Buyer's Guide to Winning Deals with Ky Pratt and Andrew Gazdecki

Foreign.

We'll get started in just a minute here. I'm super excited for this one. This is going to be on, you know, how to win acquisitions, how to properly conduct due diligence. So we got a lot of good stuff for everybody. And then Roger, to answer your question, is this view good now? Yes, it is. All right, guy, whenever you, whenever you want to get started. Let's go.

Awesome. Let me share my screen and we'll get going.

Alrighty. So today we're going to be going over the buyer's guide to winning deals, how to succeed in M and A. And as a quick agenda here, we're going to be doing some introductions, going over how to establish goals that matter, creating and sharing your process, winning deals, it's all about speed and then building your reputation. Okay, brief introductions for those of you that may not know us. My name is Andrew Gazdecki. I am the founder and CEO of Acquire.com Before Acquire.com, i had founded two different startups. One called Business Apps, which was a do it yourself drag and drop mobile app platform for small businesses. And then a crypto exchange called Altcoin IO. Both of those were acquired and through that process, it really opened my eyes to just how difficult acquisitions can be for entrepreneurs through the challenges of due diligence, even simple things like finding the buyers. So that's why I started acquire.com to help entrepreneurs and startup founders get acquired in below that are some fun awards that I won at Business Apps that made my mom real proud. Inc 500 fast growing companies and Inc. Magazines 30 under 30 and over to you, Kai.

Wonderful. Thanks, Andrew. My name is Kai. I'm the lead acquisition advisor here at Acquire. Some of you have probably worked with some, some of you have talked to through emails and support. My job is a very fast paced, fun job because I get to work with buyers and sellers helping them navigate the deal. And we'll talk a lot about it today and the best practices to the buyer's guide in closing a deal. But the deal path from start to close is always a little bit different each time. So excited to give you guys some tips. Excited to answer any questions you might have. So please put them in the Q and A and we'll try to get to them as this presentation continues.

Right on. And then acquire.com, we are building the world's most founder friendly startup acquisition marketplace in the world today. And then in terms of our impact, we've been in business about four years now. Time really does fly by and we've helped over 2000 startups get acquired. That's amounted to over half a billion in closed transactions, over half a million in registered buyers on the platform. Today, on the marketplace, you can find over 2000 startups available to be acquired. And then we've served over 100 different countries, so truly a global marketplace. We have buyers and sellers in pretty much every country you can possibly think of.

Yeah. Evidenced by the chat, even at the start of this, a lot of people all over the world. Yeah.

Again, one of my favorite parts about these webinars is just being able to speak with so many different people in so many different regions all at once.

Awesome. All right, let's get started. So, in terms of the buyer's guide to closing deals, we're going to start with establishing goals before we dive into it. If you do want a deliverable, I would get out your pen, get out your paper, get out your inote, whatever it may be, because you can answer some of these questions as you go through this process about yourself as a buyer. And the other thing that I will say is even if you're a seller on this call, it'll give you some nice perspective on how to find this middle ground, because it certainly takes two to tango to get a deal done. So the first bullet here really is on understanding why. Everybody has a goal of getting to the destination of buying a business. But understanding why really kind of paves the path there. And your why is going to be that emotional push. It's going to be that core deliverable when things may take a strange turn. But knowing the why and anything you do gives you a lot more purpose. We then get into number two, which is defining a good business. And this is a very subjective topic. So, Andrew, I know working in the marketplace, we get to see all the different businesses that. That try to list, and we can't help but say, hey, I might be interested in buying that business. What type of qualities makes a good business for you?

Definitely. Well, right at the top is going to be something that I'm interested in. So I love sales, I love marketing. Every time we have a good SaaS business in those categories, I get really excited. So this is going to be, like you said, very subjective. What are you interested in? What do you have experience in? What do you feel confident that you could grow? Is that a services business? Maybe an agency? Do you have experience in E commerce? Are you a software engineer? So maybe a SaaS business would be best for you. So generally, good business is going to have qualities that the buyer needs to get excited about then other factors like if it's a SaaS business, is churn really high, is it profitable, is it growing? All these things combine to make a good opportunity in my opinion.

Absolutely. And just heavy emphasis on subjective. If we were to maybe present some common themes, profitability is usually one of those common themes. The customer concentration is usually a common theme, meaning you don't want to really invest too much in a business that has a five customers. That's a high risk profile. But then there's also the other side of the coin. I've talked to many buyers that don't pay any mind to profitability. They're looking at recurring revenue, they're looking at the ICP that has been developed and they're looking at more so vertical type business. And even within that I've had buyers tell me that, hey Kai, I want a vertical vertical SaaS, nothing overly niche in the example as if this was like a neuroscience SaaS, they say hey, that's actually out of my, my skill set. But still it's always going to vary. So this question is really going to have multiple answers depending on who I'm talking to.

Yeah. One other point too Kai, is it depends on what you're planning to do with the business. As a buyer, for example, if you're looking to just hold the business, you're really going to be looking at profitability and durability of the business. And those qualities are important for any business. But if you're looking for maybe a smaller business that you can acquire and grow, you're probably not going to be as sensitive to profitability or durability because you're going to likely be buying a new product or product where maybe churn is really high and you think you can fix that or you have experience fixing churn and those can also be really good opportunities. So we work with a lot of different buyers that have different plans post acquisition.

Coming back to point number one, the why you could be a first time buyer looking for like a lifestyle business, something to allow you to escape from your traditional job. Or you, you could be a frequent serial entrepreneur, building your portfolio, building your legacy. It all depends 100%. Jumping to point number three, what are your opportunity levers? So every buyer, if we were to simplify it, is buying a business and then evaluating what is my return on investment and your ability to pull growth levers, opportunity levers, accelerates your return on investment. So depending on what your skills are, you could be the go to go to market strategist. You could be the SEO expert, you could be the technician to make up the technical debt and take this to a new level. Your opportunity levers are really going to help you further define how you fit. The one question I have for you, Andrew, is in your previous exits, did you have much emphasis on what the skill sets of the buyers were or was that not a priority to you at that time?

No, definitely not. So business app sold to a private equity firm. So they had a whole team of, you know, marketers, salespeople, pricing experts, you name it. The other business was sold to a strategic buyer who had a. I guess, yeah, I mean the strategic buyer, they had a deep, deep expertise in the regulatory compliance part of that business. And that was really attractive. So that got me really excited because I knew what I had built was going to be in good hands. So to answer your question, yeah, actually, now that I think of it, yeah, absolutely.

I would say too. Getting to point for what deal structures can you support? If your deal structure involves any sort of earnout or any sort of rollover equity, the seller understanding what your opportunity levers are is even more magnified because the likelihood of that earn out being achieved or the likelihood of the benefit of staying on with the company is enhanced by whatever opportunity levers you can pull with success. So to point number four, we all have our limitations and understanding how much you can bite off when you're going in on an offer really matters. You always want to build your reputation, which we'll talk about later in this presentation. But understanding your typical deal structures is a great thing to have underneath your pocket. And then we'll talk about how to reveal this information to a seller. Which brings us to point five, what's standing in your way? Everyone's obstacles are different. I would say it's, it's a look inside, it's a look at what's real and it's a look at what is fitting into points one through four. But Andrew, when it comes to what's standing in your way, do you feel like there is a leap to take if you're a first time buyer or is it something that you can methodically pave the road to becoming a first time buyer and onward?

Absolutely. Especially if you're looking at, you know, a larger business, it can be nerve wracking. You know, you're putting a lot of capital at risk and you know, not many people want to take large risks with large sums of money. One piece of advice here, and I give this often is if you're looking at potentially acquiring A larger business. Let's say you have a you're the reason your why is you want to become an entrepreneur and you want to do this through acquisition. And a good business for you is one that ideally replaces the salary that you make at your job today as just one example. So you're an individual buyer looking to become the CEO of a business or acquisition. You're probably going to need to acquire a pretty big business, assuming it needs to net 200,000, 300,000 profit to make it attractive. Before you go and you do that, I would recommend acquiring a smaller business. So you gain that experience, you walk the steps of due diligence, take everything as serious as it'd be a multi million dollar transaction, and maybe you're buying a 20 to $50,000 SaaS product or something like that to give you that confidence so you don't feel like you have, you know, these huge experience barriers standing in your way.

Yeah, that's a great point. Really take a modest approach. No one wants to jump in the deep end and find out that they can't swim. And no worse way to do that than financially.

That's a great analogy. No, you do not want to find out you can't swim when you're in the deep end.

All right, let's move to the the element of communicating your process. This itself is probably the most logical thing we'll tell you today, but it is the most overlooked in what I see in my day in, day out in the marketplace. There is this concept of we as individuals know who we are, know our pedigree, know our skills and capabilities, but the person on the other side that we're talking to does not. And sometimes we forget that. So if we were to jump into the shoes of a seller, sellers are concerned that people are there to waste their time. People are there to just gain knowledge, free knowledge, and then maybe try to create what you've built. And to remedy that, it's really important to communicate what we just talked about. So communicating your background and your goals and this is items that you can do within your profile on Acquire, but you can even send an intro message and that's a great way to establish yourself as a prime candidate in the seller's evaluation queue. Thanks to Andrew and the team, we've built a lot of tools around this so you can verify your identity safely and securely. You can verify your funds with our finance team also safely and securely. And you can provide your LinkedIn profile. If you have hesitations around this, I want you to think about again Being in the seller. Shoes sellers are looking at multiple buyers at a time. On average 30 to 50 NDAs. In some situations we're up in the hundreds. And so to be cautious with what you built, you really need to make sure you know who you're talking to. So imagine I'm a buyer, you see my profile, but I don't have a verified identity, I don't have any verified funds. And you're asking for a million in asking price and my LinkedIn URL doesn't route anywhere. How does that make you feel, Andrew?

Not good. As a buyer, you want to be instilling confidence because like you said, a lot of sellers are, you know, their guard is up and they want to know that you have the funds. They want to know that you're a real person. They want to be able to look at your experience and get excited about chatting with you, answering your sensitive questions. And yeah, if you have a broken LinkedIn URL and maybe your picture is not professional looking, that doesn't necessarily instill confidence, unfortunately.

Right, right. Again, logical common sense often skipped. And maybe it's just the lack of knowledge that you can do these things. We're here to help you do these things, to make your buyer profile more credible, to help you win deals based upon your reputation, your up forward reputation alone. I want to talk a little bit about the verified funds element. There is certainly the ability to verify funds with our finance department. At the same time, not every buyer transacts through the cash they have on hand. So if you see a buyer with verified funds compared to a buyer without verified funds, what's your best advice on how to go about finding out if that buyer is capable of moving forward on this deal? If it's a good fit, Just directly.

Asking, like, how do you plan on financing this acquisition? Do you plan to use any third party financing? Are they pre approved for maybe some type of loan? Do they have maybe investors that they're working with? Which is very common when you're selling to say a strategic buyer or a private equity firm, and a lot of times individuals as well. So just directly asking, I think is the way to go.

Yeah, it can often be the elephant in the room talking about funds and valuation, but it's part of the process. It's a necessary box to check off and again from the seller to the buyer. It's not the do you have the money? Question, it's how would you fund if this is a good fit question and that slight change in wording is I believe, much more acceptable and could probably be less offensive in some cases. Now we get to the bottom half of this diagram and we talk about sharing some of the details that you identified in your goals. So sharing your evaluation process up front. I see a few buyers do this and the ones who do this are the very credible, the very fast moving buyers. But they actually sometimes beat the sellers with an intro message and they say, hey, this is Kai. This is who I am, this is my pedigree. This is typically what we're looking for and why and we'd like to see documents XYZ and we can really have a decision in a couple weeks. That type of a buyer, if you know your strategy, here is the buyer that's going to most likely win the deal. Because you know exactly how you evaluate companies. You're giving instructions on what you need in terms of early diligence and it just really sets the tone where others may be laggard and standing behind. So these types of buyers, I want every buyer to start thinking about what typically do you like to see? And then on the seller side, we and my team are advising sellers to have these documents ready to go and being prepared for these types of asks. So sharing your process is a very core element of getting a deal done that goes into the final thing. Tell the sellers what you need to make an offer. Do not be the buyer, do not be the seller that fails to communicate. If you get to a point in your evaluation process where you're no longer interested, I would just tell them, hey, based upon these findings, it's not a fit for us. We're going to move along. You have the courtesy to provide some feedback that only helps the seller. If you think about this, it's a very emotional time to be a seller and sell. It's a very emotional process as a buyer and to speak to that emotion. Andrew, you sold two companies. These are companies that you've built from the ground up. How much emotion goes into this and how much kind of mind games can can be played with you if there is a buyer who's not communicating, maybe communicated early and then stops communicating. What type of emotional toll does that have?

Oh my gosh, it's huge. It's absolutely massive. The sale with business app specifically, there was a period where I thought the deal was going to fall through because it went silent. The buyer had mentioned they were, they were going to assign a operating CEO to the company and that operating CEO was having some doubts about. I believe it was the pricing strategy that we had. No, no, it was the Amount of customer support tickets that we had and then it just radio silence. And during those times, it. I remember one night I like, barely, I didn't sleep the other nights, I barely slept. Because what's happening is, you know, your goals and your aspirations are kind of being dangled right in front of you. You know, a lot of entrepreneurs like myself, they'll build businesses to hopefully one day sell them. And when that day finally comes, to have that, you know, goal feel so close and then be pushed back a little bit, it's. It's hard, it's rough to deal with. And I know you, you work with a lot of sellers that are going through that same thing. I talked to one this morning that I was telling you about. But yeah, it's, it's a roller coaster for buyers too, but definitely for entrepreneurs and sellers.

Yeah, it is the emotional roller coaster, it's the high stakes chess that has been compared to this from a mentor of mine. I would say this too. As a seller and a buyer, if you're ever met with lack of communication, it is a mental test because it starts tempting you to question what's wrong with your approach. Whether that's what's wrong as a buyer if you got second place on a deal, or what's wrong with your business as a seller, if a buyer decides to bow out is a very mental test to fall for that. And sure, evaluate your business, evaluate the feedback, but you also have to remember what you built and what your process is as a buyer and move on to the next opportunity.

Yeah. Do you care if I add something on this last slide, Kai?

Sure, sure. Yeah, Yeah.

I think the main piece that I, I take away from this is just how important communication is, not just on the buyer side, but both sides, sellers and buyers. So what buyers expect is, you know, a high level of documentation, understanding financials, anything they can learn about the business. If they have a detailed sim, the better. But then sellers also have expectations of buyers as well. They want to see verified funds. They want to see, you know, a working LinkedIn profile to be able to understand their resume. They want to know their process. If they sign a letter of intent, what does due diligence look like? And all that communication back and forth is required to get a deal done because both buyers and sellers have certain expectations and without it, they lose confidence. So I, I couldn't agree more with all this.

Yeah, great, great point. Absolutely. It's expectations being on the same page 100 brings us to kind of applying this all you want to apply this with speed. There is a common saying which is be quick, but don't hurry up. You don't want to rush, so you're making a mistake and buying a business that you found some surprises with down the road. You don't want to make a poor investment. But at its core, time kills deals, and sellers are eager to sell to the buyer that is most prepared and vice versa. Right. So being slow can be interpreted as a lack of interest. Which brings me to the point you see top buyers make offers within the first 30 days. I think if we're going to be broad, we say 30 to 60 days. But there's always the natural case that you're a buyer and you come into a deal and the deal has been on market and maybe the deal timeline has progressed. So some buyers drop deal schedules, which are efforts to effectively communicate with all buyers on intro, meeting timelines, offer expectations. Andrew, if you're a buyer and let's say I hop into a deal today and I find out we're in like the final week of meetings, the offers are expected next week, how do I maybe buy myself some time or even increase my credibility quickly and effectively to still be a top candidate for this deal?

You know, if you're coming in late, I think the first thing to do is acknowledge that with the seller. Hey, I'm a little late to ball game here. You know, definitely express how interested you are. Maybe there's a few things you need to do. Hey, I need to go over these documents. I need to look at your P and L. I need to try the product. I'd love to have another call after that. Again, you're communicating your timeline and then also communicate to understand the seller's timeline. Where are you with other buyers? Have you received another offer? What can I do to win this deal? Sometimes just being upfront about that, just asking, how do I win the deal? Can be helpful. But again, I would acknowledge that you're behind as another buyer. So you don't. You're not disrespectful to the process. You say, hey, I, you know, understand that you've been speaking with other buyers for a period of time. You're going to be expecting offers soon. Here's my timeline. Here's how I'm going to play catch up and then ask, you know, are you able to, you know, reach a certain point with the seller to be competitive with other buyers? So communication, long story short, yeah, I like that.

And ties to logic. We think about one of the points, which is communicating, not just in general but communicating your evaluation process. If I'm late to the game, I'm saying, hey, I know I'm late, but this is exactly what we tend to look at in evaluating a business. If you can provide me these things, I can get you an answer within the timeline. And this is my pedigree, so I have an experience buying business. I have a nice close rate, etc, those types of things. If you don't have a strong track record of closing deals, then that's to your advantage, to your disadvantage. But you want to try to put everything out there so the buyer and seller have mutual confidence in one another in kind of an expedited timeline.

One thing you just said, Kai, that I really like is, you know, I didn't mention this, but I forgot to and I couldn't agree more. But talk about your experience. What have you done in the past? Can you get the seller excited to work with you? Can you show proof of funds? Anything you can do to get them excited to work with you can help.

Absolutely. And the other thing that can help is us. So there's a lot of tools that we have in the marketplace. Acquire certainly evolved to always give you the tools that you need. So starting with familiarizing yourself in the marketplace. So back to setting your goals. You identify what types of businesses you like, what are the pros that you look for, and you pop those into your search filters. You understand what you're looking for in that sense. So the results that we give you are tailored to what you're looking for, give or take. If you have financial boundaries on your business targets. And what I mean by I.e. tTM revenue thresholds, ARR thresholds, profit thresholds, I would put a plus or minus on the tail ends of those just to widen your gap by a little bit. Sometimes if you narrow your search too much, you might not get the results you're looking for. But that's one element is understand how the marketplace works, understand where the documents are, how to use the chat with the seller. And then one of my favorite parts about acquire to help you with speed is our tools within your deals dashboard. You can build letters of intent, you can build APAs with our support. We can also help you outline due diligence items like that. And I know a common, I guess reply that I might get to those tools is, well, the LOI builder or the APA builder isn't comprehensive enough and that's certainly fine. Every deal is going to be different. But what I really recommend is start with the builder as a template and then Build off of that. Now we have a common ground that buyers and sellers are used to. And so in the items of what kills deals. Sometimes just going back and forth about red lines can kill a deal. If we have that common ground as a base template, it can minimize that likelihood of a deal reversing. And then the last point here we have the M and A team and you may see some familiar faces in that group of people. Andrew, tell us a little bit about the M and A team, how we support and even the evolution of acquire. At one point this was a self service model, but now you have support above and beyond with people like myself and even yourself too.

I like how you mentioned the tools and what we've done to really standardize and streamline a lot of parts of the acquisition process to speed things up. Because sometimes just writing a simple letter of intent could take a couple days. That may not seem like a lot, but in acquisitions that's weeks or potentially months. And the more we can get everybody on the same page, the easier it is to review, you know, the most important parts of the offer and go under loi and help these businesses get acquired. But yeah, in terms of, you know, what we do at acquire, you know, when I first started the business, we were just a platform that connected buyers and sellers and at times you kind of feel like you were on your own. It's not like that today. We've, you know, over time evolved into really a full service platform where not only do we provide tools to ensure that you're able to, you know, maximize your acquisition as a buyer, you're able to, you know, submit offers easier than ever. You can securely close with escrow. But if you just need help and handholding to, you know, get your opinion on certain deals or, you know, you're a founder looking to successfully sell your business and really make sure that you maximize your exit with us. We have a full team. Kai, you're on that team. You've helped more founders than I could count. And that's what we love doing. Like we love really, you know, getting in the trenches with founders and, you know, helping them sell these businesses and navigate all the challenges and ups and downs and the stressful moments. And there's a huge benefit to everyone involved, not just the sellers, but also the buyers too. Because when we're able to advise and support the businesses that are looking to sell on acquire.com that means we can help them better prepare certain documents that are super important, like a confidential information memorandum, which is a big word for an Overview of the business so buyers can quickly understand the business or recast financial statements and P Ls so you can get a quick, healthy snapshot of the health of the business. So all of this combined, from the tools to our support, to the way we prepare businesses and also work with buyers to understand what they're looking for in their process, has helped more startups than ever get acquired. And like I always like to say, we're just getting started.

Just getting started.

For sure, getting started.

One thing I like to say is I view my role as more of a facilitator, if anything, because I am working with buyers and sellers and the facilitation is utilizing the platform, even communication, sometimes within diligence, within negotiations. The communication element is a tough one. So I'm there to help deliver those types of messages, present it in the best way to make sure no one's making an irrational decision and also encourage on the seller side that to allow a buyer to move fast on deals. It's not just the buyer presenting their asks and their timeline, but it's also the seller being comfortable sharing certain documents, having documents in an order, being honest about their expenses and making sure that there is a clear viewpoint on what is the gross profit, what is the seller's discretionary earnings, what is the net profit really making sure that both sides are working together to expedite the timeline within a deal and how it can happen. So as Andrew was mentioning, we are here to help. Roger, I believe will drop a link in the chat if you're interested and we'll reach out to some of the registrants today. But we do have a buyer concierge program which in this call you schedule a little 15 minute call with us. We are here to learn about your buy box, we're here to learn about your experience and your acquisition process and then we're there to help connect you with the right types of businesses. So in addition to our wonderful tools and how you can matchmake on your own, we are here to be on the lookout for you because a lot of us work with the deals directly and so as things come to us within our timelines, we can often reach out to you and say, hey, heads up, there's going to be a business that's going to fit your criteria quite a bit coming to the market and within the next week, those types of things. So if you need a little bit of hand holding, you want to talk to us a little bit about your experience, what your obstacles are, that's what this service is for. It's of no additional cost. You can just hop on the calendar and chat with us. We are here to help. All right, let's talk a little bit about the final point here, which is building your reputation. And it may be inferred through what we've talked about today, but your reputation really matters. The marketplace is a community, sellers all talk. It's a, it's a very kind of club type atmosphere where if you're an exiting founder, you're supporting other exiting founders. And as M and A advisors, we're here to guide our sellers and buyers on credibility. So if you are a buyer who's closed with us or has shown great work within due diligence, whether you closed or not, just a great process. And a seller's asking me, hey, how do you feel about Andrew Gazdecki as a buyer? I'm there to deliver the message that, hey, I've worked with him before. He's very professional, he's swift, he knows what he's looking for. If you can get a call with him, that's going to be a great buyer call to take advantage of because your reputation, when it comes to competing offers, can win or lose the deal. So, Angie, do you have any stories about how our reputation has kind of swayed a deal one way or another?

Yeah, like yesterday with you, you asked me like, hey, I won't say who it is, but you know, hey, is this buyer ever closed on a business and acquired. I said, not to my knowledge, but this person has acquired multiple different SaaS businesses. Great buyer. If you get them interested, that's going to be a positive sign. But yeah, all the time. I mean, we know these buyers in the community that we have, and we want to get to know as many buyers as possible because not only can we help buyers, but we can help sellers understand if this is going to be a good opportunity to pursue. But short answer? Yeah, absolutely. It's very important. It's one of the first things that we look at when there's multiple offers being submitted on a business because we want to make sure that acquisitions close and people aren't submitting Lois and signing Lois and just wasting their time. So if we have any experience that could give a founder some indication what it's going to be like, post loi, you know, we'll share that.

So, yeah, 100%, absolutely. And there's, there's many factors in what can delay a deal and what can negatively impact your timeline. There are items that are not in our control, but there are items that are in our control. And if. Think about it from the buyer's perspective. If you take the time to verify your identity, establish your profile, develop a process, those items are in your control. I would hate for you as a buyer to be in a situation where there's a prime business on acquire, but the seller is hesitant to let you into the game because you're waiting for an identity to be verified or funds to be verified. Let's get those things done ahead of time to expedite your process. The other part of reputation that may be a touchy subject is the concept that assigned loi does not always make it to close. And there are many factors why a deal can fall through. But again, there are items that are within your control and out of your control. What I recommend is be the buyer that is methodical. Be the seller that presents enough information so that when an offer comes your way, you have great confidence that what you've looked at so far is pretty darn thorough to where the likelihood of this offer reversing or being retraded is minimized. And sure, there are natural things that could be justified for a retrade, but you never want your retrade or your reversal to be in the matter of cold feet. That's probably the one that's going to hurt your reputation the most. Would you agree, Andrew?

A hundred percent. Like if you go under loi with a business end, the churn is way higher or they miss, you know, presented financials. That's a very valid reason.

Right.

But if it's something like, you know, you get to the ninth inning and you're gonna close and then you retrade or, or decide you're no longer interested in the business, you know, that's, that's not good for your reputation, regardless of what the reason may be. Because, you know, would you want a different seller to go through that or you yourself? So we do factor those things in.

Yeah, absolutely. Absolutely. All right, Andrew, let's get to some Q and A. Let me stop sharing the screen and let's review some of the questions here.

Right on my favorite part. Okay, so there's two questions in the the chat. I'm going to go ahead and just answer those. If you have more questions, feel free to put them in there and we'll try to get to as many as we can today. Okay, first question. How do you buy a no code business? Exactly. For example, a bubble web app. What gets transferred to the buyer and how, what to take into account. So I can answer this one specifically. With bubble, you can just transfer the whole account. I've actually acquired a small bubble application before, just had the account transferred over to me, username, password, I log into it. Simple as that. That's one of the benefits of no code is it can be very simple to manage transfer. Again, you can just hand over the, the full account. You don't necessarily need to, you know, take the software, put it into a different bubble account, but you can do that as well. I'm not sure I would recommend it considering how easy it is to just transfer the accounts, but I hope that's, that's helpful. Is there a listing platform like Acquire but for deep tech science based businesses? You know, I, I don't know, I would say, you know, maybe try listing if you have a deep tech science based business, feel free to list it on Acquire.

We'll take a look.

But yeah, I'm not too sure about that one. Okay, guy, ready for your first question?

Yeah, throw it at me.

Okay. How can I prove my credibility to sellers, especially if I don't have much experience buying businesses?

It's a good question, a great question and probably a common concern like how do I compete with the five time acquiring buyer over here if I'm a zero time acquirer? I think what it comes down to is making sure that you don't set yourself up for a history of backing out of deals. It's very natural to get cold feet as a first time buyer, but if you put yourself in a position with all the avatars for credibility that you can do on the platform, so identity, financials, etc. Communicating your process, but then also having enough calls with the seller prior to offer that you feel really confident about the offer that you're putting forward that's going to win deals. You'll often get asked by a seller prior to signing, do you feel like there, there's any chance that this offer won't make it through? And that's a, it's a weird question, but it's a valid question. And if you can answer that with pretty, pretty strong confidence and say, hey, as long as there's not a financial discrepancy or some sort of surprise metric in churn, then yes, I feel very confident. That's, you know, point number one in building your reputation onward and outward.

I don't think I would add anything to that answer. Yeah, I think just covering the basics, you know, how are you going to pay for this transaction? Can you verify the funds you have on hand, make sure you verify your identity, be credible in terms of presenting yourself, are you able to show a past history of experience in operating businesses like that you're looking to buy? I think can go a really, really long ways. Okay, next question. I'll be taking this one. Do I need to have a clear strategy before I reach out to sellers or can I figure it out as I go? You can figure it out as you go if you want, but you're not really going to instill a lot of confidence in sellers. For example, if you're signing an NDA to review a multi million dollar business, then the seller says, why are you interested in my business? And you say, oh, I'm just looking around. That's not gonna make them really excited to work with you even if you are able to transact on a business of that size. So yeah, I'd highly recommend having at least just the basic outline of your strategy. For example, you sign an NDA for a specific type of SaaS business of a certain size, you're able to tell the the founder of that business, I'm looking to acquire a SaaS business like yours that generates a similar amount of profit each month in your specific industry. Now you don't need to have every aspect of that part figured out, but at least knowing what you're looking to acquire is a requirement in my opinion. Kai, would you add anything to that?

Yeah, I would just add it in terms of what we spoke about today, answering those questions one through five at the start, these are kind of to set your boundaries, your guidelines. Things are going to change as you dive into the business. So as Andrew says, you can go in with a little fluidity to this but have your guidelines at least on kind of what your strategy is going to be.

Definitely. Okay, next question. What are the best ways to negotiate a deal without causing friction or delays over to you?

Yeah, I think the best way is to have some sort of science and math to your evaluation. If your evaluation is based upon arrangement, is based upon net profit, whatever it may be, it's good to communicate that in your ultimate offer. My offer is 3.5x of profit. And then as you go into negotiations around the price, if that is to dip, you have some basis to negotiate the price if there was a dip. Now there are negotiations throughout the offer such as non compete, such as post closing services, such as those types of negotiations. I would say to have upfront ahead of time, just say, hey, here's my offer. I do want to define a couple points just to make sure we're all on the same page. Lead the conversation with I'd like to have this conversation now so we can make this work. So that kind of goodwill is fueling the negotiation point which is natural and common in deals to negotiate the terms of the non compete, the terms of the post closing services. Better do it now than have it at the gates of the APA where that's going to be the thing that stalls you.

Definitely everyone's going to have their non negotiables, both buyers and sellers price that you're willing to pay at the most and for sellers there's going to be a minimum that they're even going to consider. So I agree with Kai. Being able to negotiate your non negotiable points up front, your deal breaker points. One other thing I recommend during really any negotiation on those points, do it over a call if you can. You can write it out in an email, but generally if it's done live you can get through a lot of the negotiations rather than dragging it out over a couple weeks. Get out your all all your main points Moving on to the next question, what basic tools or resources can help me streamline the acquisition process? We touched on this earlier, but I would say the acquire.com tool. So everything from submitting a letter of intent to drafting an asset purchase agreement, securely closing with escrow.com or our other escrow partner SRS Acium, we have a bunch of different tools that are built to standardize and streamline the entire acquisition process from start to finish. So definitely leverage those tools. In terms of resources, we have a podcast where I will interview hundreds of founders that we've helped sell their business through us. We do bi weekly webinars like this one that you're attending or watching right now. We have a full resource center with a number of different pieces of content that we either written or recorded ebooks. So we have tried to write essentially the book on startup acquisitions. So I definitely recommend checking out all the content that we have, speaking with other experienced entrepreneurs that have acquired businesses or sold a business of their own. All these resources can be of huge help. If you're just looking to start into entrepreneurship through acquisition, how fast should I be moving from the first contact with the seller to closing the deal?

Well this gets into time kills deals. What I tend to see is on average list to sale for the successful businesses, 90 to 120 days list to sell. So if we're thinking about that timeline, the first 30 to 60 days give or take is exploratory meetings, early due diligence, et cetera. So As a seller and a buyer, you want to make sure everything's thorough. Buyer, you want to get in there early, have that introductory meeting, maybe follow up with a product demo, outline an IOI before your LOI that's going to allow you to essentially embody being quick but not hurrying and rushing and think about every angle. You know, what are the things that could cause you to hesitate on the business? What are the risks that you'll need to mitigate? Think everything through. So don't skip any steps in trying to achieve speed, but just do things in a nice cadence. Right. Communicate at least once a week. Set the follow up call after you have that initial call and certainly you'll be faster than most people. Yep.

Again, I wouldn't add anything that answered. Kai, well done. I think what I loved about that answer was just communicating what is that timeline and what is it? What does it look like? Especially as you, you know, go into a side loi. You want to communicate expectations clearly to the seller, the entrepreneur, so they know exactly what to expect just to ensure there's nothing that pops up. Or they think it's going to close in 30 days, when really you need 60 days for due diligence as an example. Okay, next question. How do I explain my acquisition process and goals to sellers in a way that helps build trust? Oh, I think I kind of just touched on it. But communicating your timeline and your specific process can go such a long ways and build so much trust. If you're going to need 90 days, saying that up front is huge. If you're going to need longer than that, maybe you're working with an SBA loan. You have to figure out bank financing. There's something else that's going to drag out the due diligence and acquisition process a little longer. Just communicate that. If it's shorter, you should definitely communicate that up front because that may actually help you win a deal. But one thing I do not recommend doing is if it's going to take you, say, longer than 30 days to close a transaction, don't say it's going to take just 30 days. And then it rolls into 45 days and 60 days. Again, setting expectations upfront and early builds a lot of trust. Kai, you want to add anything to that?

Not specifically. I think you hit it on the head there. I did see this question in the chat, which I was answering while you're speaking, and I want to know if we could switch over to that one. What do you think?

Yeah, yeah. You want to read it?

Yeah, of course. This From George is how can I keep all potential buyers actively engaged without losing any while ensuring I can select the right one. So. And then when the time is right. So very loaded question, very legitimate question. I think what it comes down to is running your process. So this is on the sell side. Run your process on the sell side, have your calendar available, send your intro message, have weekly follow ups with your buyer pool. That's a touch base. And what I mean by that is as common saying here, treat every buyer like they're going to be the buyer until they give you reason they're not. So they signed the NDA for a reason. Let's follow up with them week to week. Let's be considerate that they are looking at 20 to 50 deals in their queue at a time. And when we follow up, let's have purpose, follow up with education. So Q and A updates with what's new in the business at the end of each month, let's follow up with a financial update and again your calendar, trying to get people to bite, that will bite. And then when it comes to making the decision on what's right, consider a deal timeline. If you have good activity. The purpose of this deal schedule or the timeline is not to necessarily spark competition, but more so establish a fair playing field and an equal playing field so the ones that are interested can perform underneath that timeline. You always have to try to ignore the grass is greener on the other side. If you have a good offer, a reasonably good offer, try to ignore, well, what if another offer that I don't know about comes about in a month or two? It's a very risky road to go down.

Nice. One thing I love that you just said, Kai, is when you follow up, make sure to include new information that is going to be valuable to buyers. I do not like in sales and acquisition, really in anything, when follow ups, just say, hey, I'm following up. Hey, how you doing? Hey, you know, add something in there. It could be, you know, a list of questions from other buyers. It could be a favorable press article of the business. It could be updated monthly financials, it could be maybe anything really. Any additional piece of information you can give buyers to loop into the conversation, Give them a reason to respond back to you. Schedule, meeting, whatever you're looking for is the way to go. And then like I said, using tools like deal schedule to manage the timeline with other buyers. All these touch points really add up to a really, really good process and a great experience for other buyers. And I think the most important part of all this is it allows you to really ensure that most of your offers are going to be coming in at the same time. And the advantage to that is allows you to properly negotiate against each offer. For example, if you get all the offers in on, you know, it's called a Wednesday or Thursday or Friday, you're able to tell other buyers, hey, I've received an offer. I'd like your terms to improve in this way or your valuation, whatever it may be, that's really important to you. It's just such a great way to, to maximize your acquisition is, you know, continuing to communicate with all buyers, controlling the timeline and ensuring that, you know, these offers come in at the right time and buyers know that timeline so they can act accordingly. So, Kai, that was, that was a great answer.

Thank you.

All right, we got a few more questions here and then we're going to wrap it up at the top of the hour. But Kai, this one is to you. Why do deals tend to fall through and how can I prevent that from happening?

Great question. There's so many ways a deal can fall through. It it's scary if you don't have any guidance thinking about it. But again, the things that are in your control is what you present. So as a seller, to prevent your deal from falling through, transparency leads the way. The facts and even what's wrong with the business will not kill the deal. It's the surprises down the road. So making sure that everything that you present is as up to date and as transparent as possible so that there are no surprises in due diligence that could logically reverse the deal. The rest is really logistics within the deal. And here at Acquire, we have the ability to help facilitate the deal. So having form builders, having escrow provided, having people like myself facilitate and communicate throughout the deal with you really minimizes some of the pitfalls that can happen with lack of communication. Even just assuming that the buyer is going to do this when they're not. It's all about keeping that core communication there. So a lot can kill the deal, a lot can reverse the deal, but there's a lot in your control that can keep it steady for the course. Yep.

I mean, aside from the obvious reasons deals fall through, like something doesn't add up, you lose a large customer during due diligence. I've been a part of a acquisition like that which are, is really, really tough. So main things like Kai said, you know, you want to make sure that you're being honest with buyers in terms of the performance of the business. You Want to be getting ahead of anything that might be viewed as a surprise or something that can be viewed negatively. You want to be controlling how that is communicated. So again, getting in front of anything that you feel that will put your business in a negative light. But I think it really just comes down to being confident in your business, communicating both the really great parts and also the parts that aren't so great. We like to say at Acquire that you know, it's best to present your business warts and also bumps and bruises and all. So they're there, they're to be found out anyways by the buyer. So you might as well communicate the reason for them. Maybe you have some technical debt, maybe you had a really bad quarter or bad year, maybe the business has stopped growing. Whatever it may be, just being able to get ahead of things that could be an objective objection to your acquisition with the buyer is critical.

Yeah, absolutely. Andrew, do we have some time for some of these questions up in the chat?

Yeah. Do you want to move over to those for a little bit?

Yeah, I see some here from a little bit ago that we missed. This one's from Anil. Is it okay to upload a P and L statement of the last year? But we are a four year old startup so the answer is yes, of course it's okay. But I encourage you to upload the historical. And the reason is some buyers within their criteria are looking for businesses that have eclipsed over a year. Over a three year period is most commonly so being able to show how the business has grown over that time is a great thing to do. And you might say, well our last year is our best year. The previous years might be far worse. We were in a development phase. Just tell the story with it. Buyers need to know the history, so upload at least three years if you can.

You want to toss me a question, Kai?

Yeah, yeah. Let's see here. So how about this one at the bottom?

That's pretty. Yeah.

Another one from, from Anil here. If one is selling a VC backed startup, does it have any advantage or disadvantage to a buyer?

That's a, that's a big question. Well, typically the disadvantage is going to be on the seller side, meaning there's typically approvals that you're going to need to get from your investors to sell the business. And then generally VC backed businesses are not very profitable most of the time. I've seen it go both ways. I've seen very profitable venture backed businesses and some that are not so profitable. So I think that applies to every business. If it's unprofitable, it's going to be harder to sell. There's a lot of restrictions to getting the deal done that's going to be harder to sell regardless of if it's VC backed or not. So it just depends on the business. But let's assume that it's a profitable venture backed business. It's not growing 100 year over year, but it has a healthy growth rate and it's compared apples to apples to, let's say a bootstrap SaaS business. It's got to be typically the same amount of work to acquire the business. VC backed businesses will generally require a stock purchase agreement, while bootstrap businesses can be sold under an asset purchase. Asset purchases are more advantageous to buyers. But again, if everything is apples to apples and they're both able to facilitate and get approved an asset purchase rather than a stock purchase, so they're not selling liabilities to the new buyer, they can be completely the same. And we worked with both. We work mainly with profitable bootstrap startups. But again, if those things aren't restrictions on the sale, there's no difference.

Yeah, absolutely. This is great. Thank you for all the questions everyone. Let me just share my screen one more time as we're coming up on time here.

All right, well that was a lot of fun. Thanks everybody for joining us. We do these webinars about twice a month, so definitely keep an eye out for the next one. And in the meantime, if you're looking for some expert guidance on buying a business, reach out to our team. We'd love to connect with you. That's a big part of what we love to do@acquire.com is to connect not just with startup founders and learn more about their business, but also with you as a potential buyer to learn what you're looking to potentially acquire and really how we can make that happen. So we just put a link in the chat. If you want to schedule a meeting with our M and A team, we'd be happy to take a call with you, get to know you, and hopefully help you achieve your acquisition goals. So thanks again for joining today and we hope to see you next time.