🧐What I Learned Last Week
Week ending Friday September 23, 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
The WSJ recently had an interesting article about a trend that I’ve been talking about for some time - Private Equity firms going after SMBs and family-owned businesses.
Private-equity firms are joining America’s family businesses. The industry that made its name taking private big corporations has shifted its focus to smaller targets, snapping up car washes, pet-food makers and specialized manufacturers, some of which have been family-owned for several generations.
Family businesses hold particular appeal for buyout firms, and they are throwing out the traditional private-equity playbook to attract them. Management is often left intact. Owners keep big stakes. Buyout firms pledge to retain employees and plow more money into the businesses.
Who Will Inherit the Family Business? Often, It’s Private Equity
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Yale School of Management released a study on the work/life balance of a first-time search fund CEO. Important read if you’re transitioning into the role.
On the Nature of Work–Life Integration as a Search Fund CEO
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Ayo Phillips of the Rookie CEO newsletter shares the news that he sold his business. In the newsletter, he shares why he sold the business, the lessons learned, and his next chapter.
One sleepless night, I opened up my notes app and started typing up some lessons. I ended up with 34 in the first 30 minutes. That list continues to expand. here are a few unconventional ones
Entrepreneurship is not some escape hatch for people trying to skirt accountability. Your market, customers and employees will hold you accountable and they are harsher critics that a boss ever will be.
There is nothing wrong with paying for companionship - specifically coaches, therapists etc
"I'm doing it for my family" is a falsehood we sometimes tell ourselves to cover up an addiction driven by ego and a pursuit of someone else's definition of success
A C-level piece of technology beats and A-level one if you have buy in for the former and not for the latter
Working 4 hrs a week is depressing even if you had all the money in the world. You'll lose more sleep doing that than working 100 hrs with purpose.
"Fire quickly" is the BS that people who haven't fired anyone say
Resilience is not required for success. But it a pre-requisite for surviving failure.
70% of the advice you get in influenced by how you present the information
Fragmentation does not mean "ripe for a roll up"
Don't confuse niche novelty with niche profits
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Great post on SaaStr about the challenges of building a SaaS business focused on the SMB space.
Be honest about your churn and report it monthly and honestly. If you hide it or bury it in overall MRR growth numbers, it won’t get addressed. It will burn you somewhere between $5m-$20m ARR if you are growing quickly. Because at some point, growth slows to 100% year-over-year even at the best SaaS companies. And then 3% a month churn cuts your growth in half.
Be relentless about building features that increase retention. Even modest impacts to churn for SMBs can have a huge impact on your business. What features are so valuable that customers don’t just buy — but they stay? I don’t see enough SaaS SMB companies relentlessly talking about the impact of new features on retention. And measuring it.
Get better at onboarding. A lot of churn lurks in poor onboarding. This gets addressed in the enterprise with high levels of staffing. But it rarely gets enough attention with SMBs.
Most SMB SaaS leaders end up as “SML” leaders — customers Small, Medium and Large. At least, don’t run from slightly bigger customers if you start to get some demand.
Be very careful about your CAC and other spend metrics if your NRR is less than 100%. They need to be at the low end of normal. You can burn a ton of cash following the playbook used by folks with 110%, 120%, 140% NRR.
Learn the true churn rate for your competition — and challenge the team to beat it. No matter what, you can do better than the direct competition. Find out. Go ask.
The Challenge with SMB SaaS: High Growth Can Only Mask High Churn For Just So Long
🧵 Twitter
Summary of business acquisition financing options…
Easy money…
The playbook…
You can DIY…
Great rundown of payment terms in an APA…
A few tips on implementing systems in your SMB…
Love this quote. The tax hacks are great too…
How to keep deals alive…
🤔 Thoughts, Events, Other
🛠 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.
The Website Flip - a newsletter that sends content sites for sale to your email inbox. They send deals each Wednesday and Friday.
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.
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.