Insight
Recurring revenue shifts valuations from EBITDA to revenue multiples
“There's nothing faster that will take you from a multiple of EBITDA to a multiple of revenue when you go to sell your company than to have recurring revenue”
Insight
Founders selling companies should hire M&A advisors to create competitive tension
“Instead of trying to figure out how to do it yourself, I would, in all cases, Hire an M&A professional. Look, that's not like, that's not what I do for a living. So I say that without trying to sound, you know, like you can't hire me to do that. So I'm not try…”
Insight
Warrillow: Founders must add management layers at 20 employees
“So at 20 employees is where you sort of start to have, you can't have everybody reporting to the founder anymore. You've got to have some layers, right?”
Insight
Warrillow: The primary SOP challenge is employee adoption, not creation
“What we learned was the world doesn't need another SOP software. There's lots of great sort of written SOP software out there. What we came to learn through the research was the problem was slightly different than we'd originally thought it was that what the r…”
Assertion Not checkable as stated
Warrillow: Jody Cook sold JC Media for all cash using SOPs
“She got an offer, premium offer, a hundred percent cash at closing, and the reason she was able to close without an earn out is her standard operating procedures.”
Assertion Supported
HubSpot offered $25M to acquire Moz at $5.4M ARR
“Rand has built SEO Moz, software, SaaS business, something around five, 5.4 if memory serves million dollars in ARR, annual recurring revenue. And Halligan says, look, you know, we want to buy your business. We're going to give you an offer of twenty five mill…”
Assertion Supported
HubSpot's rejected $25M offer for Moz would now be worth $200M
“And I said, well, out of interest, what would that offer from Halligan now be worth given the increase in HubSpot stock? And he said it would be worth close to two hundred million dollars.”
Insight
Founders have maximum negotiation leverage when courted by acquirers
“A somewhat glib answer to the question, when's the best time to sell? It's like when somebody makes you an offer. Because at that point, you've got negotiating leverage, right? You're not courting them. They're courting you. And you can use that to your advant…”
Insight
Proprietary acquisition deals guarantee selling a business below market value
“And a prop deal is where the acquirer has proprietary or unique or exclusive access to buying your business. And it's a recipe for making sure you sell your business for much less than it's worth.”
Assertion Partly supported
Viviscal leveraged 12 bidders to raise sale price to €150M
“He got 12 bidders for the company, and the best offer at that time was, I think, a hundred and three million euros. They're based in Ireland. Well, the 12 offers were perfect because that gave him great leverage. He, you know, played one off the other through …”
Insight
Willingness to sign an NDA is a reliable proxy for buyer interest
“Yeah, an NDA is gonna be a good, Proxy for interest. Cause acquirers don't like signing NDAs because it exposes them to liability. So if you've got a tire kicker, someone is just sniffing around your company to get competitive information. They're unlikely to …”
Insight
Answering an acquirer's price expectation question is a negotiation mistake
“In fact, I think answering it is usually a mistake.”
Insight
Acquirers are typically between five and 20 times the target's size
“Simply put, the five to 20 rule means that a company that's going to acquire your business is likely going to be between five and 20 times the size of your company.”
Insight
Tying M&A earn-outs to post-acquisition earnings invites financial manipulation
“The problem with tying an earn out to your earnings is, of course, once you're a division of another company, you lose control over your financials. That gets done by head office. They can oftentimes graft other expenses onto your P&L, head office expenses. It…”
Assertion Not checkable as stated
Warrillow: Business owners score lowest on owner-dependence metrics
“And it turns out that across all eight dimensions, the one that business owners score the lowest on is hub and spoke. So this idea that they can build a company that's successful, that's got recurring revenue, but if they get hit by a bus, the business stops a…”
Assertion Partly supported
Warrillow: Arvid Kahl transferred FeedbackPanda's codebase using a one-hour video
“To transfer Feedback Panda, he had like a one hour video he shot for the buyer of the business, Kevin McArdle, and basically described how all of the code work, the code base, like how it all sort of stitched together.”
Assertion Not checkable as stated
Warrillow: Adding a book cover increased landing page conversion to 18%
“And that one change, having the book on the landing page boosted our conversion rates from where they were kind of two to three. We're up around 18% right now and have not really made any material differences other than the book on the cover.”
Assertion Supported
Rod Drury sold Aftermail for $45M with only $15M upfront
“Before he started Xero, he actually created A company called Aftermail, which was a way to archive email, and it was a very successful company. Built it up, sold it for forty-five million bucks. That was the headline number, but it was actually, after we unpac…”
