S3E29 – Christine McDannell – 3 case studies on selling businesses

Key Timecodes

• (00:30) – Show intro and background history
• (05:33) – Deeper into her business model
• (08:28) – How many employees does she have in that business
• (09:15) – A bit about the numbers
• (12:25) – Did this business have any recurring revenue?
• (14:19) – A key takeaway from the guest
• (17:35) – Does she have any other hot sales she can tell us about?
• (18:56) – Deeper into this business model
• (21:00) – How does she charge for her services?
• (23:30) – How many different deals can she manage at once?
• (26:44) – Why not skip college and start making money early?
• (29:10) – Another case study from her businesses
• (35:00) – Deeper into that business model
• (42:36) – Guest contacts

Transcription

[00:00:04.460] – Intro

Hey, this is Sean Tepper, the host of Pay Back Time, an approachable and transparent podcast on financial independence. I’d like to bring on guests to hear authentic stories while giving you actionable takeaways you can use today. Let’s go. Christine McDonnell is back. And this time we’re breaking down three case studies on selling businesses. One sold for 3.5 million and the other two sold for multiple six figures. Let’s dive in. Christine, welcome back to.

[00:00:32.140] – Christine

The show. Thanks for having me again, Sean. Happy to be here.

[00:00:35.490] – Sean

All right. So before we jump into some of the businesses you helped sell, why don’t you give the audience a little bit about your background?

[00:00:42.460] – Christine

Yeah, super quick version. And thanks again for having me on a second time is I am a serial entrepreneur. I’ve had multiple companies in the last 20 years, 10 startups from the ground up, high another 10 acquisitions, roll ins, purchases. And yeah, I love this. What I was meant to do. I love it. And now I am an M&A advisor, a business broker. I have my own firm, which is the Magnolia firm that I started about a year and a half ago. So now I get to help other people exit because I was doing my own deals for my own transactions. And now I get to do this for other people.

[00:01:17.880] – Sean

Awesome. Thank you for that. Now, with your model, a lot of M&A firms I’ve talked to, I really put them in two categories. There’s the category that helps buy businesses, but then the category that helps sell businesses. And you’re more focused on the sell side, correct?

[00:01:31.570] – Christine

Exactly. Sell side.

[00:01:33.550] – Sean

Okay. So if anybody is interested, you could go back to a previous episode, a few episodes back to hear Christine’s full back story, some of the businesses she built, which was a ton of fun. Now, let’s talk about some of the businesses you helped sell. So you primarily focus on tech. Would you say it’s SaaS? That specific or is it really just tech in general?

[00:01:55.320] – Christine

Yes. So it’s any tech company that’s remote based anywhere in the world. So we have clients in different countries. So digital marketing agencies are super hot. So we’ll do those. But those are more service based. Those aren’t necessarily SaaS with recurring revenue. We’re also doing a lot of customization, integration companies meaning like they’re integrating or they’re customizing HubSpot or Salesforce or Zoho. These large corporations will sign up for Salesforce and there’s a massive amount of customizations that need to be done. Plugins and it needs to speak with different parts of the company. Those are really hot. We’ve already unloaded two super quick. We’ve got a third right now we just put on. So that we’re doing, we do do SaaS also. The recurring revenue is always magical and great. So yeah, that’s the gist of the majority of the companies we’re helping.

[00:02:47.980] – Sean

All right, so let’s pick one. Is there a particular company maybe a winning case study we could dive into?

[00:02:55.250] – Christine

Yeah, it would be the most recent. So this one, when May now just closed in May now. It just closed in April, end of March, I believe. And it was going to close on the seller’s birthday, which really would have been great. It closed the day after, but close enough. And obviously he’s a happy guy and he’s off to the next adventure. I’m sure we’ll talk about why these sellers are selling. And a center entrepreneur, just like myself, he’s built and sold a bunch of companies. And so he listed it. It wasn’t even officially to market. We had teased it out on our website. So once we signed an agreement with the seller, we’ll put a little paragraph, put it on our website as an upcoming listing. And somebody heard me, the buyer heard me on another podcast being interviewed, which is magical. And he went to our website immediately and he saw the listing and it was such a perfect fit. This is one of those CRM integrators that I just mentioned. And that’s what he was working. He would work in these corporate companies and he would be the person doing the integrations. And so it was just such a perfect, perfect position.

[00:04:02.120] – Christine

Our job is this first business. Again, with COVID, everybody got this taste of freedom and how to go back to the corporate life. And they’re just like, oh, my God, I don’t like this. I want to make my own hours. I want to work from home. So that was his situation. And he got SBA loan for the full amount. And we know SBA loans take a while. It would have been, I mean, they could take three to 4 months. This one would have been record time, seven weeks. However, both the lawyers were just battling this purchase agreement back more than I’ve ever seen. It was frustrating everybody, of course, the port buyer and the seller. And then we had an EIDL loan with the seller had one and that is a COVID relief loan. And it’s an incredible loan. It’s 30 year term on 3.25 interest rate, which is like the best you can ever get on a business. And he dips half a million so he didn’t want to give that up. And before in another transaction, I was able to do this ninja thing where I got the buyer to assume the loan, put it towards a purchase price.

[00:05:08.060] – Christine

And so we were trying to do that. I think because it was the SBA loan in this instance, they didn’t want to do that. It got really funky. So the day it’s sold and then my seller was going to back out like, oh, my God, it’s 3.5 million. It’s full price. I know we got you an offer in three weeks flat, but it doesn’t mean we should do that again. And so finally at the close, obviously they pay off the half a mil. He gets three million cash and everybody’s happy.

[00:05:33.870] – Sean

That’s awesome. Let’s take a step back. What business model is this?

[00:05:38.240] – Christine

This was one of those integrator. This is the CRM integrator customization. He had it for 10 years. So again, he’s got mainly specifically with HubSpot. It was niche with HubSpot. They only did those integrations.

[00:05:49.920] – Sean

Got it. I was going to ask if it’s specifically for Salesforce, which you mentioned. And I’ve seen that a lot, like these custom plug ins that it’s created by a third party like this individual you work with. And then a lot of corporations use it through the, I think Salesforce, what do they call it? Like the marketplace or the Salesforce app store. But in this case, HubSpot is something I’m somewhat familiar at a high level, but they have something similar where third party companies build these bolt on tools that maybe solve a specific problem and then they’ll generate. Was this a one time purchase or was a SaaS model he had?

[00:06:27.750] – Christine

Well, let’s take that a step further. So no, this company is going to be the one that’s going to take those plug ins from the marketplace and integrate them all and plug them in. So even in our own firm, we have Zoho and my business partner is very techy, thank God. So the amount of customization and integrations is insane. I did this thing with Mindbody online software for my spa. I personally did it, which I like tech too a lot. So I was on the phone customer support every single morning for six months because there was mass membership customizations, just some funky stuff with the CRM system that isn’t out of the box. So that’s what these businesses are doing. But it’s very service based. So they’re not recurring revenue. Sometimes they are. Sometimes they could put actually a lot of them have ongoing monthly contract. They don’t have a year long contracts. Again, that’s a harder sell for us where it’s like, okay, how do we know these clients are going to stay on? So that’s the situation. It’s funny you mentioned Salesforce because the one we have listed right now, so anybody can go take a look, we just listed it, is specific to Salesforce.

[00:07:35.040] – Christine

These guys do specifically Salesforce.

[00:07:37.310] – Sean

Yeah, got it. Now I understand the model. So it’s a service business that helps with the configurations and the technical set up. It’s not an actual plug in that was created. Exactly. Got it. Okay. Because I have seen both now. Yes, these agencies that are specifically creating. I’ve run into these people who it could be one, two or three people, their developers are like, yeah, all we do is Salesforce or HubSpot customizations for businesses. And when you get a few customers, especially some enterprise customers, it’s like, okay, so they’re paying you every month to provide ongoing service. Yes, it’s a model where you’re trading your time for paycheck, which is fine. But over 10 years, we just found out the touchdown moment, sold the business for 3.5 million pocketed three.

[00:08:24.450] – Christine

After the.

[00:08:25.620] – Sean

Loan was paid. After the loan was paid off, correct. How many employees in this business?

[00:08:30.270] – Christine

How many did he have? He only worked… So sweet spot for everybody listening is an owner should work themselves out of the job, obviously, over time. He was like 10 hours a week at most. He was off not doing sales anymore, not doing business. The business wasn’t wrapped around him anymore. I’m trying to remember how many, five or 10 employees at most. That’s the cool thing about tech too. I’ve owned service businesses with almost 40 employees. Nowadays, people And that was always the number I think back. They’re like, What’s your business? I say, Well, how many employees do you have? And in people’s head, that meant the more employees, the bigger the company. And now it’s the opposite. It’s like you give praise to people that have a tiny team making multi millions.

[00:09:15.140] – Sean

Yes, exactly. Okay, so let’s back into the numbers a little bit. Sold for 3.5, what were the revenues? Were they about a million?

[00:09:24.600] – Christine

Yeah, always forget ESF, these numbers. This is the thing. I’m so great with names. I’m so great with I am not the person for numbers.

[00:09:33.060] – Sean

Welcome to the Payback Time podcast.

[00:09:35.860] – Christine

I’d have to look it up. And then my business partner ran that account. So he was on that. I landed the client, but then he took it over as far as… Well, and then I landed the buyer too, and then he took it over from there. So I cannot…

[00:09:53.490] – Sean

I can’t confirm or deny.

[00:09:55.240] – Christine

I can’t confirm or deny. And I am trying to remember even the multiple. But the multiple on these types of businesses, just so everybody knows, is on the EBITDA or SDE. And SDE is seller’s discretionary earnings. And that’s the adbacks and all that fun stuff gets factored back in. So we do a multiple on that. Anywhere from 3 to 6 X bottom line, again, how long the business, how strong the team is, are they staying as our manager, reputation, etc. I think his was about a 5 is what he went for. Really?

[00:10:30.460] – Sean

Yeah, bottom line. Got the 5 X on a service business.

[00:10:32.920] – Christine

Yeah, that’s a little bit on that, but it was super strong. We only take listings on that are like A plus, plus, plus, plus. I mean, immaculate reputations. Yeah, you can get higher multiples and it’s still seller’s market, too, right?

[00:10:46.760] – Sean

Right on. Yeah. So just break down a few things here. Ebitda, just for the audience, earnings before interest, taxes, depreciation and amortization. So it’s not like the top number on your income statement, which would be your revenue or otherwise known as sales. It’s slightly below that. So there’s some numbers cutting into it. But to sell, based on my experience with service businesses, getting three X is really good. I’ve seen 1 X, which is a punch in the gut. You work 30 years and the most you can sell is one XE, but it’s like, Ouch. I’ve had friends of a family have an accounting firm, and that’s a situation they ran into. In that case, what you do, not to go off on a tangent here, but we heat it. Instead of selling the business, bring people on and change your working hours from 50 to 60 hours a week, down to 20. So we could play golf for 50. It was like an extended buyout period of 15 years. And he’s like, I just take my summers off and that’s my version of selling my business. So anyway, back to this one. 5 X is…

[00:11:50.530] – Sean

That’s incredible. So you said A plus. How do you determine the ranking of a business in this case? Like that grade ranking?

[00:11:57.990] – Christine

Like the valuation?

[00:11:59.450] – Sean

No, i know you said A.

[00:12:00.690] – Christine

Plus plus business. The A plus plus, I know that’s just the term. It’s not like an industry term is what I say. But even back to the service business multiples, my spa, so brick and mortar service based business, I did have 30 % recurring revenues, so that helped with memberships. But mine went for 4.5 X, which 2-3 is like normal. Again, you just have to have a spectacular dialed in business.

[00:12:25.520] – Sean

Yeah. In that case, this is good for the service business owners out there. I assume some reoccurring revenue stream and processes in place is that would really takes that multiple from that 2-3 up to a four or five?

[00:12:39.860] – Christine

Yes, without a doubt. A playbook, SOPs, just a well oiled machine that anybody could come in and just take it and continue scaling it. And it needs to be going up in Revit. So it needs to be growing. Upward trend, upward tread, upward tread. So all these factors.

[00:12:57.430] – Sean

Got it. Yes, that’s really good to know. So the people out there who don’t like your checklist and standard operating procedures and your documentation, sorry, if you want to sell your business for a pretty penny, you’re going to have to put that.

[00:13:08.650] – Christine

In place. And you guys, everybody listening, I don’t like doing it either. My team does the playbook and it’s a living document. It’s always going to be constantly updated. Ours is insanely always updated. But bring in a consultant. If you’re not getting it done, someone else seems to come in and get it done. And I’ve done that in the past.

[00:13:28.130] – Sean

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[00:14:23.800] – Christine

No, he had another, he’s still an entrepreneur. I know the style because I’m the same. And then he already had his next venture already started. So he was getting excited about that. He was dovetailed into that already. So it was just time. He knew it was time to take some chips off the table, get some cash, take a vacation.

[00:14:43.120] – Sean

Right on. I like it. Okay. And then any key, maybe not lessons learned because this feels like a straight away home run. But any key takeaways you can give the audience on this one?

[00:14:56.330] – Christine

On either good or bad?

[00:14:57.850] – Sean

Yeah, good or bad.

[00:14:59.040] – Christine

I mean, I think, again, for the audience, everything we just said, that’s such a perfect, pretty picture of how do you get an exit like that. It’s all the things we just talked about that you need to do and reputation, etc. I think those are the great takeaways. You know I can’t think of a single negative thing of either what the seller did or even in the transaction. The lawyers, okay, so let’s talk about the lawyers. So there’s this thing in our industry that the lawyers kill deals, which is a lot of times true. But again, they’re looking for your best interest. So let’s talk about this because on my side, I didn’t get any lawyers involved. The buyer had a lawyer and I didn’t want one because this exact reason. And there’s too many cooks in the kitchen. And even my mentor was like, you got to get a lawyer. This is a big transaction. I was like, I don’t need one. They have one. Maybe my lawyer reviews the purchase agreement if they red line the heck out of it. But that didn’t happen. So, okay, you guys need lawyers. If you’re not, I’m a risk taker, my risk tolerance is high, so get lawyers.

[00:16:05.420] – Christine

But you’ve got to take a lot of stuff with grain of salt. They’re protecting you. They’re not trying to blow the deal up. They are trying to protect your interests the whole way through, both of them. But a part of me wonders that they’re just racking up hours because it’s just back forth, back forth, back forth. So I just don’t trust that when it’s that nitpicky. And then I tell my seller, I’m like, you got to draw the line and you just got to tell them that some of the stuff you’re going to take a risk on, you know what I mean? That you’re not worried, like, okay, this thing is so minor, the odds of me getting sued on it, I don’t know, I don’t think it’s high. Let’s give in on that. So that would be my advice is just like managing the lawyers so that the deal goes through?

[00:16:47.500] – Sean

I’m glad I asked that question. Our CTO, he is also an attorney. A lot of good experience there. Fortunately, he’s in the company, but he would agree with you 100 % as you said that these attorneys can just drag this on and run the meter. Ten hours turns into 50, 50 turns into 100. We were hoping to close this in 2-3 weeks, and now it’s three months. I’ve heard this story over and over and over from people trying to sell businesses.

[00:17:16.410] – Christine

Oh, I’ve seen lawyers have drinks together afterwards. And I’ve seen them high five each other with one of my deals at a lawsuit and then boom, boom, fight, fight, fight. And then it was like they’re high fiving each other after it when it was settled. And I’m like, okay, this is good. I don’t know about this. They’re in cahoots.

[00:17:33.620] – Sean

No kidding. Oh, my gosh, that’s disgusting. Okay, well, this is good for case study. One, let’s talk about another business. Do you have another hot sell you can share with us?

[00:17:44.040] – Christine

I have a recent one. I have a recent transaction close. Let me think. I think my mind always I’m so focused on current going forward. Once the deal is closed, my brain switches to the next transaction and I’m learning, making sure I know that one inside out. What would be, again, the other, it was way smaller deal and he doesn’t want me to disclose price, but six figures. And so it sold in two weeks flat. And that was a Zendesk in a greater customization. And he started as John starts it as a side hustle because he was working in another firm and he didn’t even know he could sell it. When he called and he’s just like, oh, I could probably get five figures for this. I think 20 grand is what he came to me and told me. And I was like, you could get six figures for this without a doubt. Just my first look at it. And he did. And it was an acquisition. So it was a strategic bottom out. And he actually joined their team, too. So he got a salary. And so, yeah, that was another amazing, very quick transaction this year.

[00:18:55.300] – Sean

I love case studies like this. Let’s dive into this a little bit. So it was this, again, was this a service model building customizations for Zendesk? So it wasn’t, again, an app. It was a service entity where he’s doing this work on the side, it sounds like.

[00:19:12.390] – Christine

Exactly. So it’s contract based, service based, not recurring. He’s doing a lot of the work because it was easy for him. But then he also had two contractors also. So I believe they actually stayed on two. And again, he went into the company. So if you’re the person, again, you’re the main person that acquires probably going to offer you a position. But he got a sweet deal. So he made that with even more. If you’re starting to count the salary, we try to get equity. I’m a big fan of bigger company. I tried for that. I was like, try, try, try, and yeah, they wouldn’t do that side of it. But you could always ask.

[00:19:51.050] – Sean

So essentially was here’s your check. We’re buying your business out and now here’s your salary in the new company.

[00:19:57.880] – Christine

That’s it. Yeah. It was cash. So that was great. Like, full price cash. But then let me tell everybody this, the due diligence is just insane. And again, it was a six figure deal. Some of these six figure deals when I see a 40 page DD due diligence checklist, I’m like, what is going on? And sometimes we’ll have a multimillion dollar one with a tiny due diligence. So when it’s an acquisition, it’s all… And this company has acquired other companies in the past. So they knew they had a whole team, inhouse team that does M&A. And so, yeah, the dev is like, I’m so sorry. And you just put NA, NA, NA. So much to the staff’s like, don’t get overwhelmed, Mr. Seller. This is just put like a lot of it doesn’t apply.

[00:20:43.510] – Sean

And you with your service, you provide a lot of that expertise. You help them walk through the documentation, what they should be looking for, like you just alluded to here, what you should spend time on and maybe other things. Don’t worry about it. We’re going to cruise past this, right?

[00:20:59.100] – Christine

Yeah, exactly. Got it.

[00:21:00.480] – Sean

I don’t think I asked this on the first time you’re on the show. Do you charge a flat fee or do you charge a percentage of the sale?

[00:21:08.210] – Christine

Yeah, we actually charge both. So we’re going to do a set up fee upfront, set up a marketing fee because the amount of time we put together to package it, we’re doing a pitch deck, we’re doing data rooms, we’re doing so much marketing materials, you wouldn’t believe it. And the buyers that reach out, I actually compliment it. They’re like, we’ve never seen a business this well packaged. So we charge a $20,000 set up marketing fee upfront. However, we credit that towards the success fee at the end of the day. And then we offer to refund it. If for some odd reason we don’t sell them within 12 months, we’ll do that.

[00:21:42.250] – Sean

You’ll refund. Wow. Good for you.

[00:21:44.400] – Christine

And then we could still keep it listed. But then we’ll get the success fee at the end. But at least it’s giving an assurance because, again, we sell so quick, we’re confident enough we can pull it off.

[00:21:56.260] – Sean

Got it. And then the percentage, are we talking like 2.5 %, 5 %, somewhere in there?

[00:22:02.610] – Christine

Oh, no, way more than that. Okay. Yeah, we’re boutique. We’re good at what we do. We’re expensive. It’s anywhere from eight %… Again, it’s there stepped up based on the transaction size. Anywhere from eight % to 18 %. If it’s under a million, which we try not to do anymore, purchase price, it’s 18 percent.18 %. It’s tie.

[00:22:25.600] – Sean

Yeah. Good for you. I love your model. It’s like you de risk the service by having that 20 grand up front. But then you’re really in it together as a team. We’re going to try to get the highest multiple as possible. Everybody wants in that case.

[00:22:41.060] – Christine

Yeah, that’s great. We had waived it in the beginning a couple of times, and we don’t do that anymore because I want that seller to be fully bought in, present, responsive, getting us what we need when we need it quickly. And they got skin in the game. They’re just like, okay, I just paid $20,000. I need to be on it. So it’s helped tremendously in that sense, too. But yeah, I have no problem charging a lot in every business I have. I always charge more than my competition because I know we can deliver. You have to be super confident. If you’re going to charge a high price, then you got to deliver. And it is white glove type. They literally have all of our cell phones, including me and my business partner. They could call text, weekend holidays. I love doing that. I love just providing incredible customer service in trade for that.

[00:23:30.000] – Sean

Yes, this is a fun model. I want to circle back to the Zoho model here in a second, but really diving into your models, fun. With your model, since it is service based, how many different deals can you personally manage at once? You like a… Because this is a one to one ratio, or each other, you can you manage a handful at once?

[00:23:47.430] – Christine

Oh, my God, Sean, I’m so glad you asked this question. So I didn’t have a business partner for the first year. And last summer, I made the mistake. I had a waitlist. It was insane. I took six deals as one person, worked insane hours. My friend is a lawyer and she’s like, look, she’s like, I only take five clients at a time. My rule of thumb is I have to count them on one hand. So I was like, okay, lesson learned. So I unloaded them and I only stayed up five. But again, waitlist and then met my amazing business partner and I’m like, oh, my gosh, we can each take five easy. Now we could take 10. We’ve got a support team. We’re hiring more people. And then we’re going to bring on other business intermediaries also this year. So again, the deal flow just so we don’t have a waiting list anymore, we could get people in and get them sold. But five is my max. You’re just you’re shifting gears every time you’re on this. Again, we’re very hands on. So I’m on the seller meetings. I have cheat sheets, obviously. But if I’m speaking, you just got to know the business inside out.

[00:24:49.730] – Christine

I always tell my sellers, I’m legitimately going to know your business as well as you do by the end of the transaction. We are like in their business.

[00:24:58.400] – Sean

Such a master class in business to dive into these different businesses. My past experience of managing multiple projects or multiple business at once, I would agree with that. Five is really pushing the limit. And in one hand, you’re like, Wow, I could make more money here if I do this one and add two more and add three. And it’s like, then you just create a bad experience for your customers. You don’t have the deep knowledge like you’re talking to. You’re staying surface level with many businesses, and that’s not advantageous for anybody.

[00:25:31.740] – Christine

No. And a lot of advisors and brokers do exactly that. They take every single listing. You go look at their current listings. They have so many, but they’re not selling because their focus is to spread. I just knew that. But it’s fun for me now because, and I don’t think I’ll ever get bored, hopefully not. I mean, if people look at my LinkedIn, the businesses I’ve owned are so across the board. It’s like luxury car rental business and house cleaning in a spa and Christmas tree businesses because I would get bored and I’d want to be challenged. So I’m like, oh, I want to learn another industry and this industry needs innovation. So now I get my fix of being a Sarah entrepreneur but in other people’s ways.

[00:26:11.660] – Sean

Totally. That’s fun. I want to circle back to the Zoho circumstance, and this is good for the audience. I’ve seen this with people who create these agencies that focus on one tech stack, whether it’s Salesforce, HubSpot, Zoho, and they either create a plug in like a product which you buy through their marketplace, or they create an agency. And as we’re learning here, if you have your documentation, you’re running a tight ship, you can sell it for more than 3x, you can sell it for 5x. That’s a huge difference. But I’ve actually been talking to some kids, we’re talking 18, 19 years old, seeing this path and they’re skipping school and saying, Hey, I’m going to learn this tech stack and then create an agency because they’re seeing other people build and sell agency. And it’s like, let’s say you start this model at 18, 19 years old, you run it for five years, let’s say, and you really got a nice client base, sell it. I mean, you just skip college, and now you may have potentially multiple six figures in your bank account. That’s a smart decision.

[00:27:18.340] – Christine

Oh, yeah. I love that you’re on board with that. And I don’t know if people talk about skipping college. Do you have kids yourself?

[00:27:23.940] – Sean

No, but I know you and I did talk about the way things are going. You can get into the workforce, avoid the opportunity cost situation, which you, Okay, so I’m going to spend money for 4, 5, 6, 8 years, depending on what you’re going for. Why not flip the equation, start making money right away?

[00:27:42.330] – Christine

No, I love it. And again, I didn’t go to… I skipped that route. I’m so glad I didn’t go to college. Some of my friends, what they offer their teenagers is like, Look, either, A, you could go to college. So they leave it up to the kids, which is cool, or we’ll give you $200,000 to start. This is the cost of college to go start your own business. I really like that idea. I’m a fan. Again, our sellers are young. Our youngest was 23. They had the business for five years, started when they’re 18. Our oldest client is 47. So most of them in their mid 30s have had their tech company for six years, ready to exit, ready for the next venture. They’re just going to keep doing that. You’re not going to see these kids keep a business longer than five years usually because they’re going to get bored. It’s really exciting to see how quick people go and scale a business with very little employees all through tech. Ai is just going to change the game. It’s going to be even better. So it’s fun to watch. And YouTube, everybody listening with kids, just have your kids watch.

[00:28:46.620] – Christine

Any time I’m wondering how to learn something, it’s like YouTube is my university.

[00:28:53.190] – Sean

Totally. You can shorten that learning curve. Just get right to brass tacks. How do you do this? I had to learn how to do electrical work in the house. I had no idea. I’m like, Well, let’s go on YouTube. And within an hour, I’m like, Okay, I can do this without killing myself.

[00:29:09.150] – Christine

Love it.

[00:29:11.070] – Sean

Let’s dive into one more case study here. Is there another business example you can share with us?

[00:29:16.740] – Christine

Let me think of one or pull one up real quick if I can.

[00:29:21.810] – Sean

Sorry, I should have prefaced and said I like to talk about three, but we’re providing a ton of value here in short time. So I wonder if we could squeeze one more in.

[00:29:31.320] – Christine

Ecomm, because now we could go on one that’s harder. Yes. So Ecomm, so let’s talk about this because we won’t even take Ecomm on anymore, to be honest. They’re very difficult. And I’ll tell you why. So when that iOS update happened, April 2021, we know the date with the privacy thing, right? It’s on the phone. They’re not going to track the stuff you’re doing. They’re not going to display the ads because they don’t know. They’re not following along online anymore because you click the button. It’s about 40 % roughly said, no, don’t follow me anymore. Privacy. Okay, so all these ecom businesses where that was their only advertising source, which this is a list lesson for everybody, please do not just have one marketing channel. You need as many as possible. That was their channel. Boom. Lost so many sales. Then in turn, the cost of ads went up. Then inflation, the cost of the actual product went up, the shipping containers, we know that whole mess. Well, it’s still really bad. The cost is like triple quadrupled if you’re getting a container from China. So that is just really a mess. I hate to say it, but yeah.

[00:30:47.170] – Christine

And every time we get Ecomm, we just don’t because a lot of them are we talked about the upward trend. A lot of them are downward trend, and they’re struggling because of that reason mainly.

[00:30:59.300] – Sean

I talked to our audience about that, especially when they’re investing. We love SaaS businesses. It’s digital, it’s reoccurring, and there’s no costs against it. But to put people in the frame of mind, like, okay, so now you have a physical product. So you got to think about, okay, who’s manufacturing it? What are the cost to manufacture it? What are the cost to ship it to either me or directly to the customer? And there’s so many moving parts and costs and things you can’t control. To me, e-commerce, you put the two side by side, it’s like night and day. Do I go SaaS or do I go e-commerce? And it’s definitely like 10 out of 10 times go with SaaS, zero go with e-commerce. Now, some people do get into e-commerce because they’re really passionate about a product. For example, I’ve got to get a shout out to a guy I had on the show. His name is Mike, and he sells these little it’s called love handles. I’m showing on video here these little it’s like an elastic strap that glues on the back of your phone. And they cost a couple of bucks for a one pack, two pack or three pack.

[00:32:06.100] – Sean

But they are brilliant because it’s flat. And if you’re in places like I love traveling and I’ll be over edges and holding stuff, and I’m not going to put my phone over the edge. But if I got this little strap here, it’s brilliant because you’re wrapping it around your finger. And it’s like, this is a brilliant e-commerce model. You don’t have too many moving parts. It’s a simple… Give you the specifications here. It’s a piece of plastic with adhesive and then a little elastic strap. That’s pretty much it. So the costs are low, material are low, but he’s making a killing selling these things because he does branding with sports teams, pro teams and college teams, and then you do partnerships that way, and he’s got to figure it out. But that’s very rare to execute in e-commerce business like that.

[00:32:51.890] – Christine

Yeah, for sure. And some people specialize it and they love it and they’re great at it. I’m not saying every e-commerce company is going downhill. I’ve seen some super successful ones. I did think of another really cool case study right now, a good one, another recent one. So we sold a… These are really good two educational platforms. So this is SaaS recurring revenue. You pay a monthly subscription or you pay an annual for this was for college planning. This was for parents or adults that are looking to go to college overseas because it’s so much cheaper, A. B, you can usually get the same degree in three years instead of four. And that same degree is still good here in the US. And so we sold her business. I don’t remember how many months hers took, maybe six or seven at most to sell last year. And then the person who bought it, younger guy, he’s a serial entrepreneur again, he buys it. He does all these, he takes six months, does an insane amount of automations. So I almost picked the business up because I’m just like, oh, my gosh, he totally took this business to a next level.

[00:34:00.940] – Christine

And so he just was excited about the next adventure. The tension span is a lot shorter. So he had a new venture he’s starting. It was taking off. And he’s just like, hey, Christine, can you help? He’s like, I can run the transaction. He’s sharp dude. He’s like, but can you push this to your list? And I go, okay, we talk about it. I was like, okay, for 5 % commission, that’s it. We’re going to push it to our entire database because it was such a hot listing and everybody was everybody wants to be in the education space, content site. And so we push it to our entire database. One email, we got an eight competing LOIs in two weeks flat. He sold it and under he closed the transaction all cash within, again, this is six figure deal, so it’s quicker within under a month. So that was like a super success story. That was really cool. He was super happy. But yeah, that’s another one. So it’s cool. Every deal is different, right? And I think that’s what makes it exciting for me.

[00:35:00.730] – Sean

Let’s dive into this model a little bit. You said this is a SaaS?

[00:35:04.140] – Christine

This was a content site with recurring revenue. It’s not software as a service, not software as a service.

[00:35:09.960] – Sean

Okay, that’s where I was getting confused. So was it like a courses site? There’s education they subscribe to?

[00:35:17.160] – Christine

Yeah, education. There was an upsell for direct consulting with the founder or with the team members. She had a team in place, a couple, again, just a couple of employees. So there was that upgrade of like, and then what’s funny is the owner stayed out. So it’s funny because she wasn’t going to stay on. So it made our sell harder because she was the face of the company everywhere. We had to take her down off the website immediately. She authored a book. So we offered any buyer to co author. This is a little hack for listening. You co author a revised revision of the book, like second edition, and because it gives credibility automatically to the buyer. So we’re trying to pull her out of the company the whole time. That was actually the number one objection. What’s ironic, at the last minute after the transaction, she went back and went into the company again to do consulting because he paid her really well. So that helped the second time around where she’s like, okay, I could probably stay on with whoever buys it. And so, yes.

[00:36:17.430] – Sean

Similar to the HubSpots situation with that founder is you sell, you get a nice payday because you sold the business and then you get in that case, it was a salary. In this case, it sounds like probably a pretty nice consulting fee.

[00:36:32.410] – Christine

Consulting when needed, very minimal. So she wanted to get back into being a therapist. That was her passion. And actually therapist specifically with teenagers and people going, like trying to choose what college to go to. So that was her passion is to do in person one on one stuff.

[00:36:51.360] – Sean

So this model, I’d like to dive in a little further just so the audience knows if they’re going to create something similar. Was this like $100 a month where you subscribe to content. Do you remember the pricing structure?

[00:37:04.320] – Christine

Yeah. I don’t remember the pricing because she had it tiered. So there was like three different options on her platform to choose from. And so, yeah, it’s video. You get into the portal and there’s videos. Do you get into a private Facebook group where there’s everybody? And it was a very active Facebook group. So that had value to it. People, parents and adults and teenagers asking questions. And it was so it’s funny. She didn’t even need to manage. She wasn’t really barely in there. Her team member was moderator. But honestly, everybody answered each other’s questions, which is cool.

[00:37:37.570] – Sean

That’s nice when you have that community. I’ve seen that in other platforms, too. I was part of a health and wellness platform for those who are helping others with heart disease, diabetes, high blood pressure. And it’s cool because the expert of this, it wasn’t me, it was somebody else helping, but they didn’t have to answer every question. The community was there to support each other, which created less time for the founder. It was cool. Okay, so then this model, do you recall what the multiple was? What it sold?

[00:38:06.760] – Christine

I know. I knew you were going to ask that.

[00:38:08.330] – Sean

I know. Sorry. I got to ask.

[00:38:10.540] – Christine

I know. I’m so sorry.

[00:38:13.070] – Sean

Because it’s a similar model to a SaaS, but I find it’s probably in between. I know we don’t have a hard number here, but it’s not a service business. It’s not a SaaS. So maybe it falls somewhere in the middle, maybe.

[00:38:26.860] – Christine

Yeah, I don’t even want to guess. I can’t remember that one. Again, it was a healthy… The margins… I’m sorry, the multiples are very healthy right now. So hopefully that continues in the market.

[00:38:39.720] – Sean

And that’s fine. At least the audience knows, like, okay, so you’re creating some membership site with a community on a focused industry, you can take a payday that can be multiple six figures, it.

[00:38:50.960] – Christine

Sounds like. Exactly.

[00:38:52.600] – Sean

Yeah, right on. Awesome. Let’s take a quick commercial break. Hey, this is Sean. I’d like to say thank you for taking the time to listen to this podcast. I know there’s a lot of other podcasts you could be listening to, so thanks for taking the time to listen to this one. I have a quick request. If you have a moment, could you please head over to Apple podcast and leave a five star review? The reason is the more ratings we get and the higher those ratings are, the more Apple will share us with the world. So thanks in advance for doing that. And then I have a quick comment. If there are any questions you want me to ask the guests, please head over to our Tykr Facebook group. You could drop a question right there. I’ll go ahead and make a note and I’ll do my best to ask that question on the podcast. All right, back to the show. Well, Christine, I really enjoyed hearing some case studies. I knew I had to get you back to talk about specific models. I’ll have you back again at some point just to get a refresh.

[00:39:45.170] – Sean

What did you recently sell? Because this is really important for entrepreneurs out there because, yes, you want to be your own boss, create your own business, but you want to be thinking ahead as well. Could you eventually sell this business? What can you sell it for? An expert like yourself can help them through that process. But what I’d like to do is a short version of the rapid fire round. We already covered some of the business questions in the favorite movie. I think that’s fun stuff. But I’d like to know the answer to two questions. What is a recent podcast you’re listening to right now?

[00:40:14.980] – Christine

I’m binge listening to Alex Hermozi, like you and Blade. So his new book comes out. His first one is a million dollar leads or $100 million leads that we just finished. I was in a book club and I read it for the second time. His new book comes out next in July. So he’s doing the podcast circuit. He’s doing the YouTube interviews. So it’s funny. I was just telling somebody else that I’ll binge listen to somebody. Listen to one interview and then I have to listen to them for the whole weekend. And then my team, I’m like, Alex, where’s Jose? He’s a market marketer. He’s a brilliant business person, sales marketing, across the board. I just agree with every single thing he says. So that’s a big one right now. So it’s a great question. That’s what I’m going to say, too.

[00:41:04.710] – Sean

You’re pushing me over the edge here because I’ve seen his videos, but I haven’t read his book, but this is giving me the nudge. I’m going to add it to my cart.

[00:41:11.820] – Christine

So one of them is $100 million Offers and the other one is $100 million Leads. Those are the two books. Yeah. Okay.

[00:41:19.830] – Sean

All right. And then the other question is, this is a book question, is there a recent book you’re reading and would recommend to others?

[00:41:26.320] – Christine

Oh, my gosh. And I have a custom. It’s funny. I almost set my laptop up for this video with my custom bookcase floor to ceiling in the background. It looks really cool. I just had it done recently, but I did not do that. And then let me peek really super quick at A udible because I’m a big advid. I did re listen to $100 Million Offers just because we were just in a book club for it. The Millionaire Real Estate Agent, which is an older book, which is Gary Keller, which is Keller Real Estate, obviously people have heard of him. But because business brokerage and M&A models very similar when you’re building out a real estate brokerage. That’s what we got to model because I don’t see a single business brokerage right now that I would model, to be honest. Hopefully none of them are listening. But if you’re going to innovate in the space, you can’t model people in the same industry. I’ve learned that years ago. So me just digging into that. The 10 X mentor is another one. I listen to a couple at a time. 10 X mentor is Grant Cardone.

[00:42:30.360] – Christine

I’m also a massive Grant Cardone fan. The second time I’m listening to that came out last year.

[00:42:35.820] – Sean

Okay, well, good advice. Thank you again for jumping on the show. And where can the audience reach you?

[00:42:43.120] – Christine

Linkedin is best. I’m on there every single day. Happy to answer questions. And then our website is the magnoliafirm. Co. Some resources there. Monthly, we host an M&A forum where people just come on Zoom together. It’s free once a month, first Wednesday of every month. I host it. And that’s really cool for people that want to learn more about business acquisitions. So we’re actually helping the buyer side a lot more, too, which is cool and educating them and not charging $10,000 for Mastermind either.

[00:43:13.510] – Sean

Thank.

[00:43:14.380] – Christine

You.

[00:43:15.550] – Sean

All right. Christine, thank you again. We’ll talk to you soon.

[00:43:19.000] – Christine

Thanks, Sean.

[00:43:20.980] – Sean

Hey, I’d like to say thank you for checking out this podcast. I know there’s a lot of other podcasts you could be listening to, so thanks for spending some time with me. Also, if you have a moment, could you please head over to Apple podcast and leave a review? The more reviews we get, the more Apple will share this podcast with the world. So thanks for doing that. And last thing, if you do hear any stocks mentioned on this podcast, please keep in mind this podcast is for entertainment purposes only. Please do not make a buy or sell decision based solely on what you hear. All right, thanks for your time. Talk to you later. See you. Please check out our previous episode on Top 3 Ways to Create Passive Income