Essentials of Buying and Selling a Business - Walker Live in San Diego
foreign [Music] a little bit with us about how Quiet Light is supporting brands in selling and some of the things you need to know about selling your business give it up for Walker Deibel ladies and gentlemen [Applause] thank you yep it's just a clicker all right hey guys um whoops I'm not on title slide can I can you hook me up on title slide please um so I I really hesitated to talk about this um thank you and um especially after yesterday because after I heard Charles and Brett talk I was like you know none of us should sell our business we should all like [ __ ] double down on Facebook ads and YouTube and go Crush right and so I'm not going to talk about this but but um the thing is is we spend a lot of time thinking about the things that we have control of and the things that we can do in our business to grow and perform right however there are other things external to us that are going on in the world that directly impacts us okay and as someone that has been through um a couple of recessions it seemed important to bring up what is going on here I literally can't figure this out got it my name is Walker diebel um first and foremost I'm an entrepreneur right so I am obsessed with the private Capital markets and I help people exit but uh everyone at Quiet Light is an entrepreneur first everyone on our team uh has started companies has sometimes raised Capital has sold their own companies acquired companies okay that's I think the little thing that makes the big difference with us right and um uh I saw Garrett speak in 2018 by the way when he was like you know up and coming and his business was thriving I thought it was interesting what they just said I've got um uh I've got uh total total aside but I have a business right now that like the last six years I've gone it to about three 3.2 million okay in revenue and it's one of these where it's you know I've had it for like seven years and I now have a verbal offer to sell it and this is not my 20 million dollar exit but it's my fourth seven figure exit right and so so it's just a different way right so I've had a number of smaller exits like that which is awesome um but uh you know I've coached uh consulted advised on over a hundred transactions um and uh everything from sub hundred thousand dollar transactions all the way up to 180 million um you know I'm an investor I've got all these things and again the headline like I've been through two recessions right there's other people in this room that have been in these recessions also okay but I'm starting to figure out I'm 46 okay and I was talking to a guy yesterday in this room maybe Jared and then and I realized he's like 26 and I thought that I was the same age as him and this is common right like I'm starting to figure out like wait a minute there are so many entrepreneurs that don't even know what's going on and they don't know how to read the water oh I wrote this book um so I I spent a lot of time buying existing companies and so uh I wrote a book called by then build and if you have interest in figuring out how an acquisition strategy to grow your company um this is the best book my mother has ever read so I recommend you do too um so here's the deal the first time uh that I got the pleasure to speak at Blue Ribbon was in uh Denver in October and we talked about buying businesses and though and paying attention to the life cycle of the business itself and figuring out the different profiles of buyers that buy at different places okay and when you can buy all right and then last time we talked about the m a market cycle and how the m a market cycle impacts us and moves like a sine wave Through Time right and how um uh this last positive m a cycle is the first time that online based businesses had were mature enough to participate in it okay so it did occur to me that by talking about the economic cycle this time maybe I'm making sort of like a Trilogy you know and although we all like the original Star Wars and Empire is everyone's favorite this one you know might have it might have Jabba right it's cool right so what are we going to cover mink we we've got why is the market changing all right um where are we on the market cycle can I still sell um spoiler alert yes you can is Craig in here he's not in the room right now okay Andrew is part business partner raise your hand Andrew are you guys buying right now buying you can you can still sell okay uh okay we're gonna talk about different buyers um how to prepare mentally logistically what to expect what can go wrong expect the unexpected uh benefits of an advisor how to get started that's a lot this is more than a 30 minute um presentation so I'm going to be skipping things as we jump through okay uh but first why do I care why do we even care about any of this and the thing is is Garrett actually teed us up perfectly okay because your business okay you will not die with your business please don't okay you're going to exit at some point and the data shows that 50 of all Financial benefit that you will get from your business will be the day that you sell it okay so it's critically important okay and the thing is is when we look at the stock market right every single day there's buying and selling so we have a stock price all the time but with our business you know someone like Garrett someone like Ezra you know you might get a couple of bites of the Apple for for most of us it's one transaction right for most of us it's one transaction and so having that exit strategy helps keep you on pace so in in the year 2000s I became a stock broker uh at Charles Schwab okay and it was the tail end of the tech boom and Charles Schwab hired 6 000 people coming out of college my undergrad degree was in English and religious studies and I became a stock broker okay and I knew I wanted to go into business it was okay but but the point is is like um it was it was it was I got licensed by the SEC and then they immediately moved me into receiving margin calls okay so the there was a boom and now we were in the bust right the.com bust was on and it was happening um that's was terrible okay it was terrible but I was young I you know went to Mexico for a week it was cool when it was hard to get another job try to start a business there was no money whatever so I then you know by 2007 I'd acquired my first company it was this eight million dollar book printing business and we're running it and um I bought a a condo because I thought that I wasn't going to be able to afford a house because the home prices kept going up right what happened right so during that bust I ended up uh laying off people in my printing company we ended up doing furloughs okay everyone customers stopped spending money okay it was [ __ ] terrible [ __ ] terrible and the point is is during the.com boom you can't even think that this is going to happen
right during the housing boom it just it doesn't it just seems like yeah something like that could happen but like it's not gonna happen soon it's not gonna happen to us [ __ ] terrible right if you are in this room the odds that if you were publicly listed you would be listed on the NASDAQ are really high right we all have tech companies here's the one-year performance of the NASDAQ how does this impact us right you might say well that's that's great but you know I sell on on Amazon or you might say well you know I stay away from Amazon I sell on Shopify okay um I don't have notes so I forgot what this one was yeah I advertise on Facebook I advertise on YouTube right okay [ __ ] it let's put all our money in Bitcoin there's things happening right there's things happening here so why is the market changing all right so we've got last year okay we had a flood of cash coming in okay and a bunch of people were raising a bunch of money and we had a lot of people chasing too few deals all right and so what happens is that it floods them it floods the market with all of this extra cash so this is this is quantitative easing at its best people right this is all of the money that was printed we all had stimis in our bank account we're at home buying [ __ ] on Amazon like this you know people are raising 12 billion dollars to go roll up these companies right and then of course there weren't enough right and so you ended up getting all of this all of this cash moving into the market and it creates this this mental state okay this euphoric State and this euphoric State brings in these marginal buyers and what I mean by marginal buyers is not like hey this person is marginal it's it's hey you know we're used to getting like say three four offers on a deal and all of a sudden we're getting seven of fourteen right what happens someone calls you and says look seriously like like what the hell do I need to do to get this deal like what's the number right what happens right so that's what was going on it also happened in the real estate industry right I mean there was houses that you know I was looking at I was looking to buy and now the the price it's like two streets over my from my house we just we need a new bedroom I have too many kids and you know like now all of a sudden the prices are are um double what they were like 18 months ago we've all seen this right and so just yesterday this guy John Burns I don't even know who that is I just picked one of these headlines to be like look I mean people are starting to say like hey 16 of the 20 signs of a housing market bubble are flashing red right okay okay so those marginal buyers were also doing that in the real estate market so some deals didn't work right so a bunch of aggregators let's use FBA aggregators as an example okay all right I was doing deals with a bunch of aggregators and all of a sudden deals stopped closing right we're under contract you know we're 90 days in diligence is going fine and all of a sudden people are backing out and it was multiple aggregators all at once and all of the reasons felt like kind of pinning the tail on the donkey right it was like wait a minute that's that's [ __ ] that's not a real reason okay and so um you know again like the good news is that it's not it's not gone yet right I mean we still are we still getting like two billion dollars inserted into this aggregator Marketplace people are still buying things are still happening okay the sentiment is starting to change this results in credit tightening so a lot of the aggregators as our as our example here are um the reason they weren't being able to close on deals is because the performance of their portfolio was starting to decline internally and what happened was that as they went from Venture Capital uh investors let's just say on the on the west coast to sort of like debt investors on the East Coast those debt investors were getting seats at the um at the decision committee okay the investment committee level okay and they were shooting down deals at the last minute all right and you know we talked Garrett talked a minute about like how excruciatingly exhausting it is to go through one of these processes right and so it's it got pretty ugly there for a minute you know I'm I'm not picking on thracio they're sort of synonymous with this with this space okay I'm not saying that they're credit tightened I don't know but they're not buying okay and they they were sort of like the the biggest player well they were the loudest right um interest rates are rising as a result right so we have this quantitative easing we print all this money we flood the market and then we go oh [ __ ] that causes inflation so we start tightening credit right we start raising interest rates and and you know here's here's our interest rate chart and you know the thing is is there seems to be a delay going on right Like You can disagree with me but I don't really understand how we like print you know like like 25 to 30 percent of all new dollars in circulation one year and then 24 months later we raise interest rates a few times and like inflation settled I don't I like I don't get it maybe I'm just you know I just don't understand so here's the part with the economic cycle okay maybe this won't happen again maybe it won't okay but if history is any guide all right you end up with optimism at the beginning right you're in a bull market things are like starting to pick up steam everyone's starting to get really optimistic okay um it moves to enthusiasm times are good we are flying things are selling we're moving like we're growing everything's awesome I'm talking to my friends their businesses are awesome like we're going on vacation this year right and buying a Tesla um you know and then what happens is this enthusiasm part what happens is this the banks get together for their annual retreat in Hawaii okay and they're like God we just had the best year ever right and they're flaring up cigars like last night and I was Blazing that cigar ette this presentation was much clearer yesterday but so so um so they're and they're like okay God we said the best year ever like how do we improve next year like how do we make more money right and then some guy in the back says um uh miss what we can do is um uh remove all the requirements so if you need an income requirement in order to get a certain mortgage we can remove the requirement and we'll give more Market more mortgages out oh my God euphoria okay euphoria then things start to not quite execute as we thought right and you move into this anxiety followed by denial fear everyone's panicking I'm so sorry guys this super dark capitulation capitulation everyone throws in the towel and it's at that moment that certain people that maybe have a lot of money or whatever start buying up assets and they're like oh man we're at the bottom right and the bull market starts all over again you get hopeful cautiously hopeful and eventually optimistic okay I don't know but I'm gonna guess that that was 2021. based on the private Capital markets based on the public markets okay this is where that was so where do you guys think we are now what do you think beer okay uh my colleague Jason said to me yesterday he thought we were at fear I think that we're here I don't know okay I don't know but what I see is that everyone's really kind of anxious right we're anxious when we were trying to sell companies in January and February of this year it was crickets I mean we were putting out great businesses for sale and no one like I mean like like people were downloading the things but there was no calls there was no nothing was happening it was really eerie okay and then all of a sudden March started and in our business we and we do about 100 transactions a year right I mean this is statistically significant rhythms right and so like we started seeing people coming back okay and that's why I think it we're sort of entering denial because I'm watching the market start to Andrew bye right we're buying again we're buying again we were scared for a second but now we're cool right now it's cool okay here's the big thing the sentiment and the data are different and that's that's sort of the big headline that I've got for you today that's the thing like if you take one thing away that's the thing to take away the data that we have and the sentiment that we're feeling are very different there's a gap so quiet lights first half sales were 50 above last year and we couldn't get any attention in January and February that's interesting um there's less cash at closing so deal terms are getting a little a little out of whack okay multiples are very slightly down very slightly down um I you know I don't want to say the number because I don't want it to give meaning because it's not really meaningful um and buyer's sentiment is more sober in other words transactions are happening we're not getting seven to 14 offers anymore we're getting like you know three four two right and and a lot of them are saying like oh you're under offer okay we'll just you know let me know if that doesn't work out and come on back okay a year ago they'd say come on what's the number what do I need to do right um so here's some metrics so so total deal value uh this is as of yesterday it's it's the trailing 12 months at Quiet Light this is inside data for Real uh over the prior 12 months our total deal value is up 20 percent okay um number of transactions zero change exactly the same number of transactions as a year ago right okay aggregator deals uh 24 of all of our deals were purchased by aggregators which was down about 14 okay that's a lot they were really big last year weren't they they were very very loud right um time to close is up about you know 7.5 percent value valuations uh I used the wrong word here it should be like you know average deal amount okay so so the people that have and and this is how I give meaning to this last one is the people that have created a little bit more value are the ones exiting right now right they're like hey I think I'm I think you know I think I think we've got enough value let's go ahead and let's go ahead and cash in and sort of move on and do something else right is this helpful oh thank you good so so all right who's buying so here's the thing aggregators okay our private Equity firms last year they were very loud weren't they very loud we have tens of thousands of buyers just on our list okay and aggregators are like a hundred Maybe maybe there maybe you know maybe they have multiple people out of 300 you know there's not that many aggregators they're just very loud in our space okay so you know when I wrote by then build you know like you know I bought almost 20 million in Revenue just by just by using SBA Loans right and I was able to like grow my business just by buying all these different companies right so SBA buyers are very very real okay and if you're buying a company you know anywhere under say seven and a half million dollars there's entrepreneurs out there including everyone in this room okay I can get you up to 90 leverage to buy one of these companies okay it's a great way to grow your business right um uh maybe wait maybe wait a few months um but you know yeah I think uh so you know we'll see what happens but but then you've got private Equity firms obviously right and we all like to think that private Equity firms are like the easiest to work with and all the rest of it um that's sometimes true that's sometimes true um it's also uh they've got they've got their own they've got their own problems they're professional buyers right but they have they they tend to have a lot of the money teed up right um aggregators we talked about and private Equity firms you know so aggregators are firms but we also have other private Equity firms by the way folks that like are not aggregators that are buying companies right um and then you've got um individuals with cash so this could be like you know Ezra right he's an individual with cash in a [ __ ] sweet car right and um I bought a Tesla Model S plaid and it looks like the cheaper one so like it I don't get that attempt I don't have that problem you do but a little bit uh so anyway so it's it's like uh um these are people that have had an exit already right usually or or they're or they're um you know professionals that that just have have a lot of a lot of cash or Garrett's kids right you know uh so search funds is you know it's kind of a weird word uh you really have to understand this like and there's sort of different kinds like they're self-funded there's traditional um there's single sponsor search funds there's independent sponsors this can look a lot of different ways right so when I got the 180 million dollar business under contract it was actually to an independent sponsor and like we were able to pull together the whole team around it in terms of like the debt and the private Equity Firm that backed it former Fortune 500 CEO came in uh to join the team um and so that like the the concept here that I just want to share is that like you don't have to sell your business to to an aggregator there's so many different so many different people out there and when you look at it okay this is lower Middle Market buyers lower Middle Market can be defined a few different ways usually it's going to be you know on the low end people will start it somewhere as low as two some will say it doesn't start till 25 okay um it's probably about 5 million up to maybe 250 million okay that's going to be the pocket where most of us in this room are I think um so as you can see like 18 percent are private Equity firms and aggregators would be in there but even even when buying like 100 million dollar transactions I mean you know 40 of these are just done by individuals it's kind of kind of interesting right um the other four is existing companies actually one more thing on that one more thing on that um often a lot like a lot of people will come to me and say like hey I know who's going to buy this company from us okay from from them right like I want you to take it to this guy over here and uh all I can tell you is um if you're ever talking to a broker and they say like oh I've got I've got the buyer already know who's going to buy this or you're you think to yourself like oh I know who should buy this I know who's going to buy it you're both wrong okay that's not who's gonna buy it at all all right just the thing is let me give you a quick example um I had a deal so Build-A-Bear is in St Louis okay it's a St Louis based company that's where I am um I've met the the CEO founder Maxine Clark before she's amazing um I had a business that they that would like literally solve their Public Market downward spiral okay and and the thing is is that when you go into these corporations and you're like hey I've got this thing I have like this magic weapon and trust me you need it it's not on the list of things that these people are doing for those 90 days it's just not what they're doing they take way too long it's not it's not you know so it's like if you're buying if you're selling it to another company whoops this is usually due to um that company already has an acquisition strategy in place and they're acquiring that's what's happening there okay so just some clarity it's it's you know it's not it's not who you think it's going to be um so there's you know I'll cover these next slides really fast so so basically the the mental part of selling your business is really the most important okay it this is this is like a special project like it takes a lot of work right and the big thing is is like you know why are you selling so in 2021 that was the time when you could say like well I guess I'll sell if the price is right that was last year that's not really happening right now a little like the window's closing and it's pretty clear but like but like this isn't where you're like okay like like I get people on the phone and they'd say you know look I'm if I can't sell for at least an 8X like I'm not selling at all and I'd be like okay like you know what's your Revenue they're like hundred thousand hundred fifty I'm like okay never mind no that's not that's not just say no that doesn't connect um so yeah you know that was that was last year I I you know buyers are getting a lot more sober right in terms of how they're approaching the market um and there's less of them right um you know shrinking businesses can sell but it's not um it's not ideal right like so so we've talked a little bit about you know you as an individual all right in the in the past as a seller we've talked about the m a cycle okay and we're talking now about the economic cycle it is the rare person that lines up all three like most people get kind of two of them right but like so many people come and they're like Hey listen I'm totally burnt out like you know I was doing you know you know as we talked about you know I was doing 100 million I had 100 million evaluation now I need to sell for nine just because I'm ready right and the day what you want to sell it just shows up it just shows up that's usually what happens if you don't have an Exit Plan okay so we can always we can always get you out but you know you want it you want your business to be growing even if it's due to external market conditions okay um uh yeah crickets are excitement the thing is is like if we go to market and we and we get 14 offers in a week that's that's great but if you if we go to market and we get crickets chill out it doesn't mean anything yet like just hang on okay like you can have both kind of experiences and they're in there and we'll still succeed in the long run um logistically uh okay look I think everyone in this room is is pretty buttoned up in terms of financials I mean this is Blue Ribbon if if you're not using an accounting system please do it now immediately hire a bookkeeper for a few hundred bucks a month and get it done if you're not in QuickBooks and you're using Excel get it in QuickBooks like just if use accrual okay if you don't know the difference between cash and accrual start using accrual tomorrow okay please okay because it's the right way to tell time and you're going to start building that history for when that day does come um uh disclosures a lot of people are like oh hey like uh we got all these warts on the business and and uh you know we probably shouldn't lead with that I totally disagree you want to get all that [ __ ] out front right away because when you when you say like here's all the negatives and here's all the positives and this is why you want to buy it because this is a calculated risk and we're over we're this is why you want to buy it they're like great and now guess what comes up later in diligence nothing nothing right so do yourself a favor and talk about all the ugly [ __ ] right away okay um what to expect um okay look like like it everyone has this dream of like oh I'm gonna like okay here's an example I sold a business for 24 million dollars what wasn't mine I was a broker on this deal and um uh there was two partners and there was an equity role there was a two-year earn out the inventory was guaranteed but deferred there was like um let's call it a stability payment like like a hold back okay uh and then there was the cash at closing and then of course transaction fees and stuff and then there was two partners so they split it and then after taxes each of them had about two and a half million dollars in their bank account they were still like 24 months from getting all of it okay but the thing is is cash at closing is one component right and either one of these Partners could go to the golf course the next day and say I just sold my business for 24 mil right see I just need you I just want you thinking about like okay there's structures that go here and the more aggressive the valuation of your business is the more deferred a lot of the comp tends to be okay does that make sense right um so this isn't like I'm selling my business for 24 million and I'm getting 24 million on that day I just want you to have that in your head um talk to your CPA beforehand um and then you're going to come ask me if you can do a stock sale ah sure but let's talk about it uh okay what can go wrong guys everything can go wrong all right um but the the big one the big one that I want to draw your attention to is falling Revenue during the process if we go out and get get your business under contract okay and and your your Revenue starts declining this is really hard okay and I'm the best broker in the entire world I promise you that but the thing the thing is is that is that like everyone just starts to think that there's something going on even if it's like an external thing or there's a hiccup or whatever okay and um uh so that's the best thing you could do is be going into this process what Ezra say sell when you're like 70 of what you think it can do I love that can I steal that that's like perfect thanks thanks it's exactly right and you want to you want to be coming in not like when you're exhausted right at the like oh I got it right okay um yeah don't count your money until closing okay because it puts you on a very terrible mental negotiating position all right um and you may need to restart the process okay about a third of companies I work with or we work with at Twilight you know we need more than one Loi to get there to get done all right um and of course uh it's not it's not linear it's kind of a messy messy process um here's the big thing all right I got 50 seconds so I'm just going to go right to it here's the deal um our metric internal to quiet light has nothing to do with you know how many leads did you get at the conference or like how many how many people signed up to buy a company like it comes in time like we if there's anything that we have learned it's at an m a cycle in an m a process in the sell buyer seller pool you cannot time when sellers are ready you cannot time when anyone is ready our internal metric is nothing other than meaningful conversations okay we are a hundred percent Performance Based okay and all we want to do is hang out and talk about this this is what we do so like if you um so that's sort of like the the free giveaway like if you don't have an exit strategy there's 14 of us at Quiet Light like hold on calling of us okay um reach out go to the website that's all I got give it up thanks ladies and gentlemen [Music]
2022-12-06 05:37
