Transcript of Efficiencies Expert Jason Helfenbaum On How To Increase Your ROI Through Training And Efficiencies
Lowell Ricklefs On How To Sell And Market SaaS Companies (#103)

[00:00] Introduction Welcome to the Sell My Business Podcast. I'm your host Jeffrey Feldberg. 

This podcast is brought to you by Deep Wealth and the 90-day Deep Wealth Experience. 

Your liquidity event is the largest and most important financial transaction of your life. 

But unfortunately, up to 90% of liquidity events fail. Think about all that time, money and effort wasted. Of the "successful" liquidity events, most business owners leave anywhere from 50% to over 100% of their deal value in the buyer's pocket and don't even know it.

I should know. I said no to a seven-figure offer and yes, to mastering the art and science of a liquidity event. Two years later, I said yes to a different buyer with a nine-figure offer. 

Are you thinking about an exit or liquidity event? 

If you believe that you either don't have the time or you'll prepare closer to your liquidity event, think again. 

Don't become a statistic and make the fatal mistake of believing that the skills that built your business are the same ones for your liquidity event. 

After all, how can you master something you've never done before? 

Let the 90-day Deep Wealth Experience and our nine-step roadmap of preparation help you capture the maximum value for your liquidity event. 

At the end of this episode, take a moment to hear from business owners, just like you, who went through the Deep Wealth Experience. 

[00:01:44] Jeffrey Feldberg: Lowell Ricklefs is the CEO and Founder of Traction Advising, which specializes in helping B2B SaaS companies with a greater than 5 million ARR get acquired. Lowell has been a Co-founder, CEO, Chairman, and COO of $120 million public company, Startups CRO, and Global VP at Rockwell.

Lowell is a global mentor, investor board member, and CEO coach. Lowell's current business Traction Advising. Started out of his frustration when he was in a buyer's position. The investment banker model uses accounting and finance people trying to sell.

In Lowell's words, no one hires accountants to sell products, so why hire them to sell a company? Selling and marketing a small SaaS company is more like selling a technology product than selling a financial instrument. With company buying and selling experience of more than 30 organizations, Lowell knows what internal stakeholders need to approve a transaction. As a founder and CEO, he knows what it's like to start up a company, build a product, hire employees, raise money, find customers, keep them happy and make payroll.

Lowell leverages this experience to craft acquisitions that get the best outcome for the founders and investors in a structured way that maximizes success

Welcome to The Sell My Business Podcast. And today you are going to be enthralled with who I have as a guest and what we're going to be talking about because as a business owner when you think of your liquidity event, wouldn't it be nice if you could have a crystal ball where your future self could come back in time and tell you to do this, don't do that. And here's where you really want to focus. That's some of the tidbits of information that we're going to be talking about today and doing some deep dives on, but let me not get ahead of myself, Lowell welcome to The Sell My Business Podcast.

An absolute delight to have you with us. Lowell, there's always a story behind the story. Why don't you tell us what got you to where you are today?

[00:03:49] Lowell Ricklefs: Thanks, Jeffrey. I'm thrilled to be here. I got here in a kind of circuitous manner. I was an electrical engineer, computer science graduate. And worked for Fortune 500 company, Rockwell. Went up the technical sales route and then worked for three technology companies, scaled one from a million to 50 million, had an exit to WPP, and then scaled another as the COO from 10 million to 120 million.

I was co-founder and CEO of a Fintech company that had an exit as well, but along the way was involved in acquiring about a dozen companies and had a lot of interaction with bankers and was always surprised. I had a sales background. Why a financial background people were in charge of a sales process?

They were very good with investment analysis, but they weren't very good salespeople and they followed a structured process. So, it came time to sell the company that I co-founded. I decided to leverage my enterprise selling background to run an enterprise sales process and position the company as I would position a technology product. I felt that small companies are acquiring a small technology company is more like acquiring a technology product than it is acquiring a financial instrument. And I think they need to be presented that way. So, I had that premise, we were successful selling our own company. One of our investors wanted some help running the process for another portfolio company.

And five years ago, I realized there was an opportunity out there to help other small companies, good B2B SaaS companies. We feel run a better process to help them find the right fit, get the most value for their business, and structure it in a way that makes the most sense for them.

[00:05:30] Jeffrey Feldberg: Wow. Wow. There's so much to unpack there Lowe, that's incredible. So, you've just had an incredible amount of experience, from Fortune 500 big companies to your own companies, Fintechs everything else in between before we talk about what you do today, and some of those insights. When you look back at you with the companies that you started and the companies that you sold and bought along the way, are there common themes of, hey, do this, if I want to do something really well, or at all costs stay away from this because it leads to just a disastrous outcome?

[00:06:03] Lowell Ricklefs: Well, there are a lot of directions that you can go there. When I was on the founder side and raising money and talking to investors, I always had the exit slide right towards the end of the deck. And I would throw some recent acquisitions out and some potential buyers, but I didn't really know what the buying process was.

And now I'm on the other side, I talked to at least a thousand buyers a year, sometimes 5, 10 a day. So, I know, what they'll pay for. I know what they're interested in. And at the end of the day, the reason B2B SaaS companies are valued as highly as they are. It comes down to growth and retention.

That's what they'll really pay the premiums for. The reason SaaS is valuable is because it's a reliable revenue stream. And if your retention is low, for example, if you've got 50% annual churn, people aren't really buying a long-term subscription. It's the equivalent of buying a two-year license.

So, those companies are valued more like the traditional license maintenance model company. So, a lot of things in there. Revenue is everything. I think a lot of people see a problem. They solve it and they underestimate how difficult it is to drive awareness, interest and generate revenue growth. But to me, survival and prosperity is all about revenue.

Pulling in revenue is less even about raising money than I think it is about revenue because then you can potentially can self-fund. And then retention. So, I think a focus on retaining clients, people that stick around for a long time and then ideally selling more to those same clients as well.

So, your net retention increases as well but that to me the survival part of it really comes down to generating real revenue people that will pay for your product and then stick around.

[00:07:49] Jeffrey Feldberg: Fascinating. And for listeners what's interesting here is Lowell's on both sides of the table and you know, what, if you want to win at a game. You have to understand what the rules are. So, Lowell when you're sitting in the buyer's seat now, and you're speaking to 5 to 10 buyers a day, a thousand or more buyers a year, you're really getting into the mindset of these buyers.

And I know at Deep Wealth, in our nine-step roadmap of preparation, step number three, the future buyer, it's all about the buyer's mindset and what we often share with business owners. Stop being selfish. Do not think like a business owner don't think like a seller transform your thinking to be like a buyer.

And I'd love to hear Lowell, there's probably, you know, Pareto's Law that 80% of the things that buyers are thinking about are probably coming from 20%, give or take of some common strategies or principles. So, most buyers out there when it's a B2B SaaS company that they're evaluating, what's going through their minds in terms of maybe the games that they're going to play for starters in terms of, okay, what can I do here?

It's a great company, but maybe I can lower the price a little bit. If I do A, B, C, and D, what would that be for most buyers of the types of games that they may play?

[00:09:00] Lowell Ricklefs: Yeah, really good question. And I think it's true in sales with selling your company or selling your product, you know, people really don't care about your company or you, they care about themselves and their problems. And so to the extent that your product, your company solves a problem that they have they're interested in.

So, I feel that you should understand the buyer, understand what they're trying to accomplish. And then talk about that. Don't talk about my name is so-and-so, my company is, yes, we do this, this and this. You have a hole in your product portfolio that we can fill that helps to generate revenue and EBITDA for your investors, put yourself in their shoes.

And it really depends. I'll say there are two and a half categories of buyers and they're starting to look somewhat similar. So, you've got strategics, which are real companies that have real clients and customers and they're trying to grow. And then you've got financial buyers, a group of people that are trying to invest someone else's money to make money on their money. For small SaaS companies though, they start to look a little bit similar, and here's why the financial buyers typically private equity, they own a platform company. A platform company looks like a strategic.

It's a real business that operates and but they're typically very active in buying ad-ons so companies with 2, 3, 5, 10 million in ARR can be added on or bolted onto these platforms. So, you know, some things are different if you're greater than 10 million ARR, you might be a platform company. We could spend a lot of time on this.

I'll keep it short but as a platform, they'll build around you, so your financials matter because the only way you can grow is organically or through acquiring other companies. With the strategic, you might have 100 clients and a strategic buyer may have 50,000 clients. To grow from a hundred to two hundred is a lot of work.

But if you're acquired by a strategic, really, all they have to do is all oversimplified as a marketing campaign, to introduce your product to their 50,000 clients. If they get 10% adoption in their clients, they've got 5,000 new clients. You're 50 times the size you were. That's why strategics can often just genuinely rationalize, paying more for the business than a financial can. Things to watch out for, you definitely want representation. You know, what do people try to do, things to watch out for on the private equity side, in particular, is to make sure that they've spent the time to understand your business.

The first part of a process that will run last for indications of interest and there might be 5 or 10 or 20 people that are interested in buying your business. What people will sometimes do is they'll give a high bid to make it to the second round of the process without really doing any work.

And you may choose them only to find out only then will they do the hard work of the due diligence and then they'll retrade it, they reduce the price. So, I look at certainty is a big deal. This is a lot of work and expense on both sides. You want to make sure that you understand what concerns the buyer might have, cause yes, you're selling and you're trying to put on your best face, but you want, at some point, you're going to know everything about each other.

It's important to expose everything, good and bad to derisk it before you get to the purchase agreement stage. You know with strategics, what I see it's a little bit different often they'll do their due diligence internally. You may have non-expert acquisition people, you might have a CTO that who's not an expert at doing due diligence, a VP of HR.

You may have SVP of sales, people who are very good at what they do but acquiring companies isn't their primary day jobs. So, that's where I feel the fact that I've been on the acquisition side often, I've actually had more experience acquiring companies than the acquire.

So, even though I represent the seller, I help coach the buyers on how to structure, how to do diligence, things that are important. It's also understanding how it gets done on the strategic side is that they'll sit around a table.

You have HR, you'll have product dev sales and they'll talk to each other. And all it takes is for one person to raise their hand and have an obstacle that can kill a deal. So, staying close to each of those individuals, understanding, if they have any concerns about moving forward, and then addressing those concerns. Often there are things that can be addressed to make them go away, but if they're not addressed in a timely fashion, they can take on a life of their own. And the company's interest will drift away.

[00:13:15] Jeffrey Feldberg: Fascinating. Lowell, let's flip the tables out. Let's talk about the sellers, the business owners, the founders, entrepreneurs that you're representing, and I'll speak from my own personal experience. Unfortunately, it seems because it's not an easy way. It's the hard way I find that I learn more from failure than from success.

That's just at least for me the way that it is. So, when you look at some of your clients in the past, Are there common mistakes that business owners are making that if they knew this in advance, if they could come prepared it in these few areas, it would make the world of difference. And if there is what will those areas be?

[00:13:51] Lowell Ricklefs: A couple of areas. One has to do with just properly preparing your business. If you're going to sell your house, they'll tell you that paint it neutral inside, stage it with furniture, cut the grass. There are certain things you can do to bump the price.

There are things companies can do. If you've never done a price increase, you can run a price increase, to increase your net revenue retention. When you're trying to bring in new clients, you'll sign up anyone and everyone. And if they leave, you don't care, at least they paid a little bit for a while that can negatively affect your retention metrics.

So, that's an important one. If they're not truly a subscriber, if they're really just a trial, make sure they're counted differently. The other thing that I see comes down to small companies, particularly if they're bootstrapped if they've not had to professionally report their financials before. Their financials may not be clean.

I'm not saying that there's anything like integrity-wise wrong. That's a whole nother level of problem. I'm just saying that sometimes, with a part-time bookkeeper, as long as your actual intake of cash is greater than your expenses, things are fine and you pay your taxes, but a buyer will want accrual-based financials upfront. They may buy the company based on your cash-based financials, but one make sure they're accurate. Make sure all the expenses were actually logged. Make sure all that your revenue is properly logged. But also there are some things in accruals that can be a little bit tricky, for example, if you collect on annual contracts, you'll have a lot on your balance sheet.

You'll have some unearned income, which is a surprise to many, many sellers because they say, oh, I've got 2 million in cash. I'll keep that, the buyer comes in and says, yeah, but you've got 3 million in unearned income. You've collected revenue on future services that the buyer will have to provide. And they'll deduct that from the sales price.

So, that's something more just to be aware of. And there's a little bit about, more it's learning about like net working capital is something that always gets negotiated at close and that can be contentious, but it's often something that even the smartest business owners struggle to understand that net working capital target because it feels like that comes out of their pocket if it's not negotiated properly.

[00:15:54] Jeffrey Feldberg: Now what's interesting we're talking about accrual-based accounting systems, but we're also talking about SaaS-based companies. And I know in certain circles you have this whole discussion that really the business model, the accounting of a SaaS-based company is really different than the more traditional accrual-based kind of company.

So, is there a case to be made Lowell of having a SaaS-based kind of accounting put forward as opposed to the more traditional accrual, just given how the business model works and how the business operates?

[00:16:25] Lowell Ricklefs: Yeah. SaaS companies compared to one of the companies we had. We had 13 offices in 10 different countries and we had intercompany transfers and foreign exchange. So, financially SaaS companies tend to be fairly simple. But where does start to be a little bit complicated is with some of the metrics like cohort analysis.

But also the accrual financing but like I say, it really comes down to, so you don't have accrual like you don't have projects that you have to account for this project is 20% complete. This one's 40% complete. How much can we count as revenue, but it really kind of comes down to do you bill monthly?

Do you bill quarterly? Do you bill annually? Usually, it's monthly or annually. And that's one where if you've got cash accounting, you may not even have thought this through before you just look at your cash balance and say well, I've got cash on the balance sheet. I'm gonna want to try to keep that, but I can promise you that buyers, even if you don't do accrual financing, they will do a quality of earnings and they will determine what the equivalent accrual finances will be. And again, that unearned or deferred revenue piece that they feel is something it's a liability to the company. And the problem is many founders have already spent that money or even worse they don't have any money on their balance sheet. And they've got, 5 million in deferred revenue and they sell a company I'm making this up, but they sell the company for 50 million. And they want to deduct that from the 50 million sales price to make it 45 million.

[00:17:47] Jeffrey Feldberg: And somewhat related different, but related. And it's something that often comes as a surprise for business owners. I'll broadly classify it as EBITDA adjustments. Perhaps their business-related expenses. I mean, hopefully, they're business-related expenses, but their lifestyle expenses.

So, things like I am just making this up. Perhaps it's having seasons tickets to your favorite sports team, or you're going to the opera or the ballet, or maybe you've decorated the office in a particular way that's more for your tastes than the run of the mill kind of thing of what you'd see out there.

What's your take on EBITDA adjustments and how do you best protect yourself even before the liquidity events starts? What are you seeing out there?

[00:18:28] Lowell Ricklefs: Yeah it's common to provide and it's very typical and buyers know that they understand that as a founder-owned company. Your goal is to minimize profits, not maximize profits it's to minimize it so you don't pay taxes on it. So, they understand that you might go out and buy, $120,000 Tesla X, because you can depreciate at a hundred percent because it's over 6,000 pounds as a company vehicle. They understand that there are expenses in that business that wouldn't be in the ongoing entity. And they will question all of it, but it's very common to go in we call those add-backs.

 You pull out the things that wouldn't be a normal business expense when it's owned by the new owner, like whatever that might be.

[00:19:11] Jeffrey Feldberg: And you know, what's interesting and we talk about this in the Deep Wealth Experience. It's our Due Diligence module. And, it's really a bittersweet pill because our thinking on this is our thesis is, if you don't have to do it, don't do it because why put yourself in a situation where number one, the buyer can make a judgment call.

We'll look at this. If the business owner's driving a Tesla, where else are they overspending in this business that I should now be taking a closer look at or the buyer simply saying, I don't agree with you. You can't prove it. So, I'm going to keep this in. It's not going to be an add back and you're going to have to suffer the consequences of that.

And when you think about it Lowell, I'm just making up numbers here, even though you're paying higher taxes because you're more profitable. If you're getting 10 X or 15 X or 20 X, whatever that number is, it's really in the scheme of things a rounding error, it's a small number to pay by having what I'll call cleaner types of books with no EBITDA adjustments or minimal EBITDA adjustments.

Then having to go back in after the fact and trying to explain anything, but let me do this. So, you were on the other side. And you really raise a terrific question. It's a sales process. So, no offense to all these brilliant financial people out there, but why the heck are they leading the process as opposed to having a professional salesperson lead the process, and you found a pain point in the market, a niche in the market, and you began to address that.

I'd love to hear what you're finding in your world today as you take your sales expertise and you have your sales hat on, and you're a smart guy and you understand the financials and you're incorporating all of that in there, but really a sales-forward approach as opposed to a financial or accounting forward approach.

So, what's going on out there in your world. And what are you hearing? What are you seeing?

[00:20:57] Lowell Ricklefs: Well, I'll tell you what, super brief history lesson. 2002, Enron did some bad things, Sarbanes-Oxley was put in place to hold CEOs accountable, it added 1 to 2 million in costs for a company to go public. It made it difficult for small companies to go public.

In steps, private equity basically they took over the low end of the public stock market and they have a five-year plan, which you could argue. Works better than these quarterly earnings. They did really well, 40% internal rates of return. So, funds were worth 10 to 20 times what was put in. Flash forward to today there's nearly $5 trillion in money in private equity firms that are just below the GDP of Germany.

So, there's a massive amount of money out there. People have SaaS multiples and publicly traded companies have doubled in the past two years. So, digitization is accelerated, but people really understand the value of this recurring revenue. So, the short story is there's a lot of money out there.

There's more capital trying to be deployed than there are available opportunities. So, it's a good time. If you need capital to be raising capital, it's pretty lucrative. The price is high. But you're right, I don't know that there are any smarter, the salespeople or the financial people.

They're just different skill sets. I would argue salespeople make lousy financial people. You're not going to hire a salesperson to run your financials because they won't do a good job. But I would argue most founders have never hired a financial person to sell their product.

So, that kind of makes you think, and you wouldn't, if you're gonna sell your house, I'll use that analogy. You wouldn't hire a bank to go sell your house. It's just not their natural skillset. The reason they're in it is historically for investment analysis, again, complex financials, foreign exchange.

When you've got asset-intensive business, it's very complicated. It's probably, you know, I'd argue many of those businesses are 70 to 80%, a financial exercise to understand, what is your return on invested capital? But for SaaScompany, financials are pretty simple. So, it's a technology in theory, it's infinitely scalable.

It's not like these intensive businesses. So, understanding the buyer and truly what their strategic roadmap is in painting a picture of their success, being better as a result of acquiring this business, and helping them put that model together. And it's pretty busy we've done three transactions this year.

We've got a fourth that we've got offers in on a fifth that we're working on in another company that we're talking to. We're as busy as we'd like to be. And we're pretty selective about who we work with. It's a stressful process for CEOs to go through this I'd argue it's one of the more stressful things that people go through.

So, we've got a pretty high bar for the integrity and character of the kind of people that we work with. So, we're pretty proud of the alumni group of people that we've worked within the past.

[00:23:38] Jeffrey Feldberg: It's a terrific success story. Congratulations with that. And so if I put myself, I'm the founder of a SaaS-based company and I come to you Lowell at Traction Advising, and I'm saying, okay, here I am. I want to have some kind of liquidity event. Please take a look. Lowell, what are you looking for that would have my company make the cut for you to say yes?

You know, we've taken a look, we're going to work with you. So, let's start there. What does that look like of you saying yes come on board?

[00:24:04] Lowell Ricklefs: Yeah. Part of it is, I do mentor, I do CEO coaching and part of why we do this is to help people. I understand what it's like to have an idea and a business idea on a napkin and to get your first you know, $80 of revenue. So, I've got a lot of empathy for founders.

I've got a lot of empathy for angel investors, VCC funds and investors, seed funds as well. So, initially, my goal is just to be helpful. So, I'm happy to talk to people. We don't engage officially with the vast majority of people that we interact with, but I'm happy to give free advice and coaching to anyone that is interested, that's looking for help.

But specifically for the companies that we engage with, you know, companies 5 to 20 million in revenue, 5 to 10 million is probably where the majority of the companies are that we work with. One of the things that we look for is the alignment of expectations. I've talked to people that have, you know, they've got $200,000 in revenue and you know, I'm happy to talk to them about what things look like, and they'll say, I would take 50 million for my company.

 You know what, maybe you'll get that. I'm not going to say you won't, but I'm not gonna be able to tell you that I can do that for you. So, part of it is the alignment of expectations. So, based on the buyers that we know, and we talked to. Do I believe it's reasonable?

Do I think someone will pay that? So, that's part of it that makes sure that we're on the same page. I don't want to engage with people if I don't think there'll be a successful outcome, which again is a little bit different, from larger investment banks. I've got a business partner in London.

He and I each work on one to two deals, a piece at a time. Bankers often will have 7, 8, 9, 10. Each at a time. So, it's more of a bring as many in the front door as you can, and try to close 50%. Our goal is to close a hundred percent. We close about 90%. So, we're very, hands-on so kind of selective.

So, back to the original question though revenue range is one part of it. Is it interesting? Like, you know, we, again, we talked to buyers, we have a pretty good idea of what there's an appetite for. That we look at the total available market size. Is it big enough to be of interest, to potential acquirers?

And then we'll look at some of the basics, we'll look at their logo churn, we'll look at revenue growth. We've looked at companies that are low growth.

And we've actually represented companies that have negative growth. Negative growth is difficult. I've heard the expression from a buyer no one wants to catch a falling knife. So, negative growth isn't good. But so some of the basics that our buyers look at, we kind of vet just to make sure that we're confident that we can deliver on our goal is under promise and over-deliver, but to try to always get more for the founder than they thought they could.

[00:26:26] Jeffrey Feldberg: That's interesting Lowell. So, as a founder, I come to you, you take a look at my company. There's an alignment of interests. My revenues are in the right range. And you say, yes, come on to the team. We're going to now start working with you. So, what happens next in your process, Lowell? What should I expect as a founder now that you've taken me on and we're looking to have a liquidity event?

[00:26:47] Lowell Ricklefs: Yeah. Great question. So, initially, we'll do extensive research with the strategic buyers and we'll create segments. So, there is a segment of buyers, let's say you've got a North American presence well they're European companies. There may be Asian companies that are looking for a presence in the US so it may do the same thing, geographic expansion.

There are other companies that you have a very specific solution and it may be a part of their broader product portfolio. So, we'll create segments of companies really based on why they would buy you. And then we'll vet that list. We'll look at recent acquisitions. We'll look at the number of employees.

Are they growing or shrinking? Do they have capital? So, we'll kind of vet how likely are they to be able to buy you? And then we'll look at the company's stated strategy as well. And then separately we'll create a list of the different financial buyers. We've got about 300 that we work with on a pretty regular basis.

And we'll identify those that look like a good fit. And then we'll create a marketing deck. We call it a confidential information presentation, again, fundamentally different than the two-tone banker decks that they'll put together. They're very comprehensive, typically put together by new analysts like freshly minted, MBAs.

 Very smart people, but usually their first job is banging out PowerPoints. They don't typically tell a story, the banker's version. It's a hundred-page thick document full of facts, figures, trends, et cetera. That I would argue as a CEO, if you sold your product that way, you probably wouldn't be very successful.

If you sent a thick deck to people and said, read this and tell me if you're interested. I don't think you'd get a great response. So, we really approach it from the point of view that we really try to simplify it. You know the classic expression I apologize for the length of my letter. I didn't have time to write a short one.

We take the time to write the short one. We try to get the essence of why the company is great and the essence of why your company will be better if you buy this company. So, we try to make it crystal clear. So, it doesn't take a lot of effort to read it and understand it. And then the financials put together a financial model, which is pretty typical.

And then we'll reach out, we'll have a kind of initial conversation. If they're interested, we will do an NDA, send them the sip. We'll do what we call a fireside chat with the CEO.

Typically kinda 30-introduction was the founder can do diligence on the buyer. Buyer kind of gets a feel for the company and hear the story. If it looks like there's interest longer term. We will engage a little bit further. Typically, six to eight weeks later we'll require indications of interest.

So, it's a loose LOI, but it gets rid of the tire kickers. Forces, people to put pen to paper. How much do you value the company? What does the structure of the deal look like? What's the source of your funds? What further diligence would be required to get to a defined agreement? What other approvals are required internally before this deal gets done?

From that we'll select a shortlist spend a lot more time, digging deeper, and then get to an LOI. Negotiate the best possible LOI. The super due diligence is kind of the final part, the most exhausting part for the founders. And then, sign and close and refresh your bank account, for the money to appear, That's literally how it works.

[00:29:46] Jeffrey Feldberg: Terrific. And thank you for explaining your process. Lowell, I'm wondering, because you're focused on the SaaS space, particularly in B2B. Do you find that you're bumping into the same buyers again and again? Or is it different buyers that you're interacting with?

[00:30:00] Lowell Ricklefs: It's a mix of both. So, particularly on the financial side, we talk to a lot of the same people again and again. So, we get to know them pretty well. On the strategic side, it's a mix, there are some that we work with repeatedly. But we're constantly finding new and different strategics. It depends on their strategy.

And sometimes you'll find a company that doesn't compete and isn't on your radar, but they sell into the same client base and they're struggling to grow, but they realize we can sell your product into our client base and increase our revenue by 10 or 15%, even if they're unrelated products.

[00:30:36] Jeffrey Feldberg: And you know what's interesting about that, then I'll throw the question your way. So, really, I don't think you disagree when I say that you're a specialist, both in the industry and at least on the financial buyer side. You know who the players are, you've dealt with them. Perhaps you do a number of deals with them over the course of a year and year over year.

And if you contrast that to a generalist, so a generalist doesn't know the industry, they're going to presumably cast a wide net to bring buyers into an auction process of sorts. How would you compare the differences with you as a specialist to say someone who's a generalist and why you, why the advantage over what you're doing as a specialist?

[00:31:18] Lowell Ricklefs: It's a really good question. I'll go back to when I was buying companies and we had bankers all very smart, but I just generally found that they weren't helpful to me. You could tell they were rushing, just trying to get a process done, get meetings, set up, like answer questions.

We'll spend the time. Part of it is credibility. I've been a CEO, COO of multiple companies. I don't say it to brag but when I talked to CEOs of multiple publicly traded companies and I sit with them, much of my career has either been either as the CEO or as the COO, as their right-hand person, helping them put together business plans is what my career has been. So, when I sit in and explain things to them, it's very different than again, no offense to these bankers are very smart people, but they've not typically not owned a P&L they've not started coming out, run a company. If you've been through all of that, you're kind of in a small circle of people that kind of understand the pressures that go on.

 So, part of the credibility often generates a strong level of trust with the founding CEOs. Part of our network of referrals actually comes from the buying CEOs, who will say, hey, these guys are different like they get it. So, part of it is we're smaller. We try harder.

We've got more of a holistic view. Yes, we can do the financials, but for example, in our meetings, we're not just looking at the numbers, we're reading the body language of the potential buyers to find out whose head is nodding, who's concerned. Who's not paying attention so we can identify that the people that could make this thing goes out, understand what their issues are to try to make this thing successful going forward.

Mark and I we're very, very good enterprise salespeople. That's what we're good at. And we apply that here and, you know, statistics will show that the best salespeople are 5 to 10 times more successful than even the mediocre ones.

And we've found that applying those same styles techniques and asking questions we're getting similar results.

[00:33:05] Jeffrey Feldberg: So, what's interesting. And for our listeners out there, here are some really important takeaways. So, Lowell's speaking with you as really one of us, he's been a business owner. He's also been in very large companies, Fortune 500 companies. He sold businesses and he's coming to you and saying, hey, I have been in your chair.

I've been there and I've gone through this process. Didn't like what I see. And as a result, now, I'm going to bring my background, my sales expertise, and I'm going to do this in a little bit of a different way. I'm not going to be the largest one out there. I'm going to be very focused. And I have a very high completion rate and oh, by the way, I'm very passionate about sales and I'm very passionate about M&A in general and just getting that done.

And so as business owners, we all have to take a step back and ask, what's really important to us when we're finding an advisor? And you better be having an advisor to help you have your liquidity event or your exit because this is the largest, single, biggest, most important financial decision of your life.

And rhetorical question intended. How can you master something you've never done before? You simply can't. So, Lowell comes along and says, hey, I've been down this journey many many times, let me share my wisdom and my experience with you. So, that you're the benefactor of that.

And so Lowell, when you look to some of the most successful liquidity events that you've had, if you could share with the audience two or three strategies of success, what would that be for them?

[00:34:33] Lowell Ricklefs: Thanks. The easiest or maybe the hardest is for the business itself, you know, to have a good business, but I think how you represent the company, whether it's the fireside chat, or if they're excited about having you as a part of the business going forward, or a part of your team, key elements of your team.

Sometimes I've talked to founders who are like, hey, I've been doing this for 12 years. I'm done, I'll do a transition. I want out. Having a great business is the first part, like I said, that's the easiest, but it's also the hardest, but also how you represent it and the ability to talk to it in a way that the buyer cares and then the integrity of everything that they see.

So, if the first thing that we approach them with, when we talk about logo churn, net retention, revenue growth, et cetera. As they start to due diligence, if the numbers start to shift, if things were exaggerated, it starts to reduce the comfort level they have with it. So, if things are consistent from start to finish that's probably one of the best things that a person could possibly do.

The other one would be the ability to move quickly. So, once you're in a process yes there are a lot of analytics that get run a lot of analysis that gets done, but at the end of the day, there's some emotion involved on both sides.

And so understanding that their level of interest and excitement will wane over time. If you take too long to get things done or respond that you risk multiple things can happen. One, your business, you could lose a big client that could scare them away. They may be approached with another company that looks more interesting that they get excited about.

So, just the ability to move quickly before things change. There's a saying, time kills all deals. Not necessarily true, but there's an element of truth to it that it's important to move quickly.

[00:36:12] Jeffrey Feldberg: Absolutely. And like we say at Deep Wealth, two words, simple words. Speed wins, particularly when you're the seller. Speed wins, you never know what tomorrow brings speed wins, and the better prepared you are that's what we're all about with our nine-step roadmap of preparation, the better prepared you are before you liquidity event, they have a professional advisor like yourself.

You can really extract on that speed wins and off you go and you cross the finish line and beat out some of those uncertainties. I mean, who knows what tomorrow brings?

[00:36:41] Lowell Ricklefs: Yeah well, and the preparation side I can't impress on people enough, how hard people work, 5, 10, sometimes 15, 20 years to build a business. And most of the time, if not, almost always spend almost no time prepping it up to be sold, which is what you're all about. I mean, I used the house analogy.

A small amount of effort to prime it up can get you another, you know, at least 5 to 10, maybe 20, 30, 40, 50% more. So, if you were to change your business fundamental, you might have to spend five more years sweating through it where sometimes relatively easy, but I get it.

People are wired to do what they do to be successful and probably get to sale is just a little bit different.

[00:37:22] Jeffrey Feldberg: Lowell, You are preaching to the choir here at Deep Wealth. And because people come to us and listen, we have a 90-day system to master the nine-step roadmap of preparation. We're very clear to tell people if you're coming to us and you're thinking about having a liquidity event a month from now, or three months from now, or six months from now, you probably should go elsewhere because we can't really help you because for us, if we could wave our magic wand, it's minimum two years, ideally three or more years to prepare.

But in that preparation process, the strategies of preparation are really the strategies of growth. So, you tell me, you keep a thriving, profitable business forever, or you sell it tomorrow. You have a choice. And the point is you have a choice, but that's us, I'm curious in your world, Lowell. If someone were to approach you and say, hey Lowell, I've got this incredible SaaScompany, we have this you know, just a terrific trajectory.

How long should we be preparing before we come to you? What's your cup of tea on that one?

[00:38:16] Lowell Ricklefs: I think people from formation should at least think about what it's going to take to exit. And some of that starts with intellectual property agreements for all employees. If it's the two of us in a coffee shop, you're not that worried about it.

The buyer's going to care if they find out that, oh, so Jeffrey wrote half this code and he didn't sign his IP agreement for six months after you were founded. Technically that's a risk and if the founders don't part friends, getting that person to sign, eight years later can be difficult. At a minimum, stressful or expensive to get them to sign that's it the deal can go through.

So, I think from the start, but realistically I think that people that probably have the best exits started thoughtfully at least a year in advance. Are there some things you can do in the months beforehand? Sure. But realistically I think that people where the exits have gone the cleanest, they're just well-prepared for it.

The deal that was the fastest for us was four months from start to finish. They had thoughtfully thought out one to two years ahead of time and put the right things in place. So, there was no rush. It was part of a thoughtful plan process. And the exit went smoothly. I think it reflected that. And I think the value they got for the company reflected that as well.

[00:39:27] Jeffrey Feldberg: And for listeners, did you pick up on that? Did you hear that one number that Lowell threw out it was four months. So, a company that prepared well in advance start to finish four months and you compare that it's always a little bit up or down either side, but typically you hear 9 months. Four months, nine months.

And if you think about it four months, while that's less due diligence, less time in the market, less risk, it's really the place to be.

So, Lowell let me ask you this. As we begin to wrap up this episode and there's been so much wisdom here, I want to turn to another kind of wisdom for you. And here's the question. I want you to think about the movie Back to the Future and in the movie, you have this magical DeLorean car that can go to really any point in time.

So, imagine Lowell, it's tomorrow morning, you look out your window and there is a DeLorean car. The door is open. It's waiting for you to hop on in, and you can now go to maybe Lowell as a young child or an adolescent or a young adult or whatever the period of time would be, what are you telling your younger self in terms of, hey, Lowell don't do this, or here are some lessons learned or here's some life wisdom. What would that be for you?

[00:40:32] Lowell Ricklefs: Yeah, I think, on a personal level, you know, I was Fortune 500 company. I had a good career, but I really think I thrived in the startup community where we're making good decisions quickly worked out better than taking a year to do something extremely thorough.

And I think I would tell myself, I would have been a CEO sooner and surrounded myself with wise people from the different functional areas, as opposed to, I felt like I had to be an expert in all of those different functional areas before I could be a CEO. I think, run sooner, surround yourself with wise people.

Make sure you've got the right people though. I think it's easy to pull in some people as advisors that don't turn out to be as helpful, or as wise as you thought they would be. And again on the company side, if your founder is to focus on revenue, focus on revenue and revenue growth.

A lot of young founders, I see a focus on fundraising, but the reality is fundraising. The first exit I think is when people realize that, oh, people get this, they're not giving you money. You're giving them shares of the company and you're giving up control of the company and an exit you may not get as much. You won't get as much. But yeah, a lot of them chase the headlines in the paper, which I get, and it can be helpful but don't raise any more than you need to and focus on generating revenue as quickly as possible.

[00:41:53] Jeffrey Feldberg: Words to the wise and some terrific insights and life strategies there for everyone to follow. So, Lowell, as we wrap this up and I'll put this in the show notes. So, for our listeners, it's point and click, couldn't be any easier. Lowell, if someone wants to reach you online, what would be the best place?

[00:42:09] Lowell Ricklefs: Yeah. You can reach me directly at lowell[at]tractionadvising[dot] com. You can look at our website, it's, and take a look on LinkedIn. LinkedIn is my go-to place and I've got some things posted on there that might be useful to people as well.

[00:42:23] Jeffrey Feldberg: Terrific. And we'll have all those in the show notes. So, it'll be really easy. And on that note, Lowell, as we wrap this up a special thank you for really taking part of your day and spending it with us on The Sell My Business Podcast. And as always, please stay healthy and safe.

[00:42:36] Lowell Ricklefs: Appreciate it. Thanks, Jeffrey.

[00:37:06] Sharon S.: The Deep Wealth Experience was definitely a game-changer for me.

Lyn M.: This course is one of the best investments you will ever make because you will get an ROI of a hundred times that. Anybody who doesn't go through it will lose millions.

Kam H.: If you don't have time for this program, you'll never have time for a successful liquidity

Sharon S.: It was the best value of any business course I've ever taken. The money was very well spent.

Lyn M.: Compared to when we first began, today I feel better prepared, but in some respects, may be less prepared, not because of the course, but because the course brought to light so many things that I thought we were on top of that we need to fix.

Kam H.: I 100% believe there's never a great time for a business owner to allocate extra hours into his or her week or day. So it's an investment that will yield results today. I thought I will reap the benefit of this program in three to five years down the road. But as soon as I stepped forward into the program, my mind changed immediately.

Sharon S.: There was so much value in the experience that the time I invested paid back so much for the energy that was expended.

Lyn M.: The Deep Wealth Experience compared to other programs is the top. What we learned is very practical. Sometimes you learn stuff that it's great to learn, but you never use it. The stuff we learned from Deep Wealth Experience, I believe it's going to benefit us a boatload.

Kam H.: I've done an executive MBA. I've worked for billion-dollar companies before. I've worked for smaller companies before I started my business. I've been running my business successfully now for getting close to a decade. We're on a growth trajectory. Reflecting back on the Deep Wealth, I knew less than 10% what I know now, maybe close to 1% even.

Sharon S.: Hands down the best program in which I've ever participated. And we've done a lot of different things over the years. We've been in other mastermind groups, gone to many seminars, workshops, conferences, retreats, read books. This was so different. I haven't had an experience that's anything close to this in all the years that we've been at this.

It's five-star, A-plus.

Kam H.: I would highly recommend it to any super busy business owner out there.

Deep Wealth is an accurate name for it. This program leads to deeper wealth and happier wealth, not just deeper wealth. I don't think there's a dollar value that could be associated with such an experience and knowledge that could be applied today and forever.

Jeffrey Feldberg: Are you leaving millions on the table?

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Your liquidity event is the most important financial transaction of your life. You have one chance to get it right, and you better make it count. 

But unfortunately, up to 90% of liquidity events fail. Think about all that time, money and effort wasted. Of the "successful" liquidity events, most business owners leave 50% to over 100% of their deal value in the buyer's pocket and don't even know it.

Our founders said "no" to a 7-figure offer and "yes" to a 9-figure offer less than two years later. 

Don't become a statistic and make the fatal mistake of believing that the skills that built your business are the same ones for your liquidity event. 

After all, how can you master something you've never done before? 

Are you leaving millions on the table? 

Learn how the 90-day Deep Wealth Experience and our 9-step roadmap helps you capture the maximum value for your liquidity event.  

Click here to book your free exploratory strategy session.

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This podcast is brought to you by the Deep Wealth Experience. In the world of mergers and acquisitions, 90% of deals fail. Of the successful deals, business owners leave millions of dollars on the deal table.

Who are we and how do we know? We're the 9-figure exit guys. We said "no" to a 7-figure offer based on 3-times, EBITDA. Two years later, we said "yes" to a 9-figure offer based on 13-times EBITDA.  In the process we increased the value of our company 10X.

During our liquidity event journey, we created a 9-step preparation process. It's the quality and depth of your preparation that increases your business value.

After our 9-figure exit we committed ourselves to leveling the playing field. The Deep Wealth Experience helps you create a launch plan in 90-days. Our solution is resilient, relentless, and gets results. Enjoy the certainty that you'll capture the maximum value on your liquidity event.
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Lowell Ricklefs On How To Sell And Market SaaS Companies (#103)