Ed Mysogland
2.4K posts
@EdMyso
Managing Partner at Indiana Business Advisors︱SMB focused M&A︱Podcast Host | SMB Investor
I arrived at the birthing center ready to be present, supportive, and meet our baby I was not prepared to test the structural limits of a couch that feels more symbolic than functional Across the hall sits a vending machine selling Diet Coke for $2.75, plus a $0.10 upcharge for using a credit card, which feels aggressively on brand I can only assume @chasedownleads owns the machine and personally approved the pricing model To be clear, the priorities here are exactly right, mom and baby first, everyone else builds character Back aching, wallet lighter, spirits high, I could not be more excited to meet our baby
We keep a ton of data on transactions closed by @smblawgroup, including basics like location. With well over 300 deals closed, FL, TX and CA (in that order) are far and away the most populr. That said, 4th, 5th and 6th place may surprise you. Who wants to take a guess?
It seems like every business school in the country has an ETA conference in October or November. Unfortunately, the opportunity set that exists for aspiring searchers today has declined significantly from what it was just 2–3 years ago (let alone 5–7 years ago). Today, SMB owners get bombarded with emails and phone calls from private equity funds, independent sponsors, and yes even searchers on a daily basis (ask me how I know). In my opinion, the vast majority of searchers do not have to resources to generate true proprietary deal flow via cold outreach. You are vastly outgunned here (this does change somewhat once you're in the actual operator seat). On the other hand, brokered deals for small businesses in popular industries with "decent" fundamentals (i.e. recurring revenue, low cust concentration, some middle management, growing industry, etc) and $500k-$1.5m+ of EBITDA now sell for 5-7x (or more) vs only 3-4x a few years ago. To acquire a business at this kind of multiple will require a vastly different deal structure that what searchers used in the past (i.e. the 80/10/10 model will not work!). That, or you will be stuck buying the lower quality businesses that all the better capitalized buyers (i.e. PE funds and their port co's) already passed on. Meanwhile, the number of ETA conferences, influencers, service providers, etc. keeps growing exponentially. These people are the merchants selling all the picks and shovels to the aspiring gold miners in the late stages of the California Gold Rush when all of the good gold claims have already been found and mined. Unfortunately, past performance does not guarantee future results. Caveat emptor.
"at least i am not building something to compete with bizbuysell"
When the majority of enterprise value sits in a terminal value which, in turn, can fluctuate wildly based upon a discount rate assumption years down the road, the valuation approach has little merit. That said, I was so 👀 when I first got into finance and realized how ‘finger in the air’ valuations really are. I once had a tense convo w the head of a large boutique IB whose analysts couldn’t model for sh|t. “Your kids can’t model to save their lives…” I said. His response: “They don’t need to. The process drives the valuation. That’s why we’ll send a book to 300 buyers.” He was right. A business is worth what the buyer is willing to pay for it, regardless of what the valuation analysis says.
