How to Buy & Sell Businesses Successfully | Insider Tips from Flippa & Swoop Experts

hi and Welcome to our podcast today on

how to buy and sell your business and

thinking about funding in the context of

buying yourself buying or selling your

business um today we'll be going through

it from buying and selling contacts

thanks to flipper and I'm joined by CEO

of flipa Blake you're very welcome Blake

thank you very much Karen awesome to be

here great to have you um and I'll be

kind of going through anything from a

funding perspective um I'm the

co-founder of swoop and we'll be

considering all types of financing when

it comes to buying and selling uh your

business so why don't we kick things off

with just a bit of a a general overview

on things and first things first be

great just to hear a little bit more

about flipper just to set the context

there yeah for those uh SW users who

have logged in and welcome to the

flipper Community as well um flip is a

Marketplace and platform to buy and sell

subscale online businesses and digital

assets so think about a Shopify

e-commerce business an Amazon FBA an iOS

or Android app assess um app or or

Chrome extension slack plugin those

types of things they can all be traded

on our platform and we have just an

excess of 1.95 million buyers registered

with the platform and we see uh just an

excess of 10,000 transactions a year

amazing so uh definitely the right

person to be chatting to in terms of

listing your business when it comes to

on an ending e-commerce SAS Amazon F FBA

so I suppose digging into that for a

second have you kind of notice much

changing in the landscape in terms of

the types of businesses that are coming

on or you seeing a kind of healthy

spread of all sorts of online businesses

within F yes we've seen an evolution I

will admit that e-commerce is still the

number one traded asset type on flipper

it did go through somewhat of a Down

term maybe mid 22 um as there looked to

be a tightening of capital availability

a trading down of customers with high

inflation Etc and so that has made

trading conditions a little bit tougher

for e-commerce but it's still the number

one traded asset on the platform we've

seen new categories pop up as investors

who are quite savvy Look to find that

new um asset that can take them on their

acquisition journey and perhaps get them

an Roi at a little quicker rate and so

that includes things like YouTube

channels which is very interesting um as

well as of course the evolution of SAS

but where SAS is then utiliz so as I

mentioned at the top of the chat um

Chrome extensions slack plug

those types of SAS assets have become a

little hotter um and then as it relates

to funding which is why I'm super

excited to talk to you um about you know

we've seen far more buyers interested in

acquisition Finance um finding Pathways

to Capital which will enable them to

either buy a bigger deal um or at least

complement something else they already

um have with with some more smaller

deals so it continues to change um but

you know the reality is the platform

economy is not going any anywhere

there's more digital assets than ever

before abely um and as a result of that

there's more Savvy buyers who are

capitalizing on this this particular uh

space um one thing I should have said

before we started uh please feel free to

use the chat box to type in any

questions and answers uh I know we've

had a huge amount of registrations for

this I think we've tapped out our Zoom

link for the first time ever so uh

please feel free to share any questions

if we don't get to them don't worry

we'll follow up with a A Blog and an FAQ

afterwards to cover absolutely every one

of them um but just digging in one

little bit more just in overview context

in terms of flipa and the type of

customers you're seeing there from the

context of the businesses that are

selling what is the kind of the general

thing you're seeing in terms of the the

size of the

transactions um the kind of timelines

associated with those transactions what

would be great question um so we're

obviously talking about um a good amount

of money and so five six and seven

figure transactions are where flipper

spends the most of its energy and where

the buyers find the asset types at the

sizes they want and so the time it takes

to get a deal done does differ greatly

between five and seven figure as you

could probably expect one you've got a

great deal of competitive tension down

at the five figure Mark um and as a

result of that that tension drive speed

the other thing about that is as you and

I would both appreciate there's more

Capital availability at the five fig

tends to be mostly cash mostly all

upfront and the due diligence process in

a five fig deal is relatively simple

compared to what you might do at seven

figure landscape now at a seven figure

deal you're talking about average

six-month sales cyes and there's a

reason for that one you're talking about

a large sum of money two the due

diligence process on that is more

involved three you're often not talking

about

um cash buyers you're talking about

buyers who have gone found funding

through a multitude of sources in some

case friends or family in other case our

swoop Finance relationship um and in

some cases you know other other um debt

Capital facil facilitation or facilities

so it does vary a lot clearly um where a

business is got fantastic operating and

trading history Y where they are showing

great evidence of continued growth

typically measured on trailing 12- month

growth mhm uh where their metrics and of

course the metrics that matter are

different by business model but where

the metrics stack up against the peer

set and the benchmarks IE you know

suburn uh sub 7% churn for a SAS

business very low refund rates for an

ecommer with a high aov call it in

excess of say $75 aov and more um those

businesses will trade a bit quicker but

the short answer to question is 180 to

180 to 220 Day sales cycle for a seven

figure asset yeah and then you you

mentioned in the five figure assets it's

super competitive in terms of you might

have multiple buyers so if you're on the

sell side in a five fig scenario what

would you expect to be running in terms

of potential interested parties within

Flippa uh in that category and then a

lot a lot okay haters haters would

manage that yeah so if you take and I

can only speak to it because I'm always

sort of running one deal at any given

time on a platform with 6,000 assets

I'll talk about a particular asset that

I'm looking after it's a seven figure

asset

top

of we've had an excess of

21,000 individual buyers have a look at

the asset and that's translated to just

in excess of 1,700 inquiries oh my go so

that's a lot now the ultimate buyer for

that asset turns out to be the CEO of a

private Equity backed online toy

retailer okay and so perfect buyer good

fit given it's a baby and baby fashion

asset um but that took us some time

because that perfect buyer wasn't

necessarily

um within the flipper Network to begin

with we had to wait for the matching to

take over and bring that buyer into the

flipper ecosystem and so therefore the

timing takes a little bit longer on a

five figure deal I'd say absolute

minimum 500 inquiries but up to an

excess of a th000 yeah okay uh I suppose

whether it's five figure six figure or

seven figure or even a figure how you

set out your listing as a seller or or

or put the opportunity out there I'd

imagine is pretty important kind of what

have you seen has like good behaviors or

bad behaviors in terms of capturing the

market from a selling point of view yeah

there really good question because one

you can't sell a business without having

a clean book of financials um you also

can't sell it without being able to

articulate the the the operational

Runnings of that business similarly if

you're on the buy side and you're

looking to Avail yourself of capital

it's unlikely you can get that Capital

if that business owner hasn't presented

the financials in a way which is

befitting what what I A lender would

like to see so what you need to do is

you go through the flipper onboarding

experience and you connect some data

yeah um that data is one of 15 different

data Integrations Shopify Amazon

QuickBooks Online zero and a multitude

of others that will then bring data into

the platform and enable us to expose

that for you and to the prospective

buyers those prospective buyers have

signed an NDA before they get to see

that data at least in most cases the

next thing you'll want to do is talk

about standard operating procedures so

what is the business how does it

run as a result of how it runs what is

the the revenue and then ultimate um fi

Financial uh position of that business

and what we talk about in that context

is is adjusted net profit so you take

out because they're small business

owners you'll take out things like

entertainment Uber taxis and a few other

discretionary items that don't make

sense on a p&l as it relates to a buyer

considering the deal that will then get

presented and then a buyer will enter

the deal room and start to ask questions

about that deal um hey tell me about um

how you acquire a customer um if you

advertise on Facebook what if what is

your cost of acquisition of course as

those questions come in you should

continue to update that listing to

ensure that it's up to date as it

relates to what buyers want to see just

diging into that one for a second BL

because I'm kind of curious um because

given obviously the success of flipper

in that you've got such a massive buying

Community but if you're putting yourself

in the seller shoes for a second

obviously you want to get a a sale in as

experted way as possible but you've got

to I'd imagine be quite careful in terms

of the stage gate of the information

that you're releasing given it sens of

Nature and also in terms of capturing

buyers intent and not wanting to spend

any time with time wasters and also

thinking about it from the I actually

need to spend time running my business

while as also answering these questions

how do you guys think about that in

terms of advising the the stage gate

over that information and is there

anything within the kind of the fliping

network that can kind of help uh those

business owners in terms of kind of

qualifying out H any any of that kind of

buyer intent or or questions yes so I

think once it gets beyond the

non-disclosure agreement being uh signed

by the buying party the risk of

information being disclosed to a buyer

that a buyer can act on uh to to somehow

damage you or your business is actually

the risk of that is quite low yeah so if

you say that your cost of acquisition on

Facebook is $50 yeah um that doesn't

mean that suddenly as a function of

knowing that I can execute to that level

um if you say that you're in the Baby

Fashion Nation you've got this fantastic

supplier in China that hand Stitches the

names of um children around the world on

those jumpers before you sell them that

doesn't mean that I know how to find

that supplier and then I know how to

stitch those names on those jumpers so

it's it's interesting we find a lot of

small business owners are quite cautious

with what they disclose the reality is

if you don't disclose enough you don't

get the buyer interest um and most of

the time the risk of disclosing

something that somebody else can act on

is actually very trivial M it's a little

bit different where you have um

technology that is intellectual property

that you're protecting um some kind of

unique application for AI or some kind

of um unique way of an outbound engine

finding customers to bring to your

platform for instance you might not want

to disclose that mhm now ultimately once

a buyer submits an Loi

a letter of intent that is that is

either subject to financing or um

subject to a due diligence period and

they're typically 45 to 90-day due

diligence periods you will have to

disclose a lot M what kind of stuff will

you have to disclose certainly you'll

need to lift the lid on financials um so

you'll need to provide zero access uh

QuickBooks online access should you have

audited financials from a bookkeeper and

or accountant you'll need to disclose

that tax returns you'll need to disclose

that um and even standard operating

procedures so um what does the warehouse

look like how is how are things stocked

what are your inventory levels um which

stock range produces the the vast

majority of your sales um if you've got

a churn rate you know what is the speed

at which customers churn um what is your

net retention all of this stuff you're

unlikely to get away with not disclosing

if you're trying to collect

a

$50,000 um exit or a $5 million exit the

reality is it's a lot of money for

whoever's buying it um I suppose digging

into some of those uh terms you kind of

touched on like like turn rates or cost

to customer Acquisitions so naturally a

lot of these businesses were talking

about are in the digital space online

and so typically they wouldn't have uh

that' be asset life from a physical

sense sense of the world but obviously

uh both sellers and buyers are finding a

sense of fair value uh and people can

gravitate towards revenue or they can

gravitate towards profit but imagine uh

in the sub sectors that you have there

are going to be some key scores that

people are looking at when determining

fair fair value um are you able to kind

of talk us through maybe some some

listings and showcasing where some of

these metrics are and how they show them

and how they how they drive in uh

interest or or attraction in the

opportunity yeah Absol absolutely so the

metrics that matter for each asset type

are of course unique and different and

so a buyer who is interested in

acquiring say an online publisher which

is you know I guess better term to blog

yeah um will be looking at free traffic

so what percent of your percentage of

your traffic is derived through organic

search by SEO and what are those

keywords look like what is the

competitiveness of those keywords so do

you have a moat around your demand

generation now if you do that means that

asset's likely to be a bit more passive

than something that requires ad spend to

acquire that same level customer base

and that's obviously very important for

an investor because they then understand

what their outgoings are likely to be as

it relates to customer

acquisition once they've then derived at

an equation IE great deal of free

traffic they're then going to look at

the revenue and how the revenue is

produced now buyers are Savage so it's a

little bit different for each buyer but

for example there was a particular asset

that was called all about cookies and it

was a gdpr compliance blog mhm and what

they had figured out was that they were

making $5 per page view and 99% of the

traffic was free traffic IE organic

right now $5 per page view from AdSense

is actually very good that was two ad

slots per page and those ad slots were

generating $5 per page view really good

awesome um do doing maybe $2.5 million

Topline but like at a net profit margin

of 97% there's no acquisition cost no

Lovely One employee yeah um nice lovely

margins lovely um now that's obviously

atypical you don't see that in SAS you

don't see that in e-commerce you don't

see that in in an Android and or iOS or

Android app typically anyway okay so the

buyer's happy now what is the buyer then

going to assess to derive fair market

value they're going to assess whether

they can do that more efficiently mhm in

the in the acquires cas

they had an ad sales

team so they were going to strip out

AdSense they didn't actually care about

how it was making to money today they

cared about the quantum and what the

revenue P page view metric was once

they'd figured that out they said okay

well let's go and have a look at the

other assets we already own how

effective is our own sales team at

converting a page view to revenue

greater than what this one is doing they

did that they acquired it um in

excessive $5 million acquisition um they

acquired that business they stripped out

AdSense within 24 hours and they started

selling against the page viws amazing um

one thing I'm gonna wanted to dig into

in that both flip and swoop of pretty

Global audiences and and I suppose for

the purpos of today we're really talking

about us Canada UK Ireland but in

particular you see loads of transactions

around around the world and I just

wanted to to know from the the cell side

do you see any nuances in terms of speed

transaction side

uh sub sectors by by by location yeah

really good question I mean American

buyers are more prolific on our platform

than any other buying and do you think

that's just a psyche thing or yeah you

know I'm Australian um we tend to

be my kiwi representation today good

colors um we tend to be a little more

risk averse than the Americans most of

us I think that's everyone in the world

um the other thing is availability to

Capital that's yeah okay so Americans

are quite content with the idea of

taking on debt um to pursue

entrepreneurial Endeavors um and that's

an awesome trait and so um not only are

they willing to do that the availability

of capital is a bit

greater um and there tends to be a

better understanding for the digital

economy in the US right now than elsewh

interestingly enough though here at

flipper 67% of our deals are cross

border so that's mostly not all the time

but mostly an American buyer buying from

an asset now we see greater Supply in

Europe than anywhere else in the in the

world really so Europe's great Supply

demand is predominantly American

interesting now I think that will

continue to shift as the digital economy

grows and as the buying Universe around

the world starts to become a little more

and I'm trying to say this in a nice way

but a little more mature as it relates

to that uh risk aversion yeah last last

night here in London um we we had 125

people turn up to a Meetup and they were

predominantly buyers learning about the

sector showing interest so I think it

continues to expand and evolve and

that's part of the reason for the swoop

deal actually because we want buyers

from all over the world as you said at

the moment this this deal is limited to

Island the UK Australia and the US um

but as it relates to the swoop deal we

want more buyers to be able to access

Capital to be able to buy these deals

more liquidly in the marketplace uh and

absolute I think from a a macro Trend

the supply capital is definitely getting

more globalized and those traditional

barriers uh where particularly like

larger in financial institutions like

Banks because of Regulation and

legislation they are constrained to only

put that Capital into a specific

Geographic Zone um but what we've seen

is a huge proliferation of cash go into

the private Equity Market um and a lot

of that cash that's in the equity Market

but hasn't been expunged and in both the

private equity and the equity spaces

they're not necessarily constrained to

traditional Geographic barriers that

Banks or alternative financial

institutions um have which means that

there's a great opportunity for uh

businesses buyers and sellers to tap

into this and I think it's both our jobs

as as business owners H to be able to to

to connect that that supply of of

traffic traffic and capital but I think

the great news is that is there's an

abundance of liquidity out there um but

it's in the same way you're talking

about how do I how do I think about

listing how do I think about value when

you think about a financing side of

things uh it's evolved and it's matured

so you really need to be well well

prepared but the good news is for anyone

listening is is there's there's

fantastic uh liquidity and and LS of

lots of good uh supply side either there

can we talk about that a little bit so

if I'm a buyer on flipper and I'm

utilizing swoop what are the types of

things that I need to understand about

that process The Lending process one how

long it takes to the materials and made

at my disposal whether it's more about

me or more about the asset that I'm

looking to acquire yeah and I think

there's some uh similarities in terms of

how you were kind of explaining to me

about whether it's a five fig seven

figure or eight figure Transaction what

you'll find in terms of like a

documentation preparation and a length

of time of of transaction will be very C

responding to in terms of what you need

to prepare uh that being said even if

you're going for a smaller transaction

it is always best to to be prepared and

have access to financial documents

yesterday and so it's brilliant that uh

flipper and swoop Connect into things

like your zero your QuickBooks your

Shopify because hopefully then it just

puts you in such much steady shape that

you don't have to go trying to drag and

analyze this information but it is

really important to start with your

yourself um so the person who is doing

the buying um and and to your kind of

cultural point of about aies and

Americans different nationalities have a

sense of comfort talking about

themselves H if I take my own

nationality Irish people don't tend to

like to be as maybe as bravado as say

the US so when it comes to acquisition

Finance they need to tap into their us

psyche a little bit more sell themselves

sell themselves because it's

particularly if you're going for

external financing people need to buy

into it they need to understand it and

they understand why you and why you've

got the capability to not just acquire

this business but actually service the

death that you're going to bring it so

the starting point is going to be you

and the people associated with you and

that's super super important so if you

don't put the time and effort to explain

yourself and you're reasoning you're

going to fall on on the F the first

hurdle um the the second stage is is to

also have those kind of key financial

documents together again it doesn't have

to be war in peace having a one pager

that can articulate the proposition how

it sits from your skill set your team

skill set how you're going to execute on

it uh and beneath that always have uh a

36-month financial forecast to hand uh

that talks through a forecast of p&l a

balance sheet and a cash flow model

absolutely there's assumptions in there

um as we touched on you're going to have

certain information available to you at

various different stages which you can

bring it in but you absolutely will need

that whether it's a bank alternative

lender Equity or VC and uh one thing we

were touching on earlier on about

information and preparing information

one thing where we see people just get

it completely wrong particularly at a

kind of a banking senior debt level is

it seems a weird thing to say but but

kind of shooting for the Stars

unrealistic these mad hockey stick

things like Bankers like actually would

hate hate to see that they just want to

see realistic Capital exactly completely

different we want to see a story that

makes sense someone that understands the

industry someone who's going to add

value and someone that can service the

debt they're they're the key

requirements and and you should be

thinking about it in terms of the key

documents the key documents is about you

and your team one pager typical deck and

then have that three-year uh forecasted

model that goes alongside it so when you

and I were talking this morning in

preparation for today um even I was a

little bit surprised about how much um

went into understanding the operational

capability of the acquirer and so can we

just double click on that a little bit

so if I'm buying an e-commerce business

because it's something I want to acquire

my financial capability to afford is is

clear and obvious for everyone to see

the underlying performance of the

business that I would like to acquire is

very good but perhaps it's been growing

25% year on year for the last three

years I'm still going to need to present

to the bank through SW my ability to run

that through my own capability yeah for

for sure and I think all so sometimes

people get very attracted to manage and

buyin and uh they can be challenging

from an external financing point of view

if you don't have demonstrable skills in

that business that you're acquiring or

at least not having someone within your

team so that's super important to show

how you have uh worked in in that

industry before or in terms of if you

are maybe doing a a bimbo which is

basically where you are bringing some of

your management in yourself and keeping

the management of the the business that

you're acquiring and being able to show

that actually through through that

structure you're going to be able to

bring the Best of Both Worlds where

you're going to learn from from

management that that that's there uh and

also bringing kind of uh players players

in that they're going to be able to add

those efficiencies that that you were

mentioning kind of earlier on one of

your acquisition examples but absolutely

people are key to this I think we we

were chatting this uh earlier on yes

there's obviously huge value in revenue

and profit but who are the people that

drove drove that so equally in in in

analyzing the business from a financing

point of view uh it's equally really

really important to edit any

Underwriters or investment committees to

understand who are the people going to

be be running it and often they they

need to understand how involved those

old business owners are I think uh even

even we see a lot of acquisition

financing being done on an unsecured

basis particularly on on the UK side of

things we've seen a real increase in uh

unsecured financing uh oh since uh the

the financial crisis 2008 but what we've

also seen over the last 2 three years is

the amount you can get it's kind of

going from kind of 250 to 500 now you've

got a large am of players who are able

to go up to 1 million at a r fairly

decent rate starting kind of from from

9% but it is unsecured Finance at the

end day and if you do want to use it for

acquisition that seller often will have

to take a PG it's very unlikely that

they're going to be able to to do it so

so often you're going to have to re

rethink what what the instrument might

might be if if you can't um rely rely on

those those people but I think you you

you were making an interesting point

earlier on actually outside of Finance

um understanding how those people can

add value in the next 6 12 or 18 months

post transaction can be really really

important in terms of getting a deal

over the line it's very useful from a

financing point of view to understand

how it works but I also think for the

success of of the deal is it fair to say

that you really need to understand what

role those people will play in in the

immediate post-transaction uh world yeah

and you know that deal I was alluding to

before um online toy retailer publicly

traded um buying a a baby fashioned

business out of Australia in that

particular case um they are raising

Capital to do that deal um and of of

course that is predicated on the

existing business owners staying in the

business for the next 18 months so for

those Sellers and entrepreneurs

listening in today who are thinking

about exiting and thinking about how um

they might exit it's often not as clean

as take cash walk out the door go to the

Bahamas have a cocktail it's often um

take some amount of capital up front and

then subject to an earnout but then the

capital that you received up front has

probably been provided by a financing a

bank non-bank lender or somebody else

and then of course they are very intent

on ensuring that the business

remains at the level of that it's been

performing for the last 3 years again

into the next 12 or 18 months and

they'll therefore want the founders to

stay on board and and the financiers

kind of want that too because often when

you're kind of structuring uh debt for

for Acquisitions okay there might be uh

immediate I need to just buy the sa but

actually sometimes uh what we'll see IS

F are are are getting senior debt so

they can go in a buy and build uh

strategy but the banker lender want to

get familiar with how they're going to

uh encourage sellers to sell but also

how are you going to encourage sellers

to stay in the business so yes I'll give

you the senior debt you know you can tap

into the sum of money but they want to

understand how it's going to be serviced

so particularly when we see things like

e-commerce or SAS they'll want to see

how those payments are anchored into

those monthly average monthly sales or

how are those payments Anchored In into

a subscription fee but equally what they

love to see is okay you're putting a

level of growth expectations your model

as we said don't see a hockey stick but

equally you're putting in so so what are

those motivators that you're you're

going to kick in is it going to be great

people you're going to hire in is it

going to be people you're retaining so

how how are you going to hit those

kickers which is going to be able to

Service uh our Our Deck going forward

and that's about asking the existing

Founders what opportunities they see in

the business um and where are their

strengths and weaknesses today because

they're the things you can capitalize on

to build that model um can you talk us

through the various Financial instrument

financial instruments available to

acquir us out there today so you

mentioned before um an unsecured loan

and then you said PG so that's a

personal guarantee being provided by the

entrepreneur of the texting which is

highly unlikely that they're willing to

do um because they prefer to go to B

Bahamas and have that cocktail but can

you just talk us through um the various

financial instruments available to

someone who wants to acquire a business

via swoop yeah absolutely the one thing

I will say on the PG the personal

guarantee Insurance um it's Unique to to

the UK but there is a very cool product

in the UK called personal guarantee

Insurance okay does what it says on the

10 um uh but the thing to call out about

it as a product it can go up to the

value of £400,000 sterling so again if

you're in the kind of six figure

transaction market and a PG does come

into the equation and there is some kind

of uncertainty around it we have seen

that as a great great way to to give

comfort and kind of not be Blocker in a

in a transaction so it's a good one to

to consider um so yeah let's let's walk

through a few different options when it

comes to acquisition financing and and

what what you might want to consider

um on one side we're talking about

unsecure there's actually plethora

options on the secured side of things

now naturally that comes down to the

comfort of the individual and how much

they want to tap into their their

personal net worth uh but certainly from

a kind of a hard asset securitization

point of view whether that's tapping

into uh property property portfolios or

commercial properties that either are

used or vacant all of these assets can

be uh

liquidated in inverted comms to to to

raise cash against that can be utilized

from a from an acquisition point of view

um so so so that's something to kind of

know off the table but again the the

potential buyer needs to be comfortable

in in in in that

position um then we get into things like

say a management buyout so that could be

an existing team that are in a business

and and want to buy the owners of of of

that business out and often what they'll

need and and this is this is fair to say

in in most financial instruments whether

it's it's it's Bank L alternative of

Finance or anything like that they want

to see skin in the game so what's skin

in the game mean normally it means kind

of 10 to 15% deposit of the amount that

you're going or if if if the person is

putting up about 50% of that net worth

that that that's interesting because

they're really putting kind of SK skin

in the game so that's kind of how we

think about that and I was kind of

giving you an example of an MBO uh we

had um about a year year and a half ago

and it's an interesting consideration

particularly for say our us friends that

are listening um often people use the

the SBA at the Small Business

Association program to do do

Acquisitions and once the acquisition is

bigger than

$250,000 you must have an independent

valuation done on on the deal that's not

the case in in um in in in Ireland to

the UK and and and this guy he he had a

a software SAS SAS business going for

about 20 25 years and kind of get into

kind of near retirement age and he kind

of restructured his assets so that he'd

move most of his shares into a business

asset so prepared himself for for sale

and kind of was working with the

management team with this in mind and

they all kind of came together on a on a

figure and as they got closer to to the

transaction uh the management team

decided don't think that's quite the

right price and it's like let's let's

get an independent valuation in and what

happened was um the guy selling the

business ended up his business valuated

about 4.5 times more than what he was

willing to put up there after the

professional valuation after the

professional valuation so what happened

was they had spit the transaction across

a two twoyear stage payment so that they

be able to afford the transaction and

and pay it out but I suppose that's an

example of a management buyout um as I

touched ear on you've got management

buyin uh which is where you want to go

uh and we had a um medical software that

one there recently where they had

previous background in this profession

and felt they could add a lot of value

uh to a lot of these practices as well

as running this this software into it so

so in that case that's that the

management buyin was was successful but

I would say management buyin are much

more uh harder to pull off than than

management buyids and so what am I doing

there I'm basically um putting the

existing

businesses um I'm using my existing

business and my existing business

capability as leverage yeah well it

potentially there's there's a couple of

different different scenarios you could

be doing it from a business point of

view I I just generally have a business

in this similar space and we want to go

and buy this and stick some of our own

team in there or alternatively you could

be a group of individuals that have uh

certain skill set of capabilities and

access to cash and have confirmed access

to liquidity from say a bank or a lender

in which you now want to go and deposit

yourselves and into that business and

and and remove the the kind of current

management within it you've you've

you've traditional leverage uh buyouts

which is again you've come up with a a

deposit and the the the the balance

is coming from a bank or alternative

Finance provider who is giving you that

Capital to then get that acquisition and

then that acquisition might not be the

full 100% day one H as as we've touched

on a few times on on this uh webinar it

could be also in line with certain kind

of Milestone payments or uh things that

need to be achieved before the full 100%

is is fully uh unlocked um and then what

what we'll see is kind of nuances in in

different countries where there are kind

of programs set out to encourage

financiers like Banks alter their

finances to give Capital out into the

markets and we definitely see that in

the US and we definitely see that in the

UK so the most popular one in the US is

the SBA or Small Business Association um

in which you can get access to

acquisition finance using that that

scheme and why that's interesting is 75%

of that loan is guaranteed by by by the

government so it's really really

encouraging those institutions there

anything that's government backed often

does come with a little bit longer in

terms of due diligence filling in forms

going through the process but that's not

to be sniffed out if you get your

acquisition at the end of the day we the

we the same kind of in principle scheme

in the UK the grow guarantee scheme

again it's it's it's guarantor uh by by

by the government so it's again it's

encouraging Banks and alternative

Finance providers to to push Cash Out

share and that cash can be used uh for

things like business Acquisitions and to

be clear and without um going on the

sales pitch if you're looking at a deal

on flipper inside the deal room now

there is a financing tab that's where

the swe financing um product is

available and people can then go through

and the SBA options are presented there

if I'm American the UK options the

equivalent options are presented there

if I if I qualify yeah I was actually

having a pay R today it's all today it's

very cool uh and one thing I kind of

noticed uh which I think there's a lot

of similarities and kind we only

discussing it today as as were chatting

earlier on and it's probably worthwhile

calling out when it comes to acquisition

Finance specifically uh because like in

swoop will do a lot of things like

working capital it's very

straightforward give us your numbers

it's formulaic let's get you the cash as

quickly as as possible but as as we're

kind of chatting here there's so many

nuances there's considerations around

how you uh assess value is time like

usually cheap money is longer time uh

more expensive money is is is is quicker

so youve all those considerations so

as people come through and they see the

the banks or the lenders or the private

Equity that might be uh an option for

them we have a corporate fundraising

team at swoop yes that are there to

listen and to hear and to hear all those

different scenarios so they they they

can talk into which documents are needed

what is the process so so that they can

kind of see because where frustrations

arise is where there isn't Clarity on

what not knowing what's the process

what's the expectations and that's very

very much where we're there and I I see

a lot of similarities when I was also

playing around today if I'm if I'm

listing my my business you guys

obviously had the same with with the the

broker service where they're able to

take a lot of that heavy lifting away

from you and and give you that level of

clarity and and I think we've this a

similar approach when it comes to

acquisition funding which is quite

different from say your typical cash

flow lending what what point can I apply

so flipper will enable you to submit an

Loi there's a modularized Loi Builder

there um flipper will also enable you to

submit an asset purchase agreement or

stock purchase agreement um stock

purchase agreement being the same as a

share purchase agreement um do I have to

have all of that complete and a deal in

principle before I can apply and what

are your recommendations of the workflow

yeah I I suppose it depends on on on on

it because you might be just looking to

see how much cash can I get available

because you're like I'm looking at

multiple opportunities here or I'm on a

buy and Bill strategy so you kind of

need to know actually what level of cash

can I get available to to me so

therefore it's more about my own Capital

so so in that case you can go straight

away and say okay right like this is

this is how much cash or we can unlock

this am your senior debt um a bit like

if you were buying your house you know

you know for a certain period of time

this is going to be true this is where

the exactly this is kind of where the

rates are at so it does kind of depend

on on that side of things but if you

have a very specific

transaction that that you want to to do

certainly to to get anywhere near like a

credit backed offer what you're going to

be needing is both you yourself your

profile but that combined set of

financials in terms of what's actually

happening in their business right now in

terms of uh live management accounts um

in the UK F accounts in the US tax

returns and the expected impact of your

acquisition again please flag don't go

stupid and put hockey sticks in there be

realistic that's what they want to want

to see so again if it's very specific on

a transaction you are going to have to

work together on getting that kind of

shared data set to get anything credit

back or credit worthy back from uh a

financial uh institution or a bank what

about timing so I was speaking to one of

our advisers over coffee this morning

and he said yeah they were expecting an

answer from the bank uh on Tuesday and

that would enable them to then you know

move closer to close and they didn't get

the answer from the bank therefore the

entrepreneurs grumpy and the acquirers

now still waiting for their answer what

are the expected timelines um you know

once have submitted this forecast freu

forecast by the way is it a cash flow

forecast or is it is it a p&l it's yes

so so it's all three it's a cash flow

statement um p&l and a balance sheet

forecast for 3 36 months I would

say naturally if it's smaller business

early stage maybe you might do 24 but I

just think in principle it's best to

best to to to to do the 36 um again

probably frustrating on to give you like

a dead clear answer but again it will

depend on your bank R return to finance

who who you're going to but if it's if

it's on the five figure H or the six

figure if we've got that documentation

together there's absolutely no reason

why

within like a week or even 10 days that

you shouldn't be getting back real clear

indication and intent either we're like

we're out of the game let's just scrap

this we're very clear what the next

steps are um as we get into those kind

of sever seven figure transactions

that's where we have multi-stage uh

scenarios but every like some some are

way worse than other but every Bank what

they appreciate that that this is

getting frustration and this is the Bon

of contention so what they try and do is

is get that early yes or no indication H

and what our jobs again is to do on the

corporate fundraising side is to give

absolutely Clarity of what this process

is like how many of these unting SE

what is going to happen how many

investment committees need to be that

side of thing so I would say what you're

you're seeing on the on the the five

figure to to low six figure you

absolutely should be getting stuff back

with within a week and in terms of

closing that transaction out again

obviously very dependent but if all

parties are interacting with with each

other I gave you that example earlier on

today where we had uh one turnaround in

in in s weeks

even taking in Christmas and and New

Year's holidays so that's the kind of 7

to n weeks let's say in that in that

kind of five to six figure range as we

get into that seven seven eight figure

range this is when you're kind of more

into your kind of I would say 15 to 20

week type type range all all in yeah and

I reckon there might have been some

jawdropping because I I don't think that

people think it takes that long they

come in um thinking it's a bit quicker

than that so I I think that's a really

important point that you've just made

can we just quickly talk about and and

sorry to put you on the spot on this and

will obviously should time stamp it so

it's what is it it's it's sort of late

late into Jan um so I don't want to hold

you to these rates but what kind of what

are we seeing out there because the

world's changed a little bit yes since

the feds drop rates at least at a a back

rate level so and I I think this is a

really good news story on this because

um whether it's the the fed the bank of

England European Central Bank they've

all had rate reductions uh over the last

12 months and we have seen an impact in

the market um both at a bank level and

alternative Finance um rates are

starting to come down so we were

chatting to this and and obviously uh

there's a lot of nuance to it but like

if we talk about what are we talking

about today in terms of flipper based

companies your SAS your digital your

e-commerce they are looked at not as

favorably as like assd heavy businesses

in terms of uh is weird but

I toally get yeah I'm I'm not Mr Barkley

but in in their head they're again it's

all as I sent you earlier it's good to

be aware of the things that they are a

bit wary of and the bit they're aware of

that oh this this is a bit fatty could

have changed it like where's the most

you talked about the M if you could talk

about your M more and more that gives

them a bit more more confidence but

because of that I would say in the in

the in The Flipper business world at a

bank level uh you are you're getting

kind of prime plus maybe 3 to 4% so

Prime uh it obviously varies in in

markets whether kind of UK Europe um in

around the kind of four four and a half

type Market where you're a little bit

higher in in the US so adding on kind of

three three to four points on top of

that y if we talk about some of that

alternative Finance money and we've seen

there really a reduction in in that area

and that can we've even seen deals go as

was 9.5 this year which we hadn't seen

in in a long time like 18 months and uh

that will go kind of go into your kind

of low to mid teens yeah your Venture

debt which I suppose I actually never

talked about this ear on when you ask

yeah this would be great to hear about

so some of the products that that's

going to coming in the mid teens even to

High Teens which might seem Punchy can

you define venture de so yeah so the

reason why it's it sounds Punchy and it

absolutely is potentially but if you can

service it and work with it it can be be

a really interesting product so why is

it interesting often the the providers

of this Capital uh Venture de companies

or private Equity companies they're not

restricted by geography so you're a UK

buyer want to buy a US company you're a

US buyer want to buy a Dutch company

they don't they don't necessarily care

where where the the geographic

boundaries are so great okay I've got a

supplier of cash first first and

foremost the other areas where the pros

are is their their uh adaptability and

flexibility in terms of how that cash is

collect it so what do I mean by that

okay so we talk about maybe charging you

a mid teens for the sum of money yes but

they understand you need to put cash to

work in the business to get up and

running and get into place so they

they're buying into your vision they're

buying into you they're buying into how

the business work so what are they doing

from a financing point of view to make

that easier so they'll do maybe an

interest free period so what's that mean

I'm not having to pay everything all

these capital sums on a monthly basis

for a period of time and so I'm

advertising a that interest pay pay

payments and what I'm also able to do

potentially is ADD bullet payments so

I'm allowing for a buildup of excessive

cash flow growth in in profit margins so

that in year two three four whatever it

might be I can make these bullet

payments and manage manage that

transaction and that's why things like

Venture debt are becoming more and more

popular uh instruments to use but from a

pricing rates point of view they're

always going to be more expensive than

your bank and your your alternative

Finance side of things and tend to be

where you can demonstrate predictability

so if you've got you know five sales

people all generating a million dollars

in revenue and you've done that

consistently um as you add new sales

people over the trailing threeyear

period Venture debt can be a great

resource if you say well look I'm going

to add another five sales people this is

what they've done in the past this is

what they'll do in the future you get

that at interest free terms add that

Revenue in and you can pay back that

working capital yes or pay back that

debt yeah um and actually just your

point actually went on point but when

you said working capital that also

reminds me some are like oh fck have I

maxed out here what am I going to do

from working capital perspective but

actually you can find complimentary

products so you need to service the

acquisition and get that deal over the

line and you're like oo sugar I need

maybe some working capital and so you

can also think about the uh quote

unquote Assets in the business uh so

we'll talk about e-commerce your Shopify

volumes what's happening on a recurring

basis you can get Revenue based

facilities alongside or you can get

invoice Finance or selective invoice

signs and you can carry those products

up to help you with your working capital

requirements and that's not going to uh

impede you when when when you're

thinking about the acquisition as well

probably an interesting consideration

that that maybe not always people people

think about um if you got any questions

please do drop those in and we'll take

those um in just a minute um so you know

in

summary obviously the um the

financial underpinnings of the business

I look at are very very important um

typically we're going to be looking at

businesses which are established you're

not going to get funding for business

been around 6 months 12 months Etc

you're looking for something more

established um and then in addition to

that my own uh

capability um either my assets at stake

yeah um or my bank balance yeah part of

that those assets I will be considered

to be able to serve that debt but then

also obviously your capability and the

team you're going to bring to the table

will be taken into consideration you're

talking about seven week processes um

maybe up for smaller transaction up to

15 to 18 week process for a for a bigger

7 to eight figure transaction yeah um so

there's a lot in that and then there's

these various instruments we've got

Venture debt SBA Loans we didn't talk

about 401K roll over but that's in the

swoop um offering as well of course the

markets that that we're currently

servicing and the fact that at flipper

you can now going to apply directly

through the deal room itself have we got

some questions yeah we do sorry we've

obviously been y on for ages and by the

list the L of this list we're going to

do our best to try get minutes probably

should have been paying more attention

um and uh as I said earlier on if we

don't get through these questions we're

going to do a whole summary app up wrap

up we'll send along form answers too

exactly okay let's go uh so Adam

boskovich uh can you touch on the

insurance of B we are a buyer um reps

and warranties Insurance yeah do you

want to dig into that yeah so um okay

let's talk about it generally and then

specifically as it relates to flipper so

a lot of m& transactions um obviously or

well all m&a transactions come with risk

um and a lot of m&a transactions can be

insured so uh generally speaking what

will happen is a buyer will take out

reps and warranties Insurance um that

reps and warranties insurance will

protect for false disclosure or

non-disclosure and actually the

entrepreneur themselves can protect

themselves from uh non-disclosure a

accidental non-disclosure through a

represent warranties Insurance product

so it exists on both the buy side and

the sell side at flipper today we have a

partnership with CFC okay um they are

the retailer of the insurance it's then

broken in the US by Rubicon and it's

underwritten by um Lloyds of London now

that is a reps and warranties Insurance

product as I said available on both the

buyer and seller side and you can buy

that for approximately 1% of the

Enterprise Value highly recommend doing

it 1% of the Enterprise value is well

worth it now that is due to launch in

the UK shortly y so we will send

everyone some information um about that

in the coming weeks it's imminent uh

we're just waiting for compliance and

governance on the assurer side to come

through and sign that off but very good

option highly recommend it for us buyers

it's available in the deal room for any

given asset that you are looking at yeah

okay awesome um okay I'm going to Rattle

through a few of these questions that

tell we've got five minutes

fast right uh next one of things for me

uh just want to find out if you want to

start a new business what help could I

get it from SPO okay very quickly

depends on where you are if you're in

the UK definitely look at the startup

loan scheme uh up to 25,000 per director

flat rate 6% can be spread across 5

years if in the US absolutely look at

the SBA program can can be used for

acquisition as well um let's go uh I'm

interested in buying I would love to

hear how the sweep deal evaluates

transaction cash flow is more important

than buyer statistics and also

interested to know in the insurance

portion for possible fraud or bad

sellers um do you feel just on that last

bit on the insurance option anything

else to add from the last piece not

really us availability reps and

warranties 1% of the Enterprise Value

and pretty strike forward to get yeah

and I think just in terms of the

evaluation of the the transaction from a

cash flow

perspective uh what we're going to be

look I suppose what we'll initially look

at but what what a bank or an

underwriter is going to be looking at is

is the the current Mi within the

business in terms of what are the the

the profit margins absolutely as as

Blake was alluding earlier on you can

make assumptions about taking certain

things out from the current management

accounts in terms of whether there's

dividends being taken out there or

entertainment or expenses but outside of

that looking how that business is

operating then layering in what you're

bringing to the table if you're adding

debt in there are you going to be able

to service those um uh repayments uh

you're obviously going to be putting in

assumptions in there in terms of

expectations of what the business is

going to be post the transaction and if

you're taking on debt so how robust are

those those um assumptions and then from

a cash flow statement does does it stack

up like that if if you if you're going

to hit these Leever in these drivers is

is it going to stack up um just on that

platform dependency as well so if you're

going to buy an Amazon FBA business

therefore it's 100% dependent on Amazon

and Amazon has consistently and

repeatedly put up their advertising

rights for instance then the bank will

take that into

consideration um we're absolutely not

going to get through all of

these I'm so sorry for not looking at

these sooner uh do you have a solution

for a US buyer acquiring an asset

company currently formed and running in

uh Australia oh wow yeah I mean crossb

transactions are difficult to fund

particularly Americans funding

Australian businesses the SBA loan

scheme will not fund an Australian

acquisition um what do you recommend

yeah so this is where I think as I was

touching on the Venture debt side of

things and again you also need to put

yourself in the shoes of venture debt

why am I giving you venture debt I fully

believe you're going to make a

significant uh boost to this business so

while I was kind of joking around about

our hockey stick grow uh graphs if your

Venture debt you definitely want to see

a bit more growth than you would if

you're if you're analyzing from a bank

perspective or you're kind of on a buy

Bill strategy so you want to be showing

your adding significant value uh but

Venture debt will be where I'll be

looking at are the providers on swoop

can I

absolutely also traditional PE as well

AR unrestricted go through swoop and see

the options for Venture de that's great

yeah um Jordy C says in needing a down

payment some is needing a down payment

something that is typical for business

acquisition loans if so what is the

typical percentage for six figer deals

yes I would say so earlier on we're

talking about kind of like at least

around the 15% marker I would say as I

said or H if if okay let's say say brass

tax here 100 Grand six figures yeah you

would lead at least

15,000 if you didn't have it no I mean

you would uh but as I said earlier on

they also look and see about your net

worth and you're putting something

considerable percentage in there yeah

the no money down deal thing doesn't

quite exist no skin in the game is like

if you want to leave with a lesson or a

nugget skin in the game is so so so

important and also like I didn't I know

actually shouldn't be asking you

question when there's a million here but

one point I wanted to ask you on is like

you've got so many buyers trying to buy

from these sellers surely the buyers

need to stand out as well so you need to

be buyer ready and one thing is some

form of skin in the game

yeah okay uh uh typically how do uh

ltvs look change based on different

factors like perceived risk strength and

background of purchasers how high can uh

so LTV sorry loan to value how high can

loan to value uh

go so yeah it this will completely

Nuance by by by country um by by sector

uh by by the individual by by by the

asset um so it's I think it's very hard

apologies to answer this one like very

specifically without

knowing um exactly kind of what what the

asset is and things like that you'll

absolutely it be rarely you're going to

see the hundred% LTV stuff again very

similar to our deposit scenario so I

kind of remiss to tr percentage Yeah I

say 75 even something like that I think

I I if you were to tr of pack a

rough model like trow a 75 if you're

trying to work some some models

together um okay do do I have time for

more or I just keep going I think wrap

up with two two morees more minutes one

one more question and then one more

question

closing promise we'll come back to all

yeah okay a quick one here from David

pop best way to approach sellers a b

seller fin ing yeah awesome question

just ask the question up front um so

let's say for argument sake you're just

talking about six figure deal $100,000

um you're very unlikely to get away with

100% seller financing most commonly

deals done with seller financing will

will be 60% cash down and then 40% sell

financing so $60,000 in cash 40% of that

$40,000 therefore sell financed

typically 12 to 18month terms and we're

seeing sort of you know negotiations

around 7 to 10% interest and as a perent

AG like would what would you say seller

financing in the most common least

common in terms of within transaction I

am going to totally guess um so this is

this is you know this is not built built

around objective data but I I'm going to

say 30% of deals will be done with the

sell financing component uh okay uh and

I'm going to leave you with an absolute

home Dinger of a question here uh

because like I mean there's oceans you

can go to this but this is I'm going to

put this one to you um how do you know

how to successfully R the business whoa

or can you be a sign partner answer me

that yeah okay all right so um one write

down a list of the things that you know

how to do really well and so if you know

how to write content really well if

you're an outstanding salesperson that's

great if you know how to negotiate deals

awesome if you know how to write content

fantastic if you know how to buy ads

wonderful write down the things you know

how to do and then basically look at the

business models where those things would

be most uh relied upon or whether

there's a great dependency

then that will orientate to a particular

business model I don't buy SAS if you've

never run a technology company and

understand what churn or LTV means just

don't do it after you've looked it up it

doesn't mean you know it um so orientate

where you have a skill set and then

finally once you've orientated where you

have a skill set orientate to where you

have a passion because businesses are

hard so not only do you want to apply

your skills but you want to apply your

skills where you have outstanding

passion awesome um kind of think of a

better way to wrap it up there um thank

you so much uh for listening saying

sorry for not getting to the questions

sooner as mentioned a couple of times we

will put all questions in the follow-up

you'll be able to get access to the full

webinar plus various cuts and an

overview on flipper.com and on sou

funding.com thanks again for tuning in

and look forward to speaking again next

time thanks so much Blake thank you