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This is your destination for feeling empowered in building your business.
These are the real, raw stories of entrepreneurs and business owners who have built their businesses through the messy middle of $1-20 Million, hosted by serial entrepreneur Matt Tait.
Matt knows what it’s like to scale past the first million, and on this show he’ll be bringing on other serial entrepreneurs and business owners who have been there, done that (or, are currently in it) to share what’s worked, what hasn’t, and what’s next.
Alexis Grant [00:00:00]:
For smaller businesses, I think you should look for a success fee only unless there's a specific advisor that has a specific expertise that you want. But for more specialized advisories or for bigger sales, it's certainly worth paying ahead of time as well. So it really depends on what works for you. I think the biggest thing is, like, talk to a few advisors and see who you jibe with, because this is someone who's going to have to, you're going to have to talk to during a really stressful, potentially stressful time. You need to feel like you trust them. You know, you feel like they have your back. That piece, I think, is really important.
Matt Tait [00:00:35]:
Hi, I'm Matt Tait, Founder of Decimal and Host of After the First Million podcast. And like you, I've taken the leap not just to start a business, but to scale and grow it. I've hustled from zero to that first million and now I'm building for the next million. I know firsthand what the messy middle looks like. And we need more than just numbers. We need strategy, we need community, and we need real conversations about what growth takes. In our line of work, scaling beyond a million means going beyond the spreadsheet. This is where you learn how to grow. This is After the First Million.
Matt Tait [00:01:15]:
All right, welcome to today's episode of After the First Million. I. I am really excited today because not only do we have an absolute expert, but a really cool person to talk about getting acquired. And so for today's episode, I'd love to introduce you all to Alexis Grant, the CEO and Founder of They Got Acquired. Alexis, welcome to After the First Million.
Alexis Grant [00:01:38]:
Thanks. I'm excited to chat to you.
Matt Tait [00:01:41]:
Well, one of the things I love to start with, because you've done this multiple times, just like I have. Being an entrepreneur starting a business, you have to be a little bit crazy. When did you know that you were one of the crazy ones?
Alexis Grant [00:01:54]:
It's funny because I never thought that would be my path. After college, I went to school for journalism and then I got a job in journalism, which I loved. And ironically, looking back, I can see how a lot of the skills that I used there are very applicable to running your own business, like asking a lot of questions, figuring out stuff on your own, like being thrown into something totally new and having to figure out what, how do I cover this and what are the basics here. I really loved that career, but I eventually left a full time role that I had to go traveling for a while. When I got back, when I was looking for a new job, I started taking on clients. This was in like 2009 for content marketing and just realized that I liked it. Like I ended up getting a full time job at U.S. News World Report.
Alexis Grant [00:02:39]:
So I went to that job and I had these, kept these clients on the side. And I only lasted there a year because I realized the potential of what I could do with the side business was bigger than the job. And also there's another kind of cool thing here is I published my first ebook during that time. This was again, this is like 2010. At that time you could make a lot of money from ebooks if you were able to market them. And I had this experience of like publishing my first ebook and people actually buying it and a light bulb went off my head where I was like, oh my gosh, I can make money and have, have a job here without asking anyone's permission. Like I can do whatever I want as long as it's useful to somebody else. They're going to pay me for it.
Alexis Grant [00:03:16]:
So I'd say that was kind of my light bulb moment that rolled into everything else.
Matt Tait [00:03:21]:
This is not my first career. I'm a recovering attorney. And yours is a much cooler, more exciting first job than mine.
Alexis Grant [00:03:28]:
Yours is maybe more useful though.
Matt Tait [00:03:30]:
I don't know about that. I was a really bad lawyer. What I think is interesting is we come from a generation that, that not only has multiple jobs, but we actually come from a generation where a lot of us have multiple careers. And I think that's really cool because I don't know if you've seen this, but I've found that as bad of a lawyer as I was and as much as I hated literally pretty much from like five minutes in on, there's a ton that I learned being a lawyer that has been so helpful to being an entrepreneur and a founder and even just like an advisor and in business in general.
Alexis Grant [00:04:11]:
Yeah, absolutely. I've had the same experience. Actually what we're doing now is pretty close to journalism, I would say with the business I'm in now. But yeah, all the skills are applicable and those foundational skills that I learned of, like how do you ask hard questions? How do you figure something out when you don't know the answer? Those are all really applicable to every single business.
Matt Tait [00:04:30]:
Well, and how to drill down too. I was talking to my son about this. I have 10 year old twins and so they talk a lot, they have a lot of questions and I always tell them, I'm like, look, the second third question is just as important, if not more important than the first One, like, the first one gives you enough context to ask why. And I was like, why is a broad question. You gotta ask a more a clearer second, like, what's your drill down? Like, what are you really trying to get to? And working with them on asking questions. And I feel like journalism and law and like, those are two careers where part of what you're doing and finding the truth is figuring out what thread to really pull on. And that can be a very specific thread versus a broader one that I think a lot of people think about.
Alexis Grant [00:05:17]:
Yeah, that applies to what you're doing right now, too. With podcasting, I had a really interesting experience that, like, really stuck with me at a writer's colony that I went to. So there was a point in time I was writing a book. I went to this writing colony in the woods for, like, five weeks. It was actually an artist's residency, so there was writers, but other artists there as well. All day we'd be on our own. It's like very solo and solitary experience. But at night, we got together for dinner, and there was a point where one of the other residents, who was, you know, obviously a really good observer, said to me, like, I've noticed something about you.
Alexis Grant [00:05:47]:
Whenever someone says, like, talks about experience they've had or shares a story, most of us are like, oh, that happened to me. Here's my story. And he said, you ask more questions about the story that they shared to get more into the details and just understand more about it. And it took someone else observing that about me for me to recognize it in myself. But I think. I don't know if that's just my personality or it's from the training that I went through.
Matt Tait [00:06:14]:
My guess is probably a little bit of both. Sometimes I find that our experiences pull out those tendencies that we have and help amplify them into true strengths. And that's really cool. So you started your first business being a content creator and helping other people with marketing, but now you help people get acquired and acquisitions are your business and your passion. Now, how did you get from point A to point B?
Alexis Grant [00:06:44]:
I mean, real simple. I sold two media businesses and felt like I didn't know what I was doing. I didn't know how to find someone to help me. I felt like there weren't resources out there for people like me, which is like, we help primarily folks who are selling six, seven and low eight figure businesses. So, like, in the media, you read about all these massive sales, but the truth is, like, there's way more of us who are you know, run small businesses. And I put that in quotes because if you sell for $5 million, it's still going to be a life changing sale for a bootstrapped entrepreneur. I felt like there wasn't enough information out there. I launched this brand about three years ago when I was looking for my next thing to do.
Alexis Grant [00:07:21]:
I thought, you know what? I want to do something in the media space that uses my strengths. But also I wanted to challenge myself and learn something new. And even though I'd been through this as a founder, I really felt like I wasn't an expert in M&A and I wanted to learn more about it. And this was a chance for me to do both those things.
Matt Tait [00:07:38]:
Do you feel like there's just an innate curiosity that you have that has also really influenced how successful you've been and how successful your business is becoming?
Alexis Grant [00:07:48]:
I am certainly curious. I don't know how that correlates and how it would work for other people, but I am curious and I want to know about other people's stories. I want to help people. And part of that, I think, is to help them, you have to learn about them. So I guess you could say that. I don't know, I've never thought about that deeply.
Matt Tait [00:08:08]:
You said something that isn't typical of most people, which was you decided to do something while also trying to learn deeply about it. And I find that a lot of people either learn a lot about it and don't do much, or they do a lot and they learn along the way, but they don't really take the time to also dive in and learn. And I think that combination is unique and pretty cool.
Alexis Grant [00:08:32]:
Thanks. Yeah, I mean, it's challenging because when you, especially for a media company, if we're covering something that I didn't feel like I was an expert on, I could share my own personal experience. And I understood the pain point certainly, and that's helpful. But we had to lean on a lot of experts who really, truly were professionals and experts in the field to share information with our audience because that couldn't come from me. Right. So it's like, how do you like, gather other people around you to help create that scaffolding so you can share the information? And then over time, like I remember at the beginning, three years ago. So I have a team of writers and reporters who create our stories, the things that we share, the advice posts. I had a reporter for a while who had written, who had experience writing about M&A, and she wrote most of our advice posts.
Alexis Grant [00:09:17]:
And I realized recently, looking at a couple of the assignments, I was like, huh, I actually could write this one now. Like, you know, back then I really felt like I didn't know enough to write these stories. And I mean all of our stories, you want to lean on experts anyways, so they want to be quoting people, including other people's experiences. But you still have to have an underlying understanding of the topic to be able to write about it well. And that was kind of a nice, like an internal win. Like I have learned about a lot about this over the last three years.
Matt Tait [00:09:42]:
It's amazing how much trust and credibility are a true currency, particularly in what you're doing in producing media to help people. And then also in the acquisition space.
Alexis Grant [00:09:56]:
And in the media space too.
Matt Tait [00:09:57]:
Yeah, media acquisitions like you are, you're fully under the umbrella of the necessary trust and credibility as currency. So getting acquired and acquisitions are a much, much more talked about, much more broadly thought about thing than they were when we were growing up. My dad was an entrepreneur and he never thought about building a business to sell. He wound it down when he retired. It was the last day. The business exists. Pretty sure it still exists because he hadn't done all the actual legal wind down stuff. But other people are now thinking about acquisitions and I'm in the accounting space and deal with a lot of acquisitions.
Matt Tait [00:10:39]:
We've done a bunch of acquisitions, just generally help advise people on acquisitions. But as you think about it and your experience, what do you think are some of the most important things that people can consider as they build their business towards an acquisition?
Alexis Grant [00:10:59]:
I mean, you just nailed the first one, which is knowing that it's a possibility. Because many of us, we build a business, we have our head down in that business and we don't realize it's a possibility until either someone offers to buy the business, which is a great thing. Right. A great starting point or something happens with our family or personally where we realize I can't do this anymore or you just get so sick of it that you. Yeah, you want to close it down. So I think just understanding that it's a possibility is the first thing. The second piece is. Yeah, thinking ahead about these things.
Alexis Grant [00:11:27]:
Because if you are in the fortunate position where you realize this is an option, it's interesting because I think in the VC world they talk about this kind of thing all the time. Like from the beginning. In the bootstrap world, it's just not talked about as much. Or people are building businesses out of a passion or a skill or a need to have an Income. And so they might not have that network around them that's like drilling this idea into their head. So if you realize it's an option and then you start thinking about, what can I do ahead of time, just knowing the basics, you really can set yourself up for a better sale. And the third one, I would say one thing I always kind of preach is sell before you're burned out, because you certainly can sell when you're burned out. But if you can sell before then you have way more options.
Alexis Grant [00:12:08]:
And you'll have the energy to get through what might be a grueling process, the sale itself. You'll have the energy to keep running the business so that it's performing where it needs to be while the buyer is reviewing it. And like, often when people burn out, the business starts to go down. This doesn't work for everyone. But in ideal world, you want to sell when the business is still like improving or growing. And that is a little bit counterintuitive if you haven't been educated, because most on the topic, because most people think like, oh, if it's still growing, I just want to keep going. Yeah, and you probably do. Like, it's hard to figure out where is that inflection point.
Alexis Grant [00:12:42]:
But if the business is going like this and it starts to go down, that's like when you don't want to sell because you're going to get a lot less for the, the business. So in some ways, even though you do want to be ready to sell because it's a big change even personally, I think sometimes it's helpful to think about it before you're ready because that might actually be the best point. Time to start acting on it.
Matt Tait [00:13:03]:
Oh, I think big time. You know, there are two things that have always stood out to me. Number one is very few people actually buy a business based on what it is today. They're buying it based on what they hope it'll become or what they hope it'll add to them or what they hope next year will be. And so that growth curve is so important because it paints the picture of somebody acquiring. It thinks it can keep going up versus if you're on the down curve, they're thinking, okay, is it going to keep going down or is it going to flatten out? Can I get it back up there? How long? What's it going to cost? That idea of painting the picture for the future, I think is so important in considering the acquisition game because so much of what the business looks like, what your financials look like, and what you talk about, it's all a story, and you have to tell a believable story and get somebody to buy into that story.
Alexis Grant [00:13:54]:
Yeah, absolutely. But I think sometimes, like, when people are looking at the potential of a business, like, I also see founders making the opposite mistake where they're like, someone's going to buy this because of what it could do and what it could become and think that's like a common misconception because, like, it does happen in some cases. But I think we hear often about those cases, like, we hear about them so often. These, like, crazy strategic deals where there's a ridiculous multiple and the founders, like, you know, walking away with tons of money. It just doesn't happen that way most of the time. So you do have to build something that's, like, good in this moment right now, and someone would want it as it is, and there's potential for it to do. Do well.
Matt Tait [00:14:35]:
Well, what I think is interesting, so much of your audience and my background is here too, so I fundamentally understand the audience is on. On tech companies. Right. You're working with a lot of bootstrap tech companies. And so much of building something new in terms of technology is that hope of what the future will become. I mean, it's effectively your vision is what you're building, and so you're going to continue to believe in that. What's interesting is I come working a lot now in the accounting world, and in the accounting space, they're exactly the opposite. They're entirely focused on today.
Matt Tait [00:15:09]:
And the vision of the future is today. It's a repeat, repeat, repeat. And it's interesting how when you really start to actually combine those or find a balance between them, that that's truly the right answer.
Alexis Grant [00:15:24]:
Yeah, that's really interesting. Wonder how else. Yeah. If you're focusing mostly on accounting firms, what else is different about now? That space. And there's always little nuances for each industry.
Matt Tait [00:15:37]:
Well, and I think what's cool, though, is we're also in a world where everything's changing right now so fast, and I think so much of the rate of change is going to increase that what we see today in each one of these industries is very different than what we're going to see in a couple of years. You mentioned something that I don't think is going to change, and I want to unpack it a little bit. You said knowing the basics is really important to getting value for what you sell. Talk me through. What are those basics?
Alexis Grant [00:16:10]:
I mean, the biggest one is there's got to be Profit in the business. And I use the word profit loosely, like, I talk about all this stuff in layman's terms because that's my background. You probably know the best terms for them because you're in accounting. But say it might be EBITDA, it might be SDE, whatever. Like the proxy you're using for profit is. Any buyer wants there to be profit in the business. So after all the expenses are paid, they want to take something home, just like you do. And I see a lot of founders who say, oh, but this is a $10 million business.
Alexis Grant [00:16:40]:
If you're spending all that money and you don't have cash flow, at the end of the day, a buyer might not be interested in it. So it's tricky because you have to balance that with growth. Obviously, that's like the biggest tension point. But if you think ahead about how am I going to make sure that there's profit in this business? First of all, it's great for you as an owner, because that means you get to benefit from that while you're running the business. And likewise, that's what a buyer is going to be looking for. And I think a lot of founders underestimate just how important that is in the sale process. Like, they might say, we've got a great brand, we have a great audience, we have great revenue, but if you don't also have good profit, then it might be hard to sell.
Matt Tait [00:17:19]:
I agree. And let's unpack profit a little bit, because I think, number one, I'm not account. I have a lot of amazing accountants that work for me, but God knows they don't even give me access to my own QuickBooks.
Alexis Grant [00:17:32]:
Well, you also do bookkeeping, right?
Matt Tait [00:17:34]:
We do.
Alexis Grant [00:17:34]:
Your firm, yeah.
Matt Tait [00:17:35]:
Yeah.
Alexis Grant [00:17:36]:
Okay, so you have people who do it .
Matt Tait [00:17:36]:
Yes, one hundred percent. And if. If I ever did bookkeeping for anybody, we'd be in big. You go to law school because you can't fundamentally actually count. But the way I like to unpack profit because I think it's important and as we've done acquisitions, is I tell any of our acquisition targets or any of the people we talk with, ultimately, I have an equation, and I am going to put your numbers into my equation, and your brand and your hope are going to be part of that. But there are fundamentals to your business that lead to profit that are really important, and part of it comes from client acquisition. Are you spending more money than you should to acquire customers? What's the payback period on that acquisition cost? What operating leverage can I get when I do make the acquisition. Are there things I can do to actually improve profit on the operations or kind of tech side? What are your margins? How are you breaking out products or services? So help me unpack some of that too, because I know even in bootstrap tech companies, one of the really successful ways a lot of bootstrapping tech companies maintain profit is to add services on top.
Matt Tait [00:18:50]:
And so what are some of the things that you see that unpack profit?
Alexis Grant [00:18:53]:
For me, there are different kinds of revenue, different kinds of profits. You kind of just hinted at it now. But for example, when you go to sell a business, the sales multiple that you're going to get for a services business is much different than what you might get for software. So if you have a business that has both software and services, a buyer is probably going to want to see that broken out so that they can see, like, how much of the revenue is coming from each of those pieces. And the software component is probably going to be more valuable. That's not always the case because sometimes the services and you might need the services to make the software work, but typically you want to look at the business and say, okay, which kind of revenue here is the best revenue? And like, can I have more of that? Because if you're making a hundred thousand dollars in revenue and you sell your business for 3x, but then you could sell a software business for 8x, you can just see how the multiple drastically changes how much you're going to sell for.
Matt Tait [00:19:48]:
One of the things I think is fascinating that we've noticed in our business, and in the five years we've been around, we've now helped over a thousand companies do their bookkeeping. And so we've got a pretty good experience seeing the differences in people's books. There's a fundamental difference between people who have a responsibility to show their accounting to outside parties than people that don't. And that outside party can be an investor. It could be a bank, it could be an owner, it could be any number of things. But simply having that responsibility changes. Usually everything is a gray area with a little bit of distinction on the edges. This is actually a pretty clear, distinct line of.
Matt Tait [00:20:33]:
There are very few companies that don't have exterior reporting that really, truly think through their business of how would an outsider look at it versus one with an outsider has to look at it on a regular basis. There are levels of bootstrapping. There's all the way bootstrap, there's bootstrap with friends and family, there's bootstrap with a couple of people like there's a lot of bootstrapping. Have you kind of seen something similar?
Alexis Grant [00:20:56]:
Yeah, I mean, I think it's a good time to say like, it's okay if your books are really messy. And that's actually normal for a lot of companies, especially founders that don't have a background in that, you know, they're focusing on building the business, providing value. And it's okay if your financials are messy, but you do want to get them in shape before you sell. And ideally, like, that's actually one of the first things I would think about doing a. Because you can do it in advance, it's an easy thing to pick up and start doing early. The second reason is it might affect how you run the business. Like by having better visibility into the business, you might actually be able to run a better business or you see opportunities you didn't see before or you realize, oh, we actually need to improve this before we go to sell. Any buyers going to want to see clean books and, and I mean, I've heard a lot of horror stories around.
Alexis Grant [00:21:41]:
This is like a founder who thought that she had great books, for example, like she actually had someone clean them up, but they didn't do a good job. And she got an offer, you know, she signed an LOI. They went into due diligence and in due diligence, you know, they all realized like, oh, these numbers weren't actually accurate. So the buyer revised down their offer pretty significantly. But by then she was so emotionally invested in the process that she didn't really want to start all over again. She ended up selling. This was like a mid six figure sale, so maybe smaller than some of the folks you're talking about. But it's still like that was a really good lesson that like you want to have your books in order before you start the process because it's going to set the expectations around the sale.
Alexis Grant [00:22:22]:
And even an offer might, might be set around those numbers and if you have to change that later, it just gives the buyer a reason to be able to pay you less well.
Matt Tait [00:22:34]:
And I run a different diligence LOI process than I think a lot of people do. But I do see in a lot of processes where a buyer will rush to an LOI knowing that they're going to find something that will allow them to then lower the price through diligence, knowing that most people, once they do get emotionally involved, aren't really willing to walk away. Like once in somebody that hasn't done a lot of M&A signs and LOI in their mind, they've sold the business and they're ready to move on. And they take a deep breath, they're like, all right, I'm done. The, the burden of ownership is gone. I'm here. And then you run through the process and you realize, oh, man, this isn't what I thought it was. And the buyer is looking for ways to cut it down.
Matt Tait [00:23:19]:
We run a much different process. I prefer to do as much diligence in the financials as possible before an LOI because my goal is never to change that price, because I know I don't want to take advantage of emotions. I'd rather do any calculation on the front end that feels more emotionally fair.
Alexis Grant [00:23:36]:
Yeah, a lot of sellers just don't know what to expect if it's their first time. But I think even for the processes that the ones that go smoothly, a lot of them fall through the whole, like, you know, talking about, like, breathing a sigh of relief after you sign the LOI. A lot of offers end up falling through during the due diligence period. And not only that, but so we interview tons of founders because we share stories of founders who have sold and how they did it. And in every single interview, we asked them, like, what was the hardest part about your sale? And a high percentage of them say, the due diligence period was much harder than I expected. And sometimes that's because, you know, they just got to ask for a lot more than they realize they would need. Other times it's because they're trying to juggle that while running the business. And it's like both two full time jobs, but a lot of people say that that's really hard.
Alexis Grant [00:24:20]:
So the LOI is really just the beginning.
Matt Tait [00:24:23]:
Oh, a hundred percent. I was explaining this to a woman who was selling her firm and we had chosen not to move forward with our own LOI. And I just offered to help advise her in the process for getting her to one. And I said, look, whatever you do, view your LOI as a starting point, not an end point. And if you do that, you'll emotionally deal with the whole process a little bit better.
Alexis Grant [00:24:46]:
Yeah. There's one other tip I'll offer around that, which is I see some founders who think of the LOI as like an informal kind of let's get this conversation started kind of document. And because it's not technically binding, however, you always want to have a lawyer look at your LOI before you sign it, because basically what you're doing is you're setting expectations with the buyer and they're going to be very difficult to change later in your favor. They might try to change it later. So it's not in your favor, but that's kind of like your starting point. And you have the most leverage before you sign an LOI. So you want to have a lawyer review that with you ahead of time. Like, don't sign it without having someone else look at it.
Matt Tait [00:25:26]:
It was interesting in my past. Done an acquisition and we got to final signing day. We had two terms in the full legal contract to go through, and we put together an LOI. And the seller at that point looked and said, you know what? We want to remove these two provisions from the LOI, which also removed them from the this, and we're not signing the deal if we don't. And I said, well, what are you giving me instead? I'm willing to give those away, but this is a negotiation here. And they go, nothing, we're walking. I said, great. They said, wait, you're willing to walk? I said, absolutely.
Matt Tait [00:25:57]:
This is effectively negotiating blackmail. And I said, here's what I was going to offer. If we hang up this call, my offer doubles. And if you want to take these provisions, I'm willing to take them away, but the cost doubles. The minute I hang up this phone, you call me five minutes later, that price doubles. I'm not walking away. And they hung up the phone. They called back two days later and they asked for the first deal.
Matt Tait [00:26:19]:
And I said, nope, it doubled. Said we, we didn't think you'd do that. And I said, nope, it doubled. And it's 3:00. You have two hours to decide and sign the contract. And here, by the way, I already put it in here because I figured you'd call back. And to me, that was. It was bad faith on their part, and I was willing to take advantage of it.
Matt Tait [00:26:37]:
They were an immature seller, but they were the ones that did the bad thing. And I was like, I'm not going to reward you for this. But you see a lot of negotiating and haggling happening throughout the process.
Alexis Grant [00:26:48]:
Yeah. And it's tricky because some of those can be red flags. Like if someone's not honest through the process, do you really want to work with them? I mean, even if you're doing, you know, mostly like a transfer of something or an asset sale.
Matt Tait [00:27:00]:
Right.
Alexis Grant [00:27:00]:
Still have to go through that transfer process. You have to rely on them to hold up their part of the deal. There might be something that they have to do with you after the transaction to ensure a smooth transition. So there's gotta be some cooperation there. I always encourage folks, if, like, somebody doesn't feel right or honestly you don't like the person, like the buyer or the seller, don't do it if you don't have other options. Maybe that's not as an easy decision, but I've been in that place myself before.
Matt Tait [00:27:28]:
No, it doesn't feel good.
Alexis Grant [00:27:29]:
No.
Matt Tait [00:27:30]:
I think that's another part of the process that should make clear is even if you're the seller and even if you're the buyer, not all of that process is going to feel good. 100%. Part of it will, but a lot of it won't, no matter what.
Alexis Grant [00:27:45]:
I think that's true. And I think, like, just having your values and your goals front and center is helpful because you could say, okay, why doesn't this feel good? And is it really affecting one of my top bubbles in this process or is it something I can deal with?
Matt Tait [00:27:59]:
I think that's really important. And I. I don't hear enough people talk about making sure that your core values and what your end goal is, that's your true North Star. And I've walked away from deals that didn't meet our values. And even that one that changed in the last minute, it matched our values and it matched the risk because the new cost made the risk worth it. You know, that's the thing, is you price risk. Any deal you're doing, you're pricing opportunity and risk at the same time. And as long as you measure and weigh them and you feel good about it, then it's worth it.
Matt Tait [00:28:36]:
But you have to measure both opportunity and risk.
Alexis Grant [00:28:38]:
Yeah, I think buyers underestimate that, especially for bootstrap founders. This is often their baby. Not always, but usually they're caring about the integrity of the sale process and whether they like you or not and whether you treat them, you know, treat them well, that's going to affect the deal. And I think that's one thing that, yeah, people just don't really talk about is like, oh, it's all about the money. Well, it's really not for someone if you're selling for seven or even low eight figures. It's really not only about the money for a lot of founders.
Matt Tait [00:29:05]:
No, it's not. And one of the things you've been. You've been mentioning throughout this conversation, and I think it's really important, is finding the right people, lawyers, advisors, to help in a process and to help ahead of time and throughout the finish line of the entire process. What are some of the Criteria that you have for helping people find like truly good advisors. Because I feel like in so many industries and accounting is one, you have old school, haven't kept up with the times, don't really do a whole lot brokers and advisors. And then you have some of these newer, what I'd call kind of snake oil salespeople. But you also have some amazing like truly good helpers. How do you differentiate and find the right advisors and help?
Alexis Grant [00:29:57]:
Yeah, I mean this is one of the main things that we do for founders is we match them with good fit advisors. The first thing is you want an advisor who has sold your type of business before. I often talk to founders who are like, you know, I met a broker at my community meetup and he sold the yoga studio down the street. You know, I think it'd be good for our software company. And no, you want somebody who has sold a software company before. So that's the first one. And that's hard. Once you know who the people are, you know they're there.
Alexis Grant [00:30:23]:
But when I was looking for someone, like I didn't know how to find that person. Right. Second is you need somebody who is willing to take on your size of deal. So most brokers, advisors, investment bankers, they have like their size that they work within. And so sometimes founders will say, oh, I've been told I'm too small for an advisor. You might be too small for the advisor you talked to, but if you have revenue above $300,000, there's probably a broker or an advisor who will be a fit for you. So that's the second thing is like knowing that they're out there and how to find someone who will do your size. The third thing is get someone who comes recommended.
Alexis Grant [00:31:01]:
That can be from a friend that you know in the space who has sold from a community, or if you don't have that, ask us. That's what we do. We're happy to help. I'd say those are the top three things. Obviously they're fees. Everybody has a different fee structure, but there's kind of two general structures. One is success fee only where they, they take a commission when you sell. So it's kind of like using a real estate agent where you only pay them if you actually sell the house.
Matt Tait [00:31:26]:
What do you see those range as?
Alexis Grant [00:31:29]:
Depends on the size of the deal. But usually they have like a tiered system where say you sell for 1 million, it might be 10% and then as size of the deal increases, the percentage decreases. So it's definitely significant and it's enough to get many founders to think about, is this worth doing? Like, do I really need this person's help? Not always, but often I say you should consider it because you know they've done a million sales like this before and you probably done none. And there's a lot of red flags to watch out for. So having someone to usher you through the process is usually ends up having more upside. As long as you get somebody who's good. If you get someone who's bad, then that can derail the deal. You have to go back to the drawing board.
Alexis Grant [00:32:12]:
It's a bad experience for you. So there is a lot of risk in choosing the right person. The other side is like, so some advisors also have a structure where that you may pay them like a retainer or an upfront fee ahead of the sale because you know they need to put time into preparing the business for sale. And for smaller businesses, I think you should look for a success fee only unless there's a specific advisor that has a specific expertise that you want. But for more specialized advisories or for bigger sales, it's certainly worth paying ahead of time as well. So it really depends on what works for you. And then I think the biggest thing is like talk to a few advisors and see who you jive with, because this is someone who's going to have to. You're going to have to talk to during a really stressful, potentially stressful time.
Alexis Grant [00:32:59]:
You need to feel like you trust them. You know, you feel like they have your back. That piece, I think is really important.
Matt Tait [00:33:06]:
Well, and we started a big part of this conversation talking about trust and credibility. And you have to find somebody that is credible. And you mentioned that with finding a good referral and having somebody refer them to you. But then trust is something you have to build yourself. And I want to add a caveat that I've seen people struggle with and brokers struggle with. Finding somebody that will be honest with you when it's hard, because you will probably have some hard aspect of the acquisition process. And some brokers aren't as good at having hard conversations. And it can be really, really helpful and value accretive if you have somebody that's willing to say, hey, this part of your baby's ugly, but if you do this, it can really help.
Matt Tait [00:33:58]:
And that's a tough thing.
Alexis Grant [00:34:00]:
Yeah, that's a good suggestion. Many advisories will work with founders to prepare evaluation before you commit to working with them on a longer term. And that's a really good way to try it out. And see if you both, you know, trust these advisors. But also are you kind of on the same page in terms of like what you want to sell for?
Matt Tait [00:34:19]:
I think that's a really good point. If you're thinking about a process, you have a value in your head. You don't know if that value matches any reality. Yeah. Before you do anything, try to anchor what you have in your head with reality. And I think that's a great way to vet potential advisors.
Alexis Grant [00:34:39]:
I do a lot of free calls with founders who are thinking about selling in the next year. And for fun, usually sometimes it's helpful, but usually I'm like, so what's the number you have in your brain? Like, what if someone said, I'll give you this right now, what would you sell for? You can never guess what it's going to be. Sometimes it's so outrageously not realistic at all. Because they'll usually say, then what do you think of that? And I'll say, well, based on where you are right now, like I'm not even a valuation expert, but I can tell you that that seems unreasonable. Sometimes I have people who say, oh, if I could sell for X amount, I would do it right now. And I'm saying, well, you absolutely could. Like that's completely within the realm of possibility right now. And they just had no idea because they don't know how this stuff works, right?
Matt Tait [00:35:20]:
So we talked about advisors, but you also really need to have a good lawyer too. And that's two separate things. And I know we're baking in a lot of cost here, but it's really important. And there are some things that are 100% worth paying for. And an advisor and a lawyer are two. You actually can't do it. I would never recommend doing a deal without a lawyer. And I really wouldn't recommend it without an advisor.
Matt Tait [00:35:47]:
Particularly if you've never done it before. How do you find a good lawyer?
Alexis Grant [00:35:52]:
I mean, I do the same with just referral network. That's how I found mine. Actually. Both times I sold, the second sale I went through, it was a smaller sale, was like about a half a million dollar sale. And it was an asset sale. It was a transfer of a website. My lawyer kind of acted like a little bit as an advisor in that because I didn't have an advisor at that point. I didn't even know all the stuff we're talking about now.
Alexis Grant [00:36:14]:
So in retrospect, I was pretty lucky that I got someone who had done a lot of M&A and he could advise me that's one thing I would say, actually, that's. I think that's the biggest mistake people make is you want a lawyer who has experience doing M&A. So you don't want probably the same lawyer who you're using for everything else or like, you know, who doesn't have a lot of experience in M&A. You want someone who specifically knows M&A.
Matt Tait [00:36:34]:
Yeah, I think that's really important. One of the other things that we don't talk a lot about, and I see this more in the accounting side, so I'm switching gears a little bit. But an advisor will tell you this. I'm wondering how much you see it in bootstrap tech companies. And let's talk about how important it is if you're thinking about an acquisition to make sure that you as the owner are not essential to the operation of the business.
Alexis Grant [00:37:02]:
Yeah, definitely. I mean, that's one of the things that we see most commonly that makes a business unsellable in its current format. And I think of owner dependency in two buckets. One is operationally, but the other one is like branding wise. So say that your face is on Everything and the URLs are your name or whatever. Like those are hard things. Some of them you can, you can change and some of them you can't. But those can make it tough to sell.
Alexis Grant [00:37:29]:
So that's definitely something you want to think about ahead of time. We have a couple posts about this specifically and we've written about a few founders who have navigated that issue as they've sold. And it's interesting, like sometimes a buyer will work with you if you're in that situation and they'll help you through the transition. But it's a risk for them either way. You'll get more money for it if you don't have that challenge. Because if, if they bring you on and there's an owner dependency, there's a risk for them that the business won't function as well after you make the transition out of the business. So any transition you can make before you sell is going to help them have less risk, which means that they'll pay you more.
Matt Tait [00:38:06]:
So I have an interesting hard question because I had a hard conversation about this last week with somebody. What do you tell people that have built a business, had it for a very long time, and it's unsellable?
Alexis Grant [00:38:20]:
I think it depends on why it's unsellable, because some things are fixable and if something's unsellable, there might be parts of the business that are sellable. Like for example, sometimes we see businesses that couldn't really be sold, but there's an email list and that piece could be sold. So I would look at like what parts of the business could you break down to sell. But those are also really tricky because at that point you're probably getting into a smaller sale. You might not be able to, you might not be at the point where you could get an advisor. You have to find your buyer yourself. You have to reach out directly to buyers. And that's hard, right, because you have to reach the right person who's going to be interested at the right price point.
Matt Tait [00:38:58]:
This is where you have to do all the work yourself. And it's hard. And I was having a conversation with a person that owned a tax firm and they were interested if we were interested in buying them and it was only about $150,000 of pure tax work and they were the only person working in the business and they didn't want to come join the company. And so at, at that point I was just said, there's nothing I can do here. There's nothing for me to acquire. And it's a hard conversation because the person had been working in the business for I think 12 years and that's a lot of time.
Alexis Grant [00:39:33]:
Well, one thing I always try to encourage folks is to think about like, think about it from a buyer's perspective, right? Like put yourself, if you were the buyer, look at your business and think, what are the things that would keep me from buying that business? And once you do that, you're like, oh, that makes sense. I can't buy a business that's relies on one person if they're not coming because it just won't continue.
Matt Tait [00:39:55]:
Right.
Alexis Grant [00:39:55]:
But I'd also encourage that person as like, maybe they can turn it into a sellable business. So I agree they've been in a long time, like there's still ways to do it, but they have to be at the point where they're not so burnt out that they have the energy to make those changes.
Matt Tait [00:40:07]:
And that's the tough thing. And we talked about a three year plan to build an asset for sale. And what's interesting is I've done that, done that a handful of times with a handful of companies over the last 10 years. And I don't find that most people are willing to actually do that because it involves some hard challenges, changes. And in general, people aren't great at change.
Alexis Grant [00:40:29]:
Yeah. Especially the delegation pieces of roadblock for a lot of folks.
Matt Tait [00:40:32]:
So if that's big time.
Alexis Grant [00:40:33]:
If the owner dependency is the main challenge, that can be hard to get over.
Matt Tait [00:40:38]:
No, I agree. I mean, I run a business that completely does not need me and it's a great feeling. But it's also weird. You know, nothing happens on a daily basis that I am needed for or quite frankly helpful with. But that's what you're trying to get to, is to remove the dependencies from yourself. So one thing, last topic as we kind of talk about the M&A space. It has been a crazy M&A world since the pandemic last four or five years and even with interest rates going up, let's talk about the macro environment and what you're seeing for 2025 and 2026. Do you see it stabilizing, decreasing, increasing? What do you see from a macro level?
Alexis Grant [00:41:23]:
So I'm hearing from people that it's turning into a better market this year. I mean, we don't actually sell businesses. So I talk to founders who want to sell or founders who have sold. So we're not in that middle point. But I mean I just did a call with a lawyer who does M&A and she said they've had tons of inquiries in January. So there's like little clues and hints. I think that M&A is going to improve certainly in the big, much, much bigger industries are like betting on M&A doing better this year. And so, you know, we're hoping that it's going to happen too at a smaller level.
Alexis Grant [00:41:56]:
But it's also very industry dependent. So like we typically cover founders in four different segments. Software, E commerce, media and content and agencies. And between like AI, Google algorithm updates and some other like industry specific challenges, the outlook really depends on the type of company that you're running. I mean software is always hot no matter what. But like for example, media and content, it really depends on what kind of model you run and how dependent you are on search, traffic or even ad revenue. So there's a lot of nuances I think that can affect what we see in the coming year and how much, how many sales we see. But overall I am hoping and expecting that it's a pickup this year from last year.
Matt Tait [00:42:43]:
Well, it's certainly in, in the accounting world it's been crazy and I would say the last three years have been the most insane it's ever been. But it's the first time private equity has truly entered the marketplace. And so when you normally just had accountants acquiring accountants and that was the world, that pace has always been relatively steady. But then all of a sudden you add venture capitalists and you start to add private equity to an industry where they never existed. And the rate of the pace of acquisitions at 11 a just has increased exponentially, which I think is very interesting and fascinating. Also, it's a trickle down. Like people look at economic indicators and building and trucking are a great economic indicator for recession or when the economy is going well. I would say that accounting will be an interesting new indicator for M&A because.
Matt Tait [00:43:35]:
Because if accountants are getting acquired, that's a group of people that work with a lot of small businesses that value a lot of small businesses that have a strategic role that they play in kind of M&A. And. And I wonder if you're going to start to see a trickle down from that as well.
Alexis Grant [00:43:49]:
Interesting. You could probably apply that some of that same thinking to agencies because agencies have had a really tough last few years. Sales M&A has been down, but I think that's partly because the performance. A lot of. A lot of agencies has been down like the revenue's been down because they're typically getting business from other businesses. Right. But hopefully we'll see that start to increase this year too.
Matt Tait [00:44:10]:
I think you will. I mean, I think with a couple of interest rate cuts, my hope is we're going to start to see a little bit smoother sailing. Alexis, I really love what you guys are doing and how you are providing light where there hasn't been some and good trust and credibility. And I think it's really cool. So when people want to find you, where can they go?
Alexis Grant [00:44:30]:
Go to theygotacquired.com. If you, theygotacquired.com/newsletter. That's our newsletter. That's the best place to kind of follow along with what we're up to. And I'm also on LinkedIn.
Matt Tait [00:44:41]:
Well, I really appreciate all these insights. Acquisitions. M&A is such a growing hot topic and it's really nice to have such a great resource. And so I appreciate your time and I really enjoyed the conversation.
Alexis Grant [00:44:55]:
Yeah, me too. Thanks for asking great questions.
Matt Tait [00:44:57]:
All right, well, have a great day.
Alexis Grant [00:44:59]:
You too.
Matt Tait [00:45:03]:
Growth doesn't stop at the first milestone or even the first million. It's really about what comes next. Build your firm as if you've already passed that first million and are still going. In every episode, I'm going to pull out key lessons to help you grow with an aftermath the first million mindset. And here's what stood out to me. All right. I had a great conversation with Alexis and she was packed with so much knowledge about selling businesses, preparing them, owning them. But if I took away anything, it was that if you build to sell, you'll make more money along the way.
Matt Tait [00:45:41]:
And to be frank, it'll be easier if you do decide and when you do decide to sell. But really, if we look back at unpacking the takeaways from Alexis conversation, I would say three things stood out. Number one, knowing that you're going to sell your business as an option puts you ahead of the game from the start. Number two, sell before you burn out. Three. Profit over anything. I know it sounds obvious, but it's amazing how many people forget that. So knowing you're going to sell your business, just preparing it that way will make it easier for you to balance your work in life, for you to set yourself up for success, and for you to honestly run a better business that's healthier for you.
Matt Tait [00:46:20]:
Number two, sell before you burn out. Too many people get stuck and they sell and you want to sell when you're on an upward trajectory and not when things are starting to dip down. Don't wait till you're exhausted and burnout. Sell before that. Profit before anything else. Set your business up for success. Understand the economics of the company. Understand what you're doing.
Matt Tait [00:46:41]:
Make money. That is the goal of business and so build towards that. It's amazing how many people forget it. I can't wait to have more of these conversations. Selling your business is important. It's become a hot topic around the news, particularly in accounting, and there are so many things that we can do to just make it easier. People like Alexis that are great advisors, very trusted, are so important to the process. Go learn now.
Matt Tait [00:47:10]:
Thanks so much for listening. After the First Million is presented by Decimal. To listen to more episodes and find tips to help make running a business easier, visit decimal.com/afm. Want to join the conversation? Reach out to me on LinkedIn and let's explore the messy middle.