Late and Great Prep for Exiting + Buy Outs
Topics: Startups, Small Business, Fundings, Sales, Finance, Banks, Mergers
I’ve found an event to attend that is SUPER early in the morning. There are never events in this city so early - so let’s see waht it’s about. It seems to be about prepping your buisiness to be bought. I’ve attended events on this topic before, and its one of those that absolutely is worth my time. With my ambition and passion for finance, I love to learn this stuff cause you never know if it’ll come in handy in the future.
Why Attend: Free breakfast, good location, and maybe networking. Plus, there are so many events I’ve attended over the years that are really helping me be a decent intern-leader/founder/CEO in the present, so I think all of this compounds and is well worth my time. I’m excited to hear what they have to say, though my expectations are a bit low. Just cause often times finance-focused events aren’t the best IMO. Not MOASS-y/retail-investor vibey enough. FIGHT FOR A BETTER FUTURE!! NOT JUST A QUICK PAYOUT TO HOLDING COMPANIESSSS
Photo Collage + Commentary:
Notes from the Event:
Late but great
Interesting talk already
Talking about okay…
The bigger skill set is around data models. If a company is in your category, whats your EBITA and how do you compare? Data is opaque.
How mucch do other companies sell for? No one knows. But in the banking community, you see what you see.
I sneezed and was generously blessed by the woman next to me. She has a nice smile and vibe.
In your category, what are your companies with this EBITA selling?
If you’re the single compannyin this vertical, we can’t tell you how much it will sell for. But once you have 10 companies we can.
Now may be the time to sell your AI company cause it’s worth more than it’ll ever be worth in the future. You have 4 months left.
AI can’t replace community.
The guy is being interviewed by another guy. I’m actually surprised with how many people are here.
Like 32 people - here at 8am!
When you go to sell, the most surprising things are a bunch of error messages you can get. Customer concentration is a great topic.
If you have customer concentration more than 40%, it’s a structural change in the deal if you sell, not a pricing change.
25% will be a structural and probably a price change
15% is a red flag
IDK what this means
Work now to diversify your customer segment.
The buyer wants to know the company can be bought without you (idk)
One company in town, teh founder is mentally processing the fact that they don’t k’now they’re going to make the same cash as before. Too far away for me to kick.
We got back to the hotel and I told him. We’re done.
He thought they were loved
Then they sent an email to reschedule, then went dark, and the deal got kicked sideways.
But if you listen well in a negotiation, you can drive the value of the deal up.
Mergers and acquisitions can be a huge distraction taking so much energy and time. How do you maintain business and keep working?
- figure out who will be in teh core team to walk wit you through the process?
If you have a simple capatable with just you and your co-founder, it’ll be super easy. But if you had several rounds off seeding, theres more. If there are two rounds of investors before shareholders, tehy’re doing the math in their head until you do it for them.
Now it’s audience questions.
How do patents fit in?
Patents, trade secrets, etc - they are parallel to revenue. Revenue, EBITA, and assets.
Without revenue, tehy’re a bit like day-old donuts
Naked asset transfer has decreasing value overtime. You wanna sell them on the uptick.
This guy talks so businessy. My bagel is super good too. Jalapeño cream cheese with a sea salt bagel.
Question: is there a correlation been the exit amount and how difficult it is to sell? 5M vs 15M, does this add more time or difficulty to get it done?
Yeah, there’s a bit of correlation. Peopel who write big checks don’t write small checks.
Some buyers do hundreds of transactions a year and. Try to fill their product portfolio, buying 4 million tools at a time.
Thisguy on stage is talking about how he was on a panel recently and it makes me think of yesterday, a guy I was talking to was stunned I’d never been an on stage speaker before. BUT HE WAS PLANNING AN EVENT AND LOOKING FORR SPEAKERS FOR SOMTEHING ELSE. AND HE DIDINT INVITE ME. I’m thinking - well, wahtever makes you not want to have me on stage (for an event on GAMES and EDUCATION!?) thats why. Hahaha.
Okay btw the event I went to last night I was talking about all my interns and they were like, “uh, is that legal?” And then I looked into it - and I’m in luck!!! Everyone is legal. But tehy need to either be students, recent graduates, non-US residents, OR collaborators. Thats everyone I’m working with so far. That’s good.
This guy speaking now is tough to keep up with. And my hands are cold from traveling here by bike. BTW I just wanna say that I awoke up at 8 (naturally, lately I’m super NOT into using alarm clocks. Acutally, I haven’t used one in almost a year or more. Its liek my one life rule. I know I sound spoiled, but I’m on food stamps too hahah. So it’s not like I’m living this super luxurious life with no alarm clock. But I’m building my dream life every day. You know? And one dream is to dream). So, I’m proud of myself cause I woke up at about 8 (this event starts at 8) and then got the bus within 8 minutes - still figured out an outfit I was happy with, like rolled out of bed, cute outfit, on the bus - all within 8 minutes. And then got on the train within seconds of getting to the station -a nd then realized I could cut 20+ minutes off my time if I bike there from one station. SO, I used a rentable bike and got here in under an hour. I love cities hahaha. I love being a city girl!!
Though… lately I am a little sick of my “botcotting pants” situation, but thats the point of it. You gotta suck it up and put effort into outfits!!! That’s the point.
Solo founders: if you’re building a product and AI is your co-founder, sometime in the non-distant future, you’ll see that AI is a founder and worth 1B. AI can do stuff we’ve never seen before.
Tech is super hot right now: you can automate so much to Make the businesses operate efficiently.
This makes me really wanna get
Typically bankers take 2.5-3.5% on transaction fees. Sometimes with a minimum and typically always with a retainer. $10,000/month. It’s a question for the banker to see if you’re serious about felling or not. Incase the founder decides not to sell at hte last minutes
BTW I’m getting distracted. I realize after that guy talked about automating so much with AI… Iw ant to get AI interns. AI expert interns. So I’m making a quick job post.
Service vs. physical/virtual product selling results?
Multiples are quite staggering deepening on which category
Home services high
CPA high (you see this in the rollup stage)
Most midsize CPA have been rolled up into bigger brands.
A few 300-400 person firms still exist
Most midsize CPA don’t have profit by category. They take discounts with day rates, per customer.
Profitability by customer type, stuff you need to know to sell… most accounting firms don’t have the data. That’s crazy, they’re accountants.
Service and blended businesses, there is multiple if ythey’re strictly int eh service business.
The questions to drive the valuation is access to people easily.
Do you acquire businesses and as a buyer do you say how much can you acquire organically new people?
Or do you go buy a company that looks liek that in different geography?
Savings in the backend and leverage the brand?
Tech space, you’re buying on future versus current 12-month revenue.
Thoughts on carve-outs, spin-outs, royalties, and earn-out
Earn-out = paid over milestones. Initial cash goes to other shareholders. Founder and team get paid based on future milestones
Carve out = selling part of the business and keep/spin other parts
Times where 95% of revenue is interesting and then 5% is interesting to one buyer.
Makes me think of RC loving buy buy baby out of bBBY
Dude I love paying attention to the financial world in my own way!!!! I literally love it and I love my financial literacy journey.
I just believe in myself so much and I love how much I’m spending time learning without having much use for it. Lol all the time if eel like Kelly Tutors is right there next to AMC and GameStop and Flexport hahahaha. My simple not even making a revenue “tuttoring” trojan horse company
Most founders are completely unemployable. That’s why we keep starting companies. Its a sickness
Closing out.
When we’re ready to let go of business, is there a possibility that other people or yourself can reach out to you and consult with you? (Threy ask the founder) - Yes, they do an assessment for $4,500 to say your changes to make and risk factors.
Also weekend intensives in the Colorado mountains with 8 bedrooms and a chef
Ahahaha wow. Luxurious and fun.
This process is super weird, you can’t talk with your team about it.
He’s been married for almost 39 years. I don’t know how to help you (how safe says) and she said you need to find someone to help you. To talk with and help you.
The event is already over. Hahhah so lemme talk about about last night’s event, just to add a little length to this blog.
Last night’s event was super cool. It was about education dn games - I went to their huge conference a few months ago. And I realize that they actually have monthly meetups.
As you know, lately I’m so… DESPERATE hahaha… for community, and I’m kinda excited to make the effort and join this monthly group and start forming community with them. To have a community with teh guitar/bluegrass folks, then this game/education group. I have my AA, my church.
For so long I have been 100% solo here in this city, so I’m just excited now to push forward and mesh and build connections.
Also, it did just take me a while to find my own voice. Plus, I’m so into niche things like MOASS and stuff that I can hardly talk with about anyone. No one really takes the time to understand and it’s SO complex I have a thought time explaining it.
But I noticed that last night at the event I was honest and outspoken and peopel liked it. IT was a lot of fun. And we had plenty to talk about! Games, education, AI. Yeah!! So I’m excited.
Especially since I’m not going to be moving to LA anymore, seems Seattle will be my “forever home” or at least nowhere else for a while. Let’s see
Wow, and I’m 2.5 blogs behind - and have another blog to write today hahaha. So, let me catch up and then get to my next event/location. I may go to a coworking event today at a cool venue. But I’m still a bit cold to be honest. I am too cold and didn’t dress warm enough.
Two people are talking near me saying that the hardest part is marketing. Without a market, the market not valuing it, its doesn’t matter what your product is.
Gahh she’s right.
The lady behind me keeps saying crazy things to the speaker. They’re talking after the event and she’s talking about how she’s got a triangle around things and how she’s workign to massage around things. It’s like wtf is your wording hahaha. Girl. Is it just me or is that SUGGESTIVE? Oof.
LOL, and I turn around to see what’s going on behind me and there’s a grandpa taking a picture of the room/hugely my face now that I turned around. Lollll.
WOW and the bathroom here is a dream come true. They have hair bands, mouthwash, toothpicks, etc. I just did an extreme makeover. Cause, I mean, as I said - I ROLLED Out of bed. And actually I got a look int he full length mirror and I was liek, wow! My outfit is really not half-bad for getting ready in less than 5 minutes this morning>. BUTTTT it’s good I got to step up my hair, etc.
I cowork here for a few hours and even sneeze and get blessed by a guy at the table near me. Lol!! There needs to be a rating scale. For the sneezing to bless you ratio. I always write about it (like the times I sneeze and get blessed by a stranger or not blessed) it cracks me up that I do this. It’s so random. But there may be more than meets my eye to this all hahahahaha. Omg. Love it.
LOL, and just in this time, 11 people applied to my AI internship and LinkedIn shut it down. In like 2 hours. Time to interview :)
