking at Fence companies? - $13M revenue - $2.5M EBITDA - $5M real estate Southern Company #SMB A few smaller <$700k EBITDA accounting firms off market too. DM me.

There’s still a lot of price discovery happening in the market…

YourDealTeam @YourDealTeam

Have had similar convos with SMB brokers. The gap in price expectations has never been larger. Everyone is asking for 5x TTM, when the business grew from $400k EBITDA to $1.6M in the past 3 years 💆🏻‍♂️ https://t.co/BCpmt46WB1

StripMallGuy @realEstateTrent

Every single listing broker I've spoken to this week has told me they're frustrated with their seller's unrealistic pricing expectations. Instead of telling me - tell them.

Keeping it simple…

SMB Kapital @SMBkapital

1/ Are you ready to take your entrepreneurial game to the next level? Buying a business could be the perfect opportunity to accelerate your growth and achieve your dreams. Here is a extremely simplified guide!

Don’t forget this during due diligence…🤯🤯🤯

Nathan Lenahan | Changing lives through the trades @n8lenahan

Latest lesson from acquiring a company: Just because an owner thinks they own their digital asset (ex. Domain) doesn’t mean they actually do. We just found out 60 days post close that the sellers don’t own their main URL or phone number on their website…

Not SMB related but this is how you develop a thesis…

Matt Lasky @MattLasky

Ever wonder about the $460 Billion industry of medical office buildings? Chances are you're going to be spending more time at them as you fight the war against time. A thread on trends in the asset class, why we're BULLISH, and how well it holds up in recessions:

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🤔 Thoughts, Events, Other

Sponsor this Newsletter

My startup DueDilio has been the main sponsor of this newsletter for some time. I’d like to get a few other relevant newsletter sponsors on board.

Please reach out if you’re interested in sponsorship opportunities for this newsletter.

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Endurance Ventures Shareholder Meeting

Xavier Helgesen @XavierHelgesen

We are holding our Shareholders’ Summit in Miami April 26-28. If the Berkshire annual meeting is Woodstock for capitalists, then ours is Coachella for capitalists. @SahilBloom is joining. I always save a few spots for new faces & Twitter serendipity. Application below:

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⚒️ Tools & Resources

I want to share some tools & resources that I have found helpful. Please note that some of these may contain affiliate links. This means that I may receive compensation if you sign-up and use them.

PrivSource - PrivSource helps you source deals and connect with transaction partners without ever paying a success fee.

BizNexus - Marketplace + off-market origination in one platform. The marketplace averages about 10k active listings & pre-CIM opportunities, and the off-market origination focuses on data & multi-channel. Local Boston company and I consider the founder (Adam Ray) a friend.

X5 Deals - Proprietary deal sourcing. They do the outreach and send you relevant, actionable deals directly into your inbox.

Import Dojo - a newsletter that sends eCommerce and Amazon FBA businesses for sale to your email inbox. They send deals each Wednesday at 9:00 AM CST.

Kumo - Find every deal in one complete platform. Spend less time sourcing deals and more time closing them. Kumo aggregates 180K+ business listings into one easy-to-use platform.

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.

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.

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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.