What’s Happening

Did you miss it?

• PepsiCo Sued by New Your state for plastic pollution

• Unlocking affordability: This startup opens a gateway to attain a 3% mortgage rate

• Canadian small businesses say they feel squeezed by Amazon power ‘imbalance’

Resources & Tools

Self-Funded Searchers Take 80% of the Equity.

That is… if you are in the USA and can take advantage of the SBA program. Unfortunately, we do not have a tool similar to the SBA loan within Canada, but perhaps that’s not all bad. This scenario requires a buyer/searcher to take out a personal guarantee and leverage 90% of the purchase price. Exactly, high risk = potential for high return. We have seen these models in other industries. You better just double-check those cash flow sensitivity models before making the decision 🥲 

Buy Small Sell High has written a great explainer of how an SBA loan works along with the risks or caveats to consider. BSSH is an excellent resource for sellers, buyers, and owners. They have other thought-provoking content that is valuable regardless of which country you are buying or selling an SMB.

Candian perspective

Based on several data points, here is what we are hearing with respect to senior debt and seller notes in Canada. There are many factors that need to be considered for each specific SMB acquisition and this should be used as general insight.

• Senior debt at 75% of the purchase price. It can go a little higher and much lower depending on deal characteristics

• Seller notes up to 30-35% of the purchase price. Typically with performance criteria which is seen as a win-win mechanism by sellers and buyers

Leveraged Buyout Model

Here is a very simple model that can be useful for back-of-napkin math.

Continuous Improvement

Podcast

CEO of Cleo (Sales, Product, Team, Culture, SaaS metrics)

This is a fantastic episode, one which will likely deliver valuable insights and thoughts for current SMB owners and searchers. Topics: customer value, building a best-in-class sales and product org, growth with profit, and PE ownership.

I first started listening to this episode while on a two-hour journey with my son to pick up his new-to-him electric bike. He researched, found, negotiated, paid for his new vehicle and perhaps drove Mom and Dad a little crazy during the six-week process. He signed me up to help with transportation, seeing that he is 10 years old, however, was the cost of having to listen to Dad’s podcast worth it….😂

Highlights:

• 23:30 - Sytems and processes for sales and marketing. Structured pipeline review with OKR’s. Drove predictable sales projections. Going deep into their segment seeking to understand what is of most value to every persona. Creation of thought content. Value Selling

• 32:00 - It’s not easy to find good salespeople because they are doing well where they are. Cleo finds success with a strategy composed of a farming system to train good potential salespeople, being purposefully on living a good culture, and always networking to identify great people who you can bring in earlier than when needed or budgeted.

• 36:00 - Great salespeople are CEOs of their territories. Building alignment and buy-in on purpose, values, and vision.

• 37:00 - Mahesh provides a good overview of how he had to grow as a CEO during phases of the business over the past 10 years. First focusing on the sales side of the organization, then moved onto a product focus asking “What is possible for our customers and how do we deliver more value to them”. Today his priorities are hiring, people, regular communication with customers and expansion strategies.

• 43:00 - 49:00 - If you’re a SaaS business please listen to this section! Growing the business while focusing on profitability. Mahesh goes into KPIs and comparables of industry peers. Knowing if your unit economics are good helps you make better decisions on how to spend on the product. Tip: Metrics, tracking, and wondering questions will help increase the probability of successfully growing a business. 

Podcast

Science-Supported Journaling Protocol (Improve mental and physical health)

Better sleep is a personal area of interest thus I wanted to share this experiment. I have not yet completed the process however, do see value in sharing Huberman’s assessment. It provokes thought!

Results one might expect from this journaling method:

• Lowering anxiety

• Improving sleep

• Boosting immunity to illnesses like colds and flu

• Reducing symptoms of autoimmune disorders such as arthritis and lupus

• Providing relief for fibromyalgia, a condition of excessive pain

• Improving everyday living metrics, including memory and decision-making

What is happening during this process: Huberman states that we do not fully understand why this process works beyond that open truthful writing is the stimulus that allows for neuroplasticity to occur which has a positive rehabilitation effect on the mind. (If my wife, a School Psychologist, reads to this point I am sure a better explanation will be provided as an update 😃 ) 

The method is supported by over 200 peer-reviewed studies and is considered a foundational pillar practice for mental and physical health. Despite its effectiveness, it seems to be relatively unknown outside of the fields of psychology and psychiatry.

This method requires a relatively small amount of time and can be done over the course of a week or a month. Even if you stop journaling after this period, the benefits can still last. Because the investment is generally low, comprising of emotional effort and a small time commitment, it could be a great way to see positive results with little risk.

Here’s the process we learned from the session. We highly suggest you listen to the podcast to gain your own perspective. Huberman provides a summary around time 1:28:00, along with some warnings and advice.

• Set a Time Frame & Decide on a Traumatic Event: Decide whether you want to journal over a week or over a month. The method is flexible and can fit into your schedule. You will journal a total of 4 times writing about the same event each time. Identify a traumatic or challenging event in your past.

• Start Journaling: During your chosen time frame, start writing in your journal with the goal of continuous writing for 15-30 minutes. Don’t worry about grammar or spelling however, ensure to write in full sentences and thoughts. Don’t stop writing throughout the time period. You want to write about the facts and how they made you feel at the time of the event. Once complete close your book or word file. Take a 10-minute break before getting back into your day.

• Repeat three more times: Complete the same process of writing for 15-30 minutes on the same topic three additional times. You can spread the times out by days or by weeks.

• Reflect on Your Entries: Once the 4 sessions you are done. You should experience benefits from this point. If you choose you can go back and analyse how your writing changed over the sessions. Specifics are provided during the Podcast. Lastly, this writing is for you, not for others.

Note: I am not endorsing, recommending, or suggesting any results that may be realized from partaking in this process. There could be negative or harmful outcomes for some individuals. I am only providing my thoughts and information for you to consider for yourself. In a future issue, I may provide an update on what I learned during this experiment.

Sales & Biz Dev

SaaS: Rethink your business model or say goodbye

Saas business’s customer acquisition costs have steadily been escalating over the past eight years with a significant increase over the Covid-19 years. The concept of what is happening is not all that complicated, it makes sense. Generally boiling down to ~ gorilla marketing and sales do not work anymore and sustained recurring revenue is a direct impact of recurring impact!

Highlights:

• Shift to Sustainable Growth:

  • The SaaS industry experienced a significant shift from "scalable" growth to "sustainable" growth, marked by the SaaS crash of 2022. Investors now prioritize enduring drivers of a subscription model over rapid but unsustainable expansion.

• Quality over Quantity in Lead Generation:

  • In the subscription model, the traditional emphasis on the quantity of leads is replaced by a focus on lead quality. The interconnected nature of SaaS means that a marginal difference in relevant leads has a disproportionate impact on Annual Recurring Revenue (ARR).

• Customer Success and Retention are Crucial:

  • Customer Success (CS) is not only important in closing a sale but also plays a critical role in onboarding, ongoing product impact tracking, and facilitating expansion phases of the customer lifecycle. Reducing churn and increasing usage through renewals and upsells are vital for sustaining profitability in a subscription model.

    

    Source: Winning by Design

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