🧐What I Learned Last Week

Week ending Friday July 29, 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.

Let’s connect: LinkedIn, Twitter, Facebook Group

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Hello Friends!

This issue of The Business Inquirer is brought to you by DueDilio.

DueDilio is a leading online marketplace focused on M&A due diligence.

We connect business buyers, sellers, intermediaries, and private investors with pre-vetted due diligence service providers.

Our large and growing network of verified independent professionals, boutique and mid-size firms, and subject-matter experts specialize in finance, technology, legal, commercial, and other key areas of business diligence.

Submit your project. Review qualified proposals. Hire service provider.

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📰 Articles

Failory published an article providing tips on how to estimate your total addressable market (TAM). Important for entrepreneurs but also applicable to any business owner.

Estimating market size is one of the most important tasks that any entrepreneur needs to perform early on in the lifetime of their startup. 

In fact, you should estimate market size when you are evaluating any startup idea — before you even start working on it — as this will help you determine if going after a specific market with a product or service you have an idea for is even worth it. 

How to Estimate Market Size (TAM) in 2022

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Entrepreneur and investor Jay Vasantharajah published a summary & key takeaways from a recent podcast episode with TransDigm CEO, Nick Howley. TransDigm is a good case study of what happens when PE meets SMB.

A few key themes really stood out – TransDigm’s core values, culture, compensation structure, and acquisition methodology. I will delve into each theme and provide insight into how it can be applied to any business.

Lessons From Nick Howley – CEO of TransDigm

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BizBuySell needs no introduction. They recently released their insight report for 2Q 2022. Must read.

• Prices reduced to accommodate buyer cost of capital

• Sellers are more realistic about valuation amid economic uncertainty

• Rising costs cut profits, labor pains continue

• Services and “recession-proof” businesses remain popular among buyers

• Rate hikes headline small business market outlook

BizBuySell Insight Report

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A Searchfunder member posted a great story highlighting the importance of deep due diligence. Business sellers and brokers always present a rosy picture until you dig into the business. Let me know if you can’t access the post.

So I review MSP/MSSP deals on a semi-regular basis, and typically they have a few warts but it's not all bad. However, I had occasion to look at one recently that was really the worst I've seen in awhile and thought I'd present it here as a great example of a bad deal that looks good if you don't know anything about technology.

A case study in what not to acquire in the technology space

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Daily Consumer newsletter has a great (long) summary of what is going on in e-commerce and the macro environment the consumer is facing. Great read to learn about the trends.

Daily Consumer #30 - The Commerce World Is Grappling With Uncertainty

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Cowboy Ventures shares tips from its network of seasoned CFOs on how to navigate the current downturn.

• Downturn Lesson #1: Cash is king

• Downturn Lesson #2: Companies with good fundamentals can take market share in a downturn

• Downturn Lesson #3: Create a path to profitability & navigate using a “margin profile”

• Downturn Lesson #4: Team members take cues from leadership, especially in turbulent times

• Downturn Lesson #5: The impact of attrition is worse than you think

• Downturn Lesson #6: Assess your customer base

• Downturn Lesson #7: Look for “Swiss Army Knife” people

• Downturn Lesson #8: Be direct, deep, and swift with layoffs

• Downturn Lesson #9: Communicate regularly

• Downturn Lesson #10: Surround yourself with the right people, especially at the board and leadership levels

Advice from Seasoned CFOs on Navigating a Downturn

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🧵 Twitter

This is a wild story…

Shaan Puri @ShaanVP

I have a new hero and her name is Sarah Moore. • Under 30 years old • Had no money, no experience. Biggest asset was her car (a RAV4) • Spent 1 year hunting through 100,000+ businesses to find ONE to buy • Bought a $20M+ business called “Eggcartons.com”, all debt

HoldCoConf is to SMB Twitter what Woodstock was to hippies. Here are just a few highlights of this event…

Stephen Olmon @stephenolmon

For anyone interested in @HoldCoConf I'll be adding takeaways / soundbites in real-time from both 1-on-1 conversations and the main sessions etc Follow along below 👇

Highlighting some helpful tools…

Joe Speiser ⚡️ @jspeiser

The dirty inside secret most entrepreneurs don't know 10 spy tools I use to beg, borrow and steal my way to saas millions

Due diligence tips from someone who’s been there and done it…

Sieva Kozinsky @SievaKozinsky

Buying a business can be life changing. But how do you know that you’re not acquiring a bad business? A guide on due diligence that will help you identify GREAT businesses to acquire:

A good reminder of the importance of doing business with quality individuals…

Mike Botkin @MikeBotkin_

You can mitigate A LOT of risk by purchasing companies from a good person. Forget the financials/industry/operations, etc. If the owner is a bad dude, move on. We’ve made (4) acquisitions in 10 months. Ask me why I’ll only ever buy from a good guy/family.

Due diligence doesn’t have to uncover problems. Sometimes it uncovers positive surprises…

Clint Fiore 🛩 DM for Biz Deals @ClintFiore

Any Buyer have a story of finding a surprise in Due Diligence or post-closing that made your deal BETTER than you thought it was going to be?

Already well known but this is a pretty good summary of the issues caused by iOS 14 privacy changes…

Alex Gurevich @alex_gurevich

1) I'm still surprised by the lack of public discourse around the impacts of @Apple's iOS 14 changes - all in the name of privacy - that are leading to massive adverse effects to SMBs and innovative companies everywhere. They might bear as much blame for a recession as inflation.

Good discussion on the pros and cons of seller financing…

Bruce Marks @sbabmarks

No one liners here, no hooks No I hope this gets me 800 new followers and this thread goes viral Just honest feedback on a question someone asked me to address for the SMB Community “saw a listing where sellers offering a 10% note. Would you be able to elaborate in a 🧵

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🤔 Thoughts, Events, Other

DueDilio Redesign
For those who are unaware, I am the founder of DueDilio. We’re an online marketplace that connects business buyers, sellers, intermediaries, and private investors with pre-vetted due diligence service providers.

I’ve been going through a website redesign for the last few months. It’s taken a lot longer than expected. There are still a few kinks to work out but I am happy to say that the new website is launched and ready.

I invite you to visit the new website and poke around. The Knowledge Center has a lot of great articles, document templates, and due diligence checklists.

I would also appreciate any feedback on the new website.

• Is it easy to navigate?

• Is it intuitive?

• Does it answer the right questions?

• Is it clear what DueDilio does and who it serves?

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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.

Cerebro Capital - Cerebro has a network of 1,500+ lenders who can provide debt financing for your acquisition, refi, etc. $500k minimum.

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

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.

BizNexus - Proprietary deal flow, deal aggregator, and exit prep. Local Boston company and I consider the founder (Adam Ray) a friend.

PrivSource - Deal aggregator for lower and middle-market listings.

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.

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 VoIP phone solution that I have found. I use this for DueDilio. You get a $20 credit if you sign-up.

Eloquens - Knowledge marketplace. I’ve purchased a few templates from them.

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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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.