What I Learned Last Week 10.20.2023
Curating the best M&A, SMB, and EtA-related content since 2020.
Hello Friends!
In this week’s issue of What I Learned Last Week:
📰 Articles
🧵 Best of X (Twitter)
🗓️ Events
⚒️ Tools & Resources
💡 How I Can Help
This issue of The Business Inquirer is sponsored by Smash.vc
Buying a business with the SBA?
Would having a capital partner help?
At Smash.vc, they do two things:
Buy minority stakes in existing small businesses.
Partner with entrepreneurs trying to acquire new ones.
If you're actively looking to buy a cash-flowing business using an SBA loan, hit them up if you'd like a partner.
They contribute capital, give advice, or help with growth when asked... but stay out of the way the rest of the time.
Silent partners there to help when necessary, nothing more.
If interested👉 go say hi.
📰 Articles
Strategies to De-risk, Eliminate, and Avoid Customer Concentration
Josh Schultz discusses strategies to mitigate customer concentration by suggesting creating a Resource Plan, securing long-term contracts, adjusting pricing, and potentially turning down business or offering discounts to diversify the customer base, all aimed at fostering a more stable and growth-oriented business environment.
Mitigating Customer Concentration:
If you already have it:
Resource Plan (MVC): Craft a plan focusing on essential resources to keep your business afloat.
Long-Term Contracts: Secure long-term contracts with major clients to reduce the risk of losing them.
Raise Prices on Non-Concentration Business: Increase prices on other products/services to reduce concentration.
Raise Prices on Concentrated Business: Negotiate higher prices with major clients for challenging or low-margin products/services.
If you're about to get it:
Turn Business Down: Declining short-term business can prevent customer concentration issues.
Discounts: Offer discounts to other customers to encourage more business and diversify your customer base
If you’re acquiring a business with it:
Customer Agreement on Sale: During due diligence, discuss the risks with the client, offering a locked-in price for a 3 to 5-year minimum volume agreement to reduce short-term concentration risk.
Add Risk Premium to Price: Evaluate the acquisition price by factoring in the concentration risk, potentially assuming the large customer contributes only 15% of the value, not paying for revenue share exceeding that threshold
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Are Hold Cos the Future?
Alan of The New Rules writes an excellent post about the trend of Permanent Equity/HoldCos, which are private entities aiming to acquire and hold traditional, profitable businesses long-term, contrasting this with the Private Equity model which often involves debt and selling acquired companies within a shorter timeframe. Alan appreciates the stability and long-term compounding benefits of Permanent Equity but also explores challenges like scalability and competitive pricing in buying larger companies.
Highly recommend checking this one out.
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Five Hot Takes Every Franchise Buyer Should Read
Key points include:
Entrepreneur Franchise 500 Not Genuine: The ranking is influenced by payments from brands, not solely performance or quality.
Most Franchises Aren’t Worth It: Many franchises lack financial transparency, and many don't offer a clear ROI path.
The Vibe Matters: Consider the cultural and lifestyle shift when moving from corporate to franchise environments.
Avoid Franchise Agreements With Liquidated Damages: Such clauses can be detrimental, especially for struggling franchisees.
Chick-Fil-A is An Amazing Opportunity: Despite criticisms, Chick-Fil-A's franchise model is deemed a good opportunity.
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Post-Acquisition Growth Strategies
The blog post on XO Capital outlines various strategies for growth post-acquisition, focusing on leveraging existing strengths and exploring new growth channels. Some key strategies include:
Leveraging Existing Growth Channels:
SEO optimization and content creation.
Improving paid ads and social media presence.
Enhancing affiliate programs.
Discovering New Growth Channels: Diversifying by finding additional channels that resonate with potential customers.
Testing and Refinement: Crafting detailed hypotheses, launching tests, analyzing results, and making necessary refinements.
Identifying Low-Hanging Fruits: Spotting and capitalizing on glaring growth opportunities post-acquisition like improving social media presence and email onboarding.
Providing Value: Showcasing expertise freely to build trust and authority, encouraging potential customers to make purchases when ready
🧵 Best of X (Twitter)
Great overview of various fund structures…
Don’t overcomplicate the LOI…
Love this post about playing in the right sandbox…
Insights on home services business…
Detailed thread on infusing technology into an old business…
The market rate of a seller note…
🗓️ Events
Austin SMB Meetup (Sept 28) - Austin, TX
The Self-Funded Search Conference (Sept 30 - Oct 1) - Dallas, TX
Buying a Small Business 101 (Oct 26) - Online
Booth Kellogg EtA Conference (Nov 1) - Chicago, IL
Main Street Summit (Nov 8-9) - Columbia, MS
Capital Camp (May 21-24) - Columbia, MO
How did you like this issue of the newsletter?
⚒️Tools & Resources
I want to share some tools & resources that I have found helpful. Please note that some of these are paid sponsors of the newsletter.
PrivSource - PrivSource helps you source deals and connect with transaction partners without ever paying a success fee.
X5 Deals - Proprietary deal sourcing. They do the outreach and send you relevant, actionable deals directly into your inbox.
Rejigg - Platform that connects searchers/investors directly with owners of off-market small businesses ($500k - $10m revenue) considering exits. All deals are sourced by the Rejigg team. Their team adds 7-10 new deals each week
Acquisition Lab - The Premier Accelerator for Buying a Business created by Walker Deibel, Author of Buy Then Build: How Acquisition Entrepreneurs Outsmart the Start-up Game. They combine world-class education, a vetted community, extensive group coaching, and resources to provide the first do-it-with-you buy-side advisory service.
Smash.vc - Whether you're looking to sell minority stakes in your business to take some chips off the table, looking for a partner to acquire an asset, or needing capital to complete an SBA deal, we'd love to chat with you.
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.
Search Fund Coalition - community for the Entrepreneurship Through Acquisition ecosystem. Monthly events and meetups for acquisition entrepreneurs.
Deal Sourcing Guide - a comprehensive list of business marketplaces, brokers, deal origination firms, and more.
💡 How I Can Help
Whenever you’re ready, here are a few ways for us to work together…
Schedule 1:1 consulting on deal sourcing, due diligence, M&A ecosystem, newsletters, entrepreneurship, or anything else you’d like to discuss
Promote your brand to business buyers, investors, SMB owners, and other M&A participants by sponsoring this newsletter
Assemble your M&A deal team with DueDilio
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