Philly SMB

@bonapartay motor pool vibes

I get pumped when I see my night crews rolling out. Infrastructure feels like being back in the army. Just good hardworking ppl getting it done.

@STLChrisH Sales generally but it depends. Do they have a cofounder with complementary skills? What industry? In any case, I’d bet on someone who is a motivated and happy entrepreneur vs an unhappy one that is excellent at sales.

A first time entrepreneur with experience in which of the following fields is most likely to be successful? A. Marketing B. Finance C. Sales D. Operations And why?

@bonapartay congrats on the growth man!

Last yr we did $7.3M in revenue, remove an exceptional, low margin sale we did $6.4M. This yr through 9 months we are at $6.1M. We have picked up add'l $115k of work that we didn't anticipate for Oct, we are on track for $850-900k revs. Might grow 25% yoy.

For $5-15M deals, what are market terms for Indemnity, Reps, & Warranties? How would the following compare? Escrow: 3%, 1/2 at 6mo., 1/2 at 12mo. ability to offset against Seller Note Nonfundamental R&W: Cap of 20%, Basket = 0.5% (non-tip), Survival Period = 15 mos

@JaredDHardin @SMB_HEFF Yes, in all share classes and in all forms of control

@SMB_HEFF Is something of this size still mandated to be minimally 51% owned by the SDVOSB qualified buyer in order to continue to qualify for the designation?

Got thrown a military gov con company at $10M in EBITDA business with a sub 5x multiple. My question to all my independent sponsor friends. How would you finance let’s say $40M plus? They need to sell to a SDVOSB qualified buyer.

@SMB_HEFF Conventional all day, these types of deals are right in my wheelhouse If you wanna chat about it happy to!

ETA Friday means LOI sent ✅ Very excited about this one! Great business with wonderful (retirement age) sellers. Last deal died due to YTD decline and sellers not accepting LOI amendment terms (not quite at retirement age so still some juice to rebound -- I hope they do!)

@dennis_unrein @ChrisMarcRosa pref cut because it’s a debt-like structure and thus seen as not equity (according to SBA)?

They removed preferred equity rights No fixed or cumulative returns No scheduled redemptions No investor out options Only vanilla common equity You can do earn outs and all of these things up market in PE But for small business the government does not want to allow you preferred equity or earn out to buy a business - a business with unaudited financials and less established and smaller with more risk Make it make sense

The SBA rule changes are causing a lot of headaches in equity funding Does the SBA expect operators to bring $1M of cash to the table - without outside investors? That’s a lot of cash - they need LPs Investor participation should be encouraged so that a small group of LPs can back an operator This is the 3-4th deal that has fallen through from “red tape” Hopefully things smooth out, but this is not fun

@PhillySMB Fingers cross seller gets it and you can keep moving fwd

Happy ETA Friday folks! This morning, I had the distinct pleasure of sending a $4M price reduction (~35%) in a LOI amendment... Did I want this? "Chances are near zero" - Oppenheimer What am I expecting as a result? **see below**

@PhillySMB Gotcha. Updated YTD probably breaking a lot of deals right now. One of my sellers is now down 30% or so

@CTW_SMB totally! And context matters for sure… think TTM included what is now evident as an anomaly year and thus a time reference range & new profit peg (and valuation EV) is reasonable

If needing a 35% price decrease, see comment below for biz issues and industry issues, is it worth buying still? Buffett quote comes to mind around great company fair price Just the thought that jumped out when i saw this. Obv, I have none of the context, just sharing Not meant to be super critical at all, and I'm sure you thought through this, just the thought that came to my mind

@rob_smb pre QofE thankfully YTD / updated $ info + status quo of industry

@PhillySMB Lol rough. QoE came lower or what was the basic reasoning?

@SMB_Attorney K&E walked so Cristiano Ronaldo could run

As a 6th year lawyer at Kirkland & Ellis, my hourly billing rate was $1,550 per hour. That's $25 per minute. I gave that up to post pictures of pizza on the internet while building a law firm that does everything differently. I make way less money but I regret nothing.

The key to most self funded searches is longevity. Think similar to time in the market rather than timing the market. Significantly easier if you have/create financial runway to do so. Results TBD if you’re like me: hard headed / have a bone to pick with the status quo.

@SMB_HEFF pulling the reverse uno card

Deal update: Someone reached out from Search funder asking if I would be interested in starting a search fund starting with my deal. The reason: “This is too small of a deal for me, but I like you and believe you could be beneficial to us… but we can’t do it for 10%” Uh….

@dig_deeper1 AZ or state should have an association that has a blank/template purchase contract. I would just ask friends or use your own prior copies and empty out the docs for new use (via a paid pdf subscription for $50 or AI)

I’m trying to do a owner to owner purchase contract along with the sellers disclosures of my Duplex and it’s a bit frustrating lol because I’m trying to download the right documents from google and or maybe pay a website to do this for me. I can see why having a realtor handling this makes the process easier…maybe they’re worth the $30K on commission?!

@guessworkinvest Sounds good 🫡

@PhillySMB Fingers crossed you get it across the line! Down to chat when you’re ready to raise equity, doing syndicate investing now.

Ladies and gentlemen, we are about to have a signed LOI 🤠

@bibelhausen We will be raising equity and always happy to chat debt solutions as it’s a big world 🫡

@PhillySMB I think I could help with debt & equity on this. Reach out if interested!