In The Trenches Seller Panel: With Alicia Browner, David Marshall & Robert Day

5:09PM Oct 8, 2024

Speakers:

Steve Divitkos

Alicia Browner

David Marshall

Robert Day

Keywords:

introductions

company backgrounds

transition challenges

valuation process

investor groups

non-price considerations

technical concerns

emotional impact

working capital

debt usage

near death experiences

board involvement

future plans

search fund model

business fundamentals

Alicia, David, Rob, thanks for joining me.

Not a problem.

Glad to be here.

Well, we have a lot to get to, and I would love to dive right in. So to start, I thought it would be helpful to have each of you guys briefly introduce yourselves, and if you can, please include what type of company you ran, when you sold it, and if you have any continuing involvement in the business. So Alicia, maybe we'll start with you. And then followed by David, followed by Rob.

Okay, thank you. I'm Alicia Browner. I have a PhD in mathematics, and after college, I spent about 20 years in the aerospace industry creating resource assignment and scheduling algorithms for DOD and NATO. One of those companies was Lockheed, and after they closed their Austin division, several former Lockheed employees started a medical records company. So I went to work with them for a couple of years, and branching out of that, a couple of those people turned to writing clinical trials site management software and brought me in to help.

So seeing how clinical trials work, what intrigued me about the data collection software aspect was that we would provide a service using our software to configure data collection forms on the internet with various roles, permissions, calculations, analysis, tools and logic, but we were not selling software, which I knew was a very difficult road to travel. We weren't even doing at that time software as a service, so it seemed like a really good business opportunity, and it was just the right time with the internet becoming more powerful and bandwidths increasing.

And so I started Prelude Dynamics with my business partner Richard Teken, in the software company to collect data for clinical trials. So as you can probably tell, this was actually a second later life career, and we worked on building the company for the next 19 years before we sold it. We initially tried to sell it in 2017 through a broker, but at that time, the veterinary part of the FDA, which was our niche, veterinary trials, they slowed their processes so all our projects got delayed and we didn't get the valuations we wanted. However, as a result of that, one of the potential investors was Tommy Jackson.

And we hired him as our COO, so he had the opportunity to learn all about the business before buying it, and he was the one who eventually put together the investor group that bought the company. We almost sold again in 2020 we were very close to sale with an international company, but it was right when covid hit and they shut down air flights and so they were not able to travel to the US, because their laws said they had to sign in person, and so that got put on hold. And of course, at that time, too, the FDA started limiting non essential clinical trials because of because of Covid.

By the time that company resurfaced, a year later, we had already had an LOI with the investors that my coo put together, and so we went ahead with that sale. Richard and I both kept a small share of the company, so we are actually still investors, but we don't have any involvement in the operation of the business.

Thanks so much Alicia. David, how about yourself? Brief overview of yourself, the company that you ran, and any continuing involvement in that company?

Yeah. Thanks, Steve, yeah. Back in the 90s, I was working for one of the big telcos here in Sydney, in Australia, and got involved in the whole sales commissions and incentive space. And then, long story short, started building out the technology to automate sales commissions and incentives falling out for big sales teams. And, yeah, a bit like Alicia. This is pre cloud. Not only heard of that back then, but around about 2009 we bootstrapped the business, bootstrap Performio, and started building out the cloud infrastructure. Yeah, so in short, I ran Performio, which is a sales commission software company. Ran that for 10 years.

And I guess my journey was, I guess the key thing for me was in 2017 I moved to the States, or spent a lot of time in the US, building out an office in the US. We'd initially really bootstrapped the company here in Australia, just off, yeah, we never raised money. We just bootstrapped the company from local companies here in Australia. And. So it's kind of an interesting journey in that regard that we didn't, we never sought venture capital or that, and it was, so was a very slow burn, as opposed to, you know, the traditional, more American style, that's really pump it hard from the beginning. So we arrive in America in 2017 and actually start getting some traction, which is great.

But for me, it was, I sort of reached my level of, I guess, capability to really grow the business beyond a certain level. And so it was fortunate, we were starting to look at venture capital and various other investment options around 2019 but, yeah, fortuitously, I think it was certainly best for the business. Grace and Luke reached out from Cyber Partners, which was their single search firm they'd set up. And we started discussions. And yeah, we went from there. And the business was acquired in mid 2019. And I was full time involved in the business for at least two years after that. Still have some involvement today, more as ad hoc contracting type stuff. But that's it in a nutshell I think

Great. Thank you. Rob yourself.

Sure, Robert Day, the company name is Integrity Advocate. So we started that less than just over eight years ago. So my brief origin story, I my background has always been in risk. I was in the military. I was a firefighter, insurance risk, hazmat risk, human rights. You know, I was a private investigator and paralegals, everything is deals with the risk side, and I was working with the law firm, and came across a case where two people were badly burned over the majority of their body, and it turned out somebody else had received the qualification. Their supervisor actually did the qualifications for them, so they didn't get the training and knowledge they needed for the work they were doing.

Because I was looking at how could this be addressed, and went out to the industry and found out that the technology had moved to responsive design. I like websites needing to work on phones and iPads, but the proctoring solutions out there did not work on that they required installs. So thameans you couldn't use the software of our competitor software on any type of enterprise level, like any bank, oil and gas company, nuclear plant, any financial institution, almost nobody. Nobody wants an install that is really just malware at its intention, which is, all proctoring software is, is watching the person things you don't want it to do if you don't have permission.

And so we created the company at that point, it was, yeah, but eight and a half years ago, we started our first line of code, and then we went through the process here, just in the last almost at a year now, and right now I'm still a managing director with integrity advocate, and so is my business partner. He's still working full time, and both of us plan to for the future.

Rob maybe I can start with you when you were presented with a specific model of a search fund. I'm curious, what about the model? Worried you. What about the model excited you? I'd love to just get inside your head in terms of how you thought about this very unique investment vehicle.

I actually was very excited about it right from the beginning. There was no worries. And just, you know, we weren't planning on selling. It was one of those ones where you had people calling, contacting you, and people would call and say, Do you want to sell your business? And I started taking some of the calls because, of course, if somebody wants to give you money, it's rude not to listen to them. So I would listen to them and ask them questions, try to see how they were evaluating our organization, you know, this type of thing.

And when I was contacted by Graham, who's the head of the search fund that I was talking to and our current CEO, he wanted to learn about the business, it seemed like somebody that actually wanted to understand what we're doing, how we operated. There was a lot more questions. It was a lot more open. There's more a lot more communication. Rather than just what are your metrics? Let's see what we can get somebody else to give us money to do this and then walk away. So I had a lot more hope in that. And I'm at a stage in my life that I was just wanting a new challenge. And this looked very interesting.

Alicia or David, when you were first presented with the model, certainly sounds like Rob's experience was one characterized by excitement and enthusiasm and optimism. Did either of you guys experience the opposite side of the coin, doubt or question marks when first presented with the model?

I guess I can go. Yeah, I was totally unfamiliar with it. Like I said, I was spending most of my time focusing on talking to VCs and related sort of opportunities to invest in the business, as opposed to the single search model, which was like a 90%. So it was more just for me, just trying to learn something that I was totally unfamiliar with, I guess, but a bit like Rob, the more I learned about I thought, this is actually potentially a really good fit for the business and myself, personally.

Alicia, can I ask you, was it important for you that the searcher was backed by a team of experienced investors, and whether it was or it wasn't? Can you just walk us through the role or importance of the investor group and the extent to which that was actually meaningful for you in considering your buyer?

Well, we had a couple of different phases. So in 2017 we did use a search fund to try to find a buyer for the business. And we're not, we're not really very happy with the outcome of that. You know, it seemed like sort of like in real estate, where they were happy to get any kind of low offer accepted, but didn't really put much effort into qualifying the bidders. And so we, I felt like we wasted a lot of time talking to people that really were never going to be an appropriate match for our business. On the other hand, I feel like we learned a lot, and then the next time around, both times where we were investigating selling the company, we did not use any kind of search fund, and because we hired the COO, who had been in charge of a group of investors, he already knew the process quite well, and he kind of guided us through it the next two times.

David, how about yourself? Was the investor group important to you? Was it important that you got to know these people? Was it important that there was an investor group to begin with? Can you just walk us through how you thought about that?

Yeah, it was, I did get to meet a couple of key investors behind the group, later stage, I guess, about 30, 45, days to go. Yeah. I mean, it was you kind of playing this thing in your mind between, yeah. For me, I'm in America, right? And my family's back here in Melbourne, so I was kind of the key attractive thing for me was to move back to Australia, but at the same time, got to look after the interest of the business. So, yeah, it was very, I think, very important to understand where the investors are coming from. But like to be honest, for me, it was the most important thing was getting to know Luke and Grace and, you know, the two lead executives in the group.

Rob, can I ask you, I mean, in selecting your buyer, presumably there were dozens of things that were important to you and qualifying them. I'd like to ask if you could kind of boil it down to a handful of things, what was, what were some of the most important things to you in selecting your buyer among a large universe of buyers, presumably there's a lot of people who would have been interested in buying Integrity Advocate. How did you qualify the buyer? And if you can, can you please speak to like the non price considerations that were important to you? I assume price is important to everybody, but outside of price, what really mattered to you, as you thought about who should buy your company?

Actually, you you kind of hit on it there, as far as the non price things were the most important to us. You know, I actually would use the analogy of almost dating as far as, because a lot of it was very I knew there was going to be a long term relationship. I wanted the organization, because we have staff around the world. As far as I care about whether they, you know, the business succeeds for them. I want whoever's taken over to succeed. I think what we do is a value in this world. So I wanted the business to succeed. So all these things, I need to have a lot of confidence in, in whoever's coming in.

And it was a lot like dating, as far as the fact that it would all came down to just great communication, seeing that we were syncing, just open, even to this day. As far as, it's a teamwork like as far as it's collaborative with people monitoring, just watching egos, and even me watching my own. Because when you build something, you don't want to see it tweaked. And, you know, there's an aspect. It's like, if you have your car and somebody else repaints it, it's like, oh, you know, but just watching that is going on, and just talking openly and having a relationship right from the beginning, and it took us a year just the back and forth, just chatting every couple months.

We weren't rushing into it because, again, we weren't planning on going through a sale or anything like that, and just chatting every couple months and just and having those discussions, and then it became just the natural and that's why I say it's kind like dating. As far as it wasn't like we started with the end goal of doing a sale by a certain date, we started and developed a relationship, and the relationship just kind of carried on to a natural conclusion.

Alicia, can you speak to that a little bit how important was price to you? Presumably, price is important to everybody. But can you talk about the role that price played in deciding who your buyer should be, and also the non price considerations that were most meaningful to you?

Okay, well, I have to say that a lot of the non price considerations were exactly what Rob articulated price was important mostly because we had a high profit margin. We were considered, our software is still considered the quote, gold standard of veterinary clinical trial management, and so the prices that we got in 2017 when we had a dip in revenue, we felt like we would do much better off just keeping the business and reaping the profits over the next few years. I will say, when we finally sold, we had some people reach out to us that would have been a much better valuation, but the fact that we would be handing off the company to somebody who had already been working within the company for three years meant a lot.

We wanted to see the product continue to be successful. You know, our clients loved our software. They loved the interface and the navigation, and we didn't want to let them down. And, of course, we didn't want to let our employees down either. So we probably took less than we might have, just because we felt good about seeing the whole business continue and have faith in our new CEO that he would put them on a good path.

So Alicia, you had the benefit of having worked with your buyer for several years prior to him purchasing your company. David, correct me, if I'm wrong, I don't think you had that experience. It was a relatively new relationship for you, insofar as your buyers didn't work for you, at least as not as far as I'm aware. How did you think through price and how did you weigh that against the non price variables and deciding you know to whom to sell your company?

Yeah, for us, yeah, we were selling. It was 90% of the stock. So yeah, price was absolutely the number one factor. But yeah, but after we kind of, I guess, vetted the buyers, if you know what I mean, so yeah, there was this initial dance with Luke and Grace. And then there was a negotiation leading up to the letter of in intent. You know, by the time we'd signed the letter of intent, we felt, you know, we they'd come out to Australia, they'd met the other owners of the business, and so we all felt that they were really a good fit, and really good guys. So, that letter of intent stage was, yeah, it was really all about the price at that point.

And then, yeah, and then you go through the whole due diligence, and then you learning more and more about how things are going to go, you know, to be honest, but yeah, I guess we'd also establish some key points as well about how the structure of the business and how it's going to be managed going forward as well, which was obviously important. We weren't just going to sell the business, and we still had a stake in it, so it was important how it was going to be, how the ownership structure was going to work, and everything. But yeah, it was more about just getting to know Luke and Grace and upfront that they were actually legit, good quality buyers.

Because, again, we weren't in a sale. We weren't actually looking to sell the business until these guys come, that was so radical about it. Up to that point, we're trying to, like, you know, sell 20% of the stock to raise money for the next wave of growth. So it was a real change the mindset that happened over a period of a few months.

So, one of the unique things about the search fund investment vehicle, and typically the characteristic of it that catches most folks by surprise, is the fact that in the vast majority of the cases, the buyers don't have all that much operational experience. And I can say that, you know, as a former searcher and CEO myself, I had never managed as much as a lemonade stand in my entire career, I had never managed as much as an administrative assistant before I became the CEO of a rapidly growing software company.

So David, how did you act in light of that? How did you actually get comfortable with the ability of the buyers to actually run your company, given what I assume was a lack of operational experience at the time, and particularly given that all three of your businesses were rather technical in nature, we have three software businesses being represented here? So David, how did you get comfortable that they could actually run the darn thing once they bought it?

Well, again, yeah, up to the letter of intent stage, you know, we did our checks, or actually didn't reference checks until later in the process, to be honest. But yeah, we took it on faith what Grayson's background was, and he did have operational experience, particularly running a larger operation. I think it was maybe 20 or 30 people at the time, so they had some operational experience. But to your point, more importantly, the worry, it was more about, yeah, the technical nature, sales commission, it is super technical. And so, yeah, I did have a concern, I guess, more about the fact that I didn't want them to be totally surprised when they finally landed in the business, right.

Which they were, you know, I think it took them, like they were, sort of in this sort of shock period for about six months, trying to wrap their head around probably, really two years, the first two years, I think, to really get their arms around all the technical details. But it wasn't, yeah, it wasn't, to be honest, during the 100 day due diligence, it wasn't something that was keeping me up at night. There was plenty of other things to keep me occupied, I think.

I bet. Rob, how did you think about that? You know, your buyer's ability to actually run it given a relative lack of operating experience and a relative lack of software experience?

Sure, and probably the best way is that I pulled from personal experience. So you can keep in mind, as far as I don't have like, I'm one of those guys that I don't have a university degree. I've had to be scrappy, you know, starting businesses and doing different things my entire life, and when I saw that aspect in the buyers. So Graham's particular, our current CEO, as far as when I saw that and the he spent a lot of time us talking about the transition and how that would work. So that would be the other aspect. And the third is myself and my business partner were going to stay in the business, and I had a high level of trust in my business partner as well as the team.

And so it wasn't a matter of that he needed to come in and hit the ground running, and we were going to kind of run off into the woods with money or something like this, you know, like, no, it's like, he was simply going to augment the team. So we saw it as an augmentation, not as something that we were going to cut and run, but we had more ability, and he has a far greater understanding as far as integrations, you know, like integrating a team than I did, and scaling a team than I do.

Rob, I want to stick with you, because instead of running a competitive auction process using the help of an investment bank or a business broker or someone comparable, you chose to engage directly with the searcher as your sole buyer candidate. Can you walk us through how you thought about that decision, and did you ever consider utilizing the services of an investment bank or a business broker or a comparable service provider?

We I'll start with the second part of the question. We did have somebody that reached out to us at one point in time, and I started down that path, but I found, and this is actually very similar, Alicia, she mentioned something akin to that, as far as it seemed very cold, mechanical, like as if it was going to be just somebody was going to take the product, commoditize it, try to get a commission off it, or something. And I didn't have any confidence in the ability to run the business and to keep it going, because they didn't ask the right questions, to be honest, as far as, you know, if you only ask about the financials, I know plenty of businesses that have good historical financials that I would never want to invest in.

And Graham and his team, as far as they asked more about the potential they saw where it was, but they asked more question about where it's going and in the future. And I liked the fact that they were considering the future, because that's really the most important thing, that money in the past, and that was raised in the revenue is already collected. And so it's our past doesn't always predict our future. And they paid as much attention to the future as they did to the past.

So if a investment bank or a business broker, someone who was looking to represent you to create a broader auction process, if they reached out to you and asked thoughtful questions about the future as opposed to more mechanically oriented questions about the past, would that be enough to kind of tip the scales and have you consider utilizing their services? Or was it important to you to just engage one on one and look into the lights of the eyes of your buyer directly?

No, 100% I would have opened, you know, if that had occurred, I would have been open to that. It's similar. If you think of everyone buying a house when you have a realtor or even a car salesman that really seems to connect with you and know you, it would have been much easier, I'm sure, if I had somebody else to go through, and maybe we could have got more money out of the process. It's possible, but I wasn't going to sacrifice one for the other.

David, How about how about you? Because you mentioned that when your buyers reached out to you, you weren't actively looking to sell the company. So when they first reached out to you, and that idea was kind of implanted in your head, saying, hey, maybe, maybe I could actually sell the majority of this thing. Did you ever consider utilizing the services of an investment bank or a business broker and just walk us through why you chose the path that you did?

I think yes and no, we didn't consider the services of an investment bank and a broker. And when we met with a few to be sure, that approached us. And I just, frankly, I just felt that they were all not snake oil salesman, but it just seemed slippery, right, whereas Luke and Grayson come along, and their pitch did resonate with me, this idea that the single search model, it was a strong model that actually delivered really good results because of the, you know, the commitment of the acquiring executives are going to run the business and as opposed to a portfolio approach. So yeah, again, I never heard of the model, but yeah, it really resonated what they were pitching.

I'd like to add that I would have been happy to hire a broker, and in fact, we did in 2017 it's just, I don't feel like I had any way to know how to vet them. I don't know which one would be good so, and there were a couple that seemed like they would be good, but again, it's hard to know, and by then, you've committed to a couple years with them.

Alicia, I want to talk about the transition period between outgoing and incoming CEO. You mentioned before we hit record that your transition period with your buyer was originally planned to be 12 months, but it lasted for six months. So can you please just share with us what that original transition plan looked like, and then why your actual experience differed from those plans?

Okay, so most of the most of the potential buyers that we talked to would have liked a much longer transition period, at least a year, some two, three, even five years. But because our new CEO had been our COO, the business side was really pretty much already taken over by him. We learned in 2017 that we needed to be less critical, so we had him take over a lot of our relationships, hiring of staff, budgeting proposals, that kind of thing. He was not technical. Both my business partner and I had a very technical focus in the company.

My favorite part of the whole work day was when a client had a problem, a logic issue that they wanted solved, that nobody else could solve, and I could come in and work on that. So that's what I enjoyed doing, but that wasn't really scalable. So my focus was more on the technology, making the clients happy, making the software do whatever they wanted it to do. His focus was more on scalability, which, of course, is what you need to take your company to the next level. And so, in that respect, most of what I did the first six months was training the technical people to do more of what I could do.

And so we had in the original contract, six months of full time and then six months of half time, but I spent the first six months very focused, and we had some amazingly great software people and project managers, and a wonderful, wonderful product manager. And so I spent that amount of time really training them, working with them, getting them as much up to speed as possible. And at the end of six months, especially since our visions were a bit different for the company, it just seemed more natural to say, okay, this is a good time to break it off.

So David actually had a really interesting comment that prompted a question you'd mentioned a couple minutes ago that you were. A little bit worried in those first 12 months of you know, can the buyers wrap their arms around this highly technical business? Might they discover something that they didn't contemplate during the diligence process? So I guess an open question to all three of you, certainly, as a buyer, there are a lot of things that I worried about in my first 12 months, particularly when myself and the seller were overlapping. For any of you, what were you most worried about when you were transitioning with the incoming CEO? What kept you up at night specific to that transition period?

So post the actual signing of the contracts, yeah? So like, I guess, yeah for me, it was just about making sure they had as smooth a transition as possible. There was the crucial there was for us, it was a, there was the initial three month where there was a sort of an earn out as part of the contract. It wasn't a massive part of the deal, but it was still important. But for me, it was mostly the thing that was just implementations of new customers and maintaining existing customers, and just all the technical stuff around that, making sure that they were getting on top of that. So there's a lot of work went into that, really, for the first seven, eight months, and then covid hit, and that's a whole different story.

Yeah, for me, it was worrying that our clients, who were so used to all the customization we had done for them, being upset about the newer model of more of software as a service, less customization, more scalability. But they were used to very personalized customization the software.

Alicia, yeah, with the benefit of hindsight and time, to what extent did your worries actually manifest? Said another way the things that you worried about, did they actually happen?

Yes, I think there were a couple of long, long term clients who no longer saw as much value. You know, there are some large institutions where they have a prescribed piece of software that you use, but then our clients would fight and say, no, no, no, we need to use Prelude. But on the other side, there have been more new clients added who really want the control themselves, want software as a service and want the scalability for their larger their larger projects. So I think there was a trade off. I think we lost some and we gained more than we lost. But it's still hard, because, you know, those become personal relationships over time.

So one of the things that buyers always worry about is what we often refer to as like go to the beach factor, which is to say, as of the day of closing, you get a wire the seller gets a wire transfer in his or her bank account for a material amount of money. And our worry as the buyers is while this business owner has gotten what they wanted, they may or may not be emotionally or commercially checked out and right when things get hard, they're going to bulk. They're going to go away. They're going to realize that they could be sipping Myties beside a pool somewhere, instead of going to yet another trade show in Nebraska. Rob, can you talk about that? Can you just speak to buyers who are going through that thought process and just get us inside the head of a seller specific to that worry?

Sure, and I would say we mitigated on our side, mainly because the structure of the deal protected against that. As far as we structured it such that there is still long term interest. You know, obviously myself and my business partner, we're still owners in in it, as far as there was an earn out capacity portion in there that actually made a big difference. And the amount of pre planning that we went through ahead of time so that there wasn't really any surprises all the way along and as we went through, I never got a point where I just kind of like would hang up, or could go, could go to the beach. It was always there's another new challenge coming up. It just has been evolving and changing, and that was thought through and planned very well and backed up with a structure of the deal that was put in place.

David, how did you think about that? Like running and growing a business is the most brutally difficult thing I have ever done, and when we finally got the wire transfer, I felt like I exhaled for the first time in a decade. I suspect you probably felt something similar. So I mean, were you ever tempted to just kind of like, hang up the pads, so to speak, once that wire hit your account? I mean, talk to us about the temptation that did or did not provide you.

It didn't, funnily enough, and I was transparent about this. I actually did go to the beach for a week with the family. I actually told them I've got a holiday booked on this date, and that was actually part of the reason why we had to close the transaction a week earlier. And so that's just funny, but no, if, like for me, if anything, I think they're surprised that I actually wanted to hang around as much as I did. I was surprised that they I think they fully backed themselves to just pick this thing up and run with it. And it seems, for me, they didn't put as many, not caveats, but controls around my ongoing involvement compared to say, Rob and Alicia, but it didn't seem to be as bigger that go to the beach factor didn't seem to be as big a factor, maybe, but Luke and Grayson.

But like for me, I would, yeah, I've been working the business for 10 years. Yes, when the the money got wide, I got this, you know, incredibly light feeling, I think, after 10 years of a lot of stress. So that was fantastic, but I was committed to staying in the business. Because, you know, you have this pride in you, when you build something for 10 years, you don't just want to walk away and let them, you know, change everything, and you want to be involved and make sure that it's got the best chance. Plus, yeah, and we did have, I still had a significant share in the business, so there was that financial piece.

So I want to so sticking with the transition period. I want to talk to you guys about watching somebody make changes to your baby. So I often say that, you know, I underestimated how difficult it would be to explain every decision to my seller and keep them constantly informed and in some cases, emotionally placated. And I think by no fault of their own, they underestimated how difficult it would be to watch somebody make changes to the thing that they had incubated and grown up and cared for for 20 years. So Alicia, maybe I'll start with you, although I suspect this was mitigated a little bit because Tommy had worked in your business for a couple years.

But how emotionally difficult was it for you to watch changes happen to your company? I mean, one change that we discussed is you used to customize your software to the specific needs of individual customers, but your new buyer said, Well, we're going to do a lot less of that going forward, because it's less scalable. Like to what extent was that harder, or maybe even easier than you thought it would be going in?

I think it was very difficult. We did recognize that we needed someone with more of a business focus. But I love the software. I love the technology. What we built was so cool, and it was really hard at times to see decisions being made that I wouldn't have made, even things like putting the servers in the cloud. We had our servers in a in a data center that we managed, and the new CEO wanted to put those servers in the cloud. It didn't seem worth it to me, and I didn't see a big benefit for it. So there were decisions like that, but I also recognize, well, he's the new CEO, and I need to let him make those decisions. But that's why, again, going back to the six months versus a year, in a way, it was easier just to back off after six months. But yeah, I love the product, I love the people, and I think, I think he'll do a really fine job with the company, but it was probably a different direction than what I would have done.

David, how about yourself? Like, how difficult was it for you to see your buyer make changes? Presumably, they must have done something that was different from what you would have done if you were still in the CEO seat. So can you talk a little bit about, you know, did you overestimate that? Did you underestimate the challenge? Did you think it would be about as difficult as it was? And maybe talk to us a little bit about like, what does good look like, right? So, if you were to advise a buyer and a seller of another comparable company, how do they make that process as easy and as seamless as it can be?

I think, yeah, I think they did a good job during the due diligence phase of you know, we worked really closely together, and they shared with me their plans, what they wanted to do. And, yeah, I gave my advice, and we disagreed on some directional things about, you know, maybe ideal customer profile stuff, but around the margins, right? But so I had a pretty good idea what they were planning. So for me, it actually, they slightly changed the logo about a couple of months in. We joked about that, but, yeah, I didn't. I'd like to think I was mature enough not to get worried about, you know, details, right? So I'd say they did a really good job involving me during the buying process, so I understood where they were going to take the company, so I didn't have any major problems at all watching my baby, you know, be changed up.

Where it did get tricky, though, and where it did get emotional was it was more about my involvement again. I think I underestimated just how keen I was to stay super involved. And I had difference of opinion, particularly as things went on, not so much in the first three months, but going into end of year one into year two, about where I thought my skill and experience could be best deployed. And so, yeah, I mean, we had a couple of, you know, come to Jesus type moments, I think, where it got pretty hairy, but we got through that. So yeah, there for me, it was actually not so much about the business, about my what I could contribute to the ongoing growth of the business.

Rob, you've got a unique perspective, because you sold your company in 2023 and you're still actively involved in the day to day operations of the company. So I'm curious, from your current viewpoint, what has been much harder, much easier, or perhaps just like, very different about the transition from what you had initially expected?

Yeah, as far as the communication obviously helps a lot with expectations. If you talk about things well you know enough and do a lot of planning ahead of time, you don't really get the angst or the, you know, the the worries about how it's going to run, and you're not surprised about the decisions. But I'd have to say that the one, the one aspect that would, you know, kind of stay in my mind, as far as would be, when you look at the investors or that are involved, if you look at CEOs and CMOs. It seems that the most of them, or almost all of them, have come in fit a certain mold type of thing, which means their life experiences are such.

Which means the how they think business should be run is all based, often based, you know, if you ran a business only using like Harvard case studies, only based on MBA practices. You would never have innovation type of thing, because that usually is a way of maintaining a business, not a way of innovating a business. Because you have to go out to people that won't accept the status quo, you know or see the world a bit differently. And that is the one thing that's hard, is just trying to understand the how people were making decisions and seeing that they were they may discount whether, you know, not, maybe in the decision up, but in their mind and their logic.

They may discount the aspects of business that I think we are more intuitive, probably the three of us, as far as they, are a lot more intuitive and put more accounting based on, said, maybe business fundamentals. Because obviously we can all think of businesses that have sold for a lot of money, that had horrible revenue, it's like but great potential, or other ones that had great revenue, but, you know, just didn't, just wouldn't be a business that we would want to invest in. And so that is my thought with the whole search fund aspect.

Is in just as a whole, as far as is it possible that when search funds, that the businesses that are being purchased could have problems 10 years out, adapting to a world with AI and technological change, because they've actually filled all the seats with individuals that think very similar and think based on past logic.

So articulated exactly how I felt. I felt like our initial success was totally due to thinking out of the box, not doing things the way other people would do them. We didn't use a relational database. Some companies said, how can you not use it? Well, it's so much faster, right? You have everything in memory. It's very fast. It's a small amount of data, so we did a lot of things that were not standard practice for just somebody who came in and said, Oh, okay, what software? Let me look up on the internet how you build software. Let's put those pieces together. And so it's hard to see some of that being pulled back. But I also understand about growth potential and scalability and that kind of thing.

100%, if I can add one other thing, as far as a concept that total addressable market, as far as when they try to come in and look at that, and had they come into our business five years before, the total addressable market would have been zero. It's because we were creating a market type of thing, and as far as and then solving that, or seeing something that where the world was going, and that's a different mindset. You can imagine going to a group of investors say, what's your total addressable market? It's zero. But don't trust us. We got a great idea. It probably wouldn't have gone very so we needed to take it past that point to show that the market now exists, you know, and to get that interest there.

So one more question for you guys on the transition before we get to valuation and structure, and maybe David, I'll pose this one to you. How did you think about when to loop in your employees about the news of the sale, particularly those who you viewed as being particularly important to the day to day operations of the business. Many, many sellers, understandably, are quite reticent to share the prospect of a pending sale, because, as we all know, sales fall apart all the time for any reason and for no reason.

So you don't want to go too early. By the same token, you don't want to necessarily go too late and drop a grenade on them saying on Friday evening, hey, we've sold the company on a Monday morning, we have a new CEO. So how did you think about timing and specifically with those employees who you viewed as being like particularly important to the day to day operations of the company?

Yeah, this was an issue that caused a lot of discussion and angst, but yeah, we decided fairly early on, after the letter of intent had been signed, to bring in a couple of key employees. Yeah, one of them was a CTO because, yeah, you know, there was the product due diligence, right? So that was a trigger for that. You know it, it was, yeah, I'm trying to think back now, but yeah, that was a really tough one. Frankly, if anything, I'd probably would have preferred to leave it as late as possible, because it does create, you know, just discussions and a distraction you don't really need.

We had a huge decision to make whether we looped in people in the US office, which was a smaller office, to the Melbourne office at that point, and we decided not to, which I think was the right decision. But it did create an awkward situation. Then when I come in and go. Hi guys. Here are the new owners. Yeah, that was that was a difficult transition. And in an ideal world, yeah, you'd loop everyone in, right? And you'd have total transparency. But I don't think that's wise or realistic.

Rob, how about yourself? How did you think about when to loop in key employees, and knowing what you know now, would you do anything differently if given the opportunity to do so again?

No, I would do everything the same way. And as far as with us, because of our structure, with my business partner, Scott and I staying on, it was really just we added more horsepower to the team, and we're still working full time. So it was really, we just, it's like adding a sales division or something. We added an upper management division, a board and the CEO and a structure, and that just didn't exist before. So it wasn't an event. It was a evolution.

Let's move on to valuation and structure. Alicia, as part of your transition, you mentioned that you rolled some equity into the acquired business. So out of the three possibilities of rolling equity or taking a seller's note or a vendor take back note, or accepting an earn out, why did you choose to roll equity, and how did you think about each of these three options, and including which was most and least palatable from your perspective,

And with the previous offers that we had, there were always burnouts, but in those cases, Richard and I would build still be in charge of managing the business. So since we were actually transitioning the business to a new CEO, and because we knew that they had a longer term strategy and would be reinvesting the revenue into the business, we didn't feel like we had any control over an earn out, especially if you're looking at EBITDA, or in any way profit, profitability. So so we that that was never even really discussed, just because of the nature of the transition. We wanted to keep some equity, mostly because we felt our product was exceptional and very far above the competition, and we had faith that our new CEO would be able to grow the company.

So we wanted to participate in that and didn't want to, weren't quite ready to let all of it go. In fact, we had an offer in, I think was 2018 from our major competitor. They were going to buy our company, and it turns out they only wanted to put us out of business. And what was interesting about that was that they had about 100 salespeople, and we had one. And I guess if I thought that they were going to replace their subpar product with ours, that might have been appealing, but basically, they were just trying to get us off the street so and nobody asked about carrying a note. I don't think I would have objected to that, but in a way, the way we kept the equity is sort of a combination of a note and equity, and so I thought it was a really good way to handle it.

So David, I'd love to ask you the same question, because as part of your transaction, I believe there was an earn out component to it. So how did you think about earnouts versus seller notes, versus rolling equity, and why did you land where you landed?

Well, initially, there was a model presented that said that, before we did the letter of intent, that, you know, there would be an equity, there'd be 10% left with the original owners. There was an opportunity to take that up. And then, as we went through the due diligence and we refined the term sheet, there was a couple of things around a three month. It wasn't really an earn out, it was more just validating the valuation of the revenue run rate. So that was kind of like a tweak. And there was also called an indemnity provision, or whatever, 12 months down the track. But really, fundamentally, it was a payment up front, 95% and then there was this equity piece, and that was how it was presented, and for me, that was attractive, because, yeah, I felt that there's a lot of upside. I had confidence in the new owners, and so I wanted to and I was going to be playing, I felt that I was going to be playing a significant role for at least a couple of years.

So Alicia mentioned that her distaste for earnouts was largely related to the concept of control, which is to say, if some of my consideration is contingent upon something, I at least want to be in control of that something. Did you follow a similar logic path insofar as you were comfortable taking an earn out because you remain largely in control of the thing that the earn out was based on?

Yeah. And again, the earn out, it was, really, was in the scheme of things, it was relatively, yeah, it was minor, I think, but, but it was important and it was within my control, right? Because it was within three months of the deal closing, it was making sure that certain deals that have been promised in the pipeline were going to come through, which was going to affect the final valuation. So I did have control over it, but yeah, like Alicia, I would not have considered a, yeah, an earn out two years down the track, because, yeah, that would have been a lot more outside my control.

So this next question, I'd actually love to get answers from each of you on it. And the question is, and Rob, maybe we'll start with you. The question is, how did you arrive at the valuation at which you sold your company? You know, in my experience, business owners might take advice from external parties to the extent that they're part of the process. Maybe they'll look at sales of comparable companies. Maybe they'll base it off of a previous valuation that a different buyer provided to them six or 12 or 18 months ago. Or oftentimes, it's more personal, and they just have a number in their head and they say, Hey, if you hit this number, because that's what I need to retire, that's what is going to make a difference for myself and my family, then I'll transact. So those were a couple different options. Rob, how did you think about and how did you arrive at the valuation that you sold your company at?

To start just an analogy, and when my company knows I'd like to tell analogies. I was on an airplane once in China, and was sitting on there for four hours, hungry as can be, and I remember texting my wife and indicating that I would pay $500 for a burger at that moment, type of thing. What I mean by that, as far as on the pricing side of it really the price is going to be largely dependent on the buyer, because people often like to think, as far as there's intrinsic value to things and obviously, like, think of diamond rings and how much they're inflated. And if it wasn't, if a diamond ring wasn't related to things like love, it's a, you know, it's not a precious stone.

Like, as far as there's lots of them, it's something there. So, like, ALicia was talking about, the idea that if somebody wants to take you out of business, they'll put one value on there, because they can see it. If they think they have synergistic skill sets, they can put another value on it. If they have a lot of cash, you know, they might structure the deal differently than if they, you know, can borrow a lot of money, and so all these things go into play. So for me, walking in, I had talked to a lot of different organizations ahead of time, they would they would reach out to me just blindly. I'd ask questions, and I would ask them that question, how would you evaluate it? You know, put a value on our and they would tell me their structure.

And I kept hearing different models over and over again. And so I asked the same question, in case of the search funds. So they asked that same question, and we just went down that road, and it made sense, and it also made sense for the long term, for the business, you know, and for the deal and the structure, as you mentioned, to keep everyone vested, to make everyone, I guess, honest, if you want to say, as far as the structure is fair and it's not great for anyone. Which is sometimes they say the idea of the best deal is if everyone walks away unhappy that you have a good deal. I think what we did is we found one that hurt a little for everybody, but ends up, in the long run, being the best structure.

Alicia, how did you arrive at the number at which you transacted? And how commercial was it? And how personal was it?

Well, since we had gone through the process in 2017 those offers all seemed really low, and they were much lower than the offer that we almost closed on in 2020, the 2020 offer was about double what those earlier offers had been. So it seemed reasonable. We had another company that was talking about a much higher valuation, but I think, quite frankly, at the point at which we sold, we were really ready to move on, both of us, you know, ready to be done with it. It's a lot of stress, as you know, running a business, but basically it was the investors who put a valuation together, and we negotiated a little bit off of that, and we're happy about it. It's more the last thing that you said, where we were kind of just happy with what we were getting out of it. And the term seemed fair, and so the timing was right.

And David yourself, how did you arrive at the number?

Well, it was very much a run right, multiple type discussion, plus some uplift for services. But it ultimately came down a run rate. And that was everything about that three month earn out for on a better term, but was about as well. But so it was all about that. And so I was really in that negotiation around the letter of intent. That's where we really landed on, on the performing, if you like, what the final valuation was going to be. So it did, just like Rob was saying, it just, you know, we obviously felt that they were keen to buy the business. It was a strategic bias that put a higher valuation multiple. And it was really, it was just a negotiation that went back and forth for like, two or three weeks, and we landed on that number. And then we felt that yeah, it was higher than what we would get from other options at that point in time.

Alicia, given that you rolled some equity into your deal, and you knew that external investors were helping finance the purchase of your company, and as a result of that, or at least partly as a result of that, there would be a board of directors to guide and advise the CEO moving forward as someone who remains a meaningful shareholder in the company. Did you ever consider requesting a board seat?

Yes, actually, I did, and I spoke to the new CEO about it, and I think I decided that I would rather not even be involved at that level. I mean, we get the financial reports four times a year, but our philosophies are different enough. And I think it would have created maybe too much conflict.

Yeah, and just to pick up on that conflict point, is it because of your observations of how Difficult it was to see somebody make changes that perhaps you yourself wouldn't have made if you were sitting in the same seat?

Right. And as I said, I do think that more of a business focus is the right thing to do. At some point, you should not have have technologists running the company. You should have someone with a business background who understands scalability and understands how to bring a new business doing that. And so I thinkI just decided I would rather put my focus on new things, new developments, new investments, and just keep my fingers crossed and hope that the old company continues to do well.

So in my experience, both as someone who's purchased and operated a business, but also as someone who invests in folks doing that, the working capital adjustment is often a source of surprise and confusion and frustration for both buyers and sellers, particularly when that true up mechanism takes place that can be 60 to 120 days post closing. Most typically, I guess, an open question to the group, to what extent was the working capital adjustment a source of surprise or frustration for you, and as someone who has gone through the negotiation process, is there a way that that could have been explained better, or introduced better, or perhaps handled better post closing? And I'll open the floor for anybody who has an experience that they'd like to share.

Yeah, I'll jump in. Yeah, I've totally forgotten about that. Thanks for reminding me Steve. Yes, it was a source of it wasn't like surprise. It was, you know, again, they were very transparent. And Luke was all the numbers guy, you know, we spent a lot of time talking about it, probably too much time, I think, because, and I felt that there was always like, I'm actually a trained accountant as well. So I backed myself into to work it all out, but at the end of the day, I still felt there was a bit of voodoo going on. I just trusted Luke, And it came to the point I thought, you know what, it's wasn't worth the energy. So I would have preferred that it wasn't in there, but I understood the reasons for it.

Alicia and Rob, any similar experience with the working capital mechanism?

Well, we had a very high accounts receivable, so we basically distributed all the cash that was in the bank accounts. And also, even though we sold 80% of the company, we ended up with less than 20% of the new company, because the investors put some working capital into it. So I think the bigger surprise for me was just how my 10% dwindled so rapidly.

Rob, have you guys had given that you sold your company most recently of the three folks on this panel, have you guys had your working capital adjustment take place yet?

Yes, that's all been done. Again, great discussions. And like David was saying and saying was all talked about ahead of time, was all there was no surprise. So the only issue that I had through that process, you know, is the deferred revenue. Because, again, software, as far as a license model, and it wasn't explained it to, you know, the search, you know, The Searchers or people coming in. It was explained to the accountants that were doing the work for as part, you know, it's like, and having them understand, as far as, no, you know, that isn't a liability.

The liability that they were thinking, right? Really, it's like, if 50% you're selling timeshares, and as far as you still have 100 days of timeshares, days left open, but it's December 1st type of thing. And they're, you know, as far as you know that, like, it's going to be profit because you don't even have the spot. And with our we have licenses that expire. And so they said, Well, what if something spiked and, you know, all of a sudden, and it's just a non event. So, but again, that's the difference between economic reality. We often joke, and accounting reality sometimes, you know, they don't actually make sense.

Deferred revenue is a particularly contentious, complicated, nuanced component of the working capital adjustment with software companies. Alicia and David, are you guys comfortable talking about to what extent it was complicated and nuanced and frustrating for you, and how you guys ended up treating working capital, or, pardon me, no, deferred revenue as part of the working capital negotiation?

Like it wasn't controversial. To me, it all made total sense. But like I said, I think it was just like, I can't quite remember the details now, but I felt that at the end of it all was. Like, Oh, we're up against it. There was just some adjustments that either caught me by surprise or where we ended up just losing that working the capital adjustment amount, and it was like 100k, I think so, it wasn't insignificant. But I felt like just so much friggin energy went into that whole calculation, which probably was wasted time.

Yeah, what seemed almost humorous to me, was it depended on exactly when we said closing was. So, you know, we have payments hitting the bank account. We didn't have a specified amount, and that probably would have been better, but we, as I said, we have a very large accounts receivable, and the buyer basically got the advantage of all of that, which was coming in kind of continuously. So we basically whatever had already come in, we shared based on the ownership, and then they got everything that came in after that. So I think both sides felt okay about it, and was not a lot of there was not a lot of contention, but, yeah, it was certainly something we talk a lot about.

So in my experience, a lot of founders and small business owners rightly take a lot of pride in the fact that they never utilized any debt in the growth of their business over many, many years. Now, some have, some haven't. It's neither a good nor a bad thing. It's simply a source of funding. When I, many moons ago, was looking to buy a company, I remember when I first proposed the idea of adding debt to the post close entity, I got a lot of pushback from founders.

And a lot of that pushback was rude in this idea of, hey, I've grown this thing over 10 years, 15 years, 20 years without the use of debt. I'm not comfortable with debt being on the balance sheet, even if I don't necessarily have a meaningful economic interest in the company going forward. So my question, maybe I'll start with you, Rob, is, did it matter to you whether your buyer was planning to use debt to finance a part of their purchase? And why did it matter? Or why did it not matter?

And you're right, as far as similar as David there, as far as we actually bootstrapped the whole thing. We did not use debt at any point in time. And I'm from out in Western Canada. So as far as, like, I grew up in that country where you didn't want to have debt at all, and your whole goal of your entire life is to never pay interest to a bank for anything. And so it wasn't part of our culture, but this was part of me separating as far as when you're making this deal, as far as that's not my decision, it's not my you know, across the bears and we have, you want to put it as far as that, that was their decision, and I had no problem with it on that side.

Alicia or David, any any different experiences? Did either of you react negatively to the idea of your buyer utilizing debt to partially fund the acquisition of the company that you founded?

I'm not sure I even know if they did utilize debt.

Okay, so I'll take that to mean that it wasn't a particularly important consideration. I mean, you're you're considering probably 100 different things at once, so you'd be forgiven for not considering the 100 and first thing. David, how about yourself?

Looked similar to Alicia. My mind is saying was that they weren't using debt, that it was the investors were putting, there wasn't, yeah, I don't recall there being debt going onto the balance sheet. There was definitely a capital injection, but I don't think there was debt, but, yeah, maybe I wasn't paying enough attention. I know they brought, they did bring in a debt facility later on in the in the picture.

I had Covid right before we closed. So one month before we closed, I didn't know much.

So in my experience, every deal has at least one near death experience, which is to say, throughout the course of any given deal, it almost dies at least once more frequently, it almost dies at least a couple of times, so as to the extent that memory will continue to serve you, Alicia or David or Rob, did your transactions have any near death experiences? And if so, I'd love to get a quick tidbit about what that near death experience was and how you ended up overcoming it?

Well, we did have almost a near death experience. I read the LOI as saying they were buying a stock, and then the contract came through as an asset sale, so that was a bit of a problem. And then there was an issue of commissions. So yeah, I'd say we had about a month where things were pretty tense, and the problem is the LOI doesn't have all the details. And then you see the contract, and you read the details, and you think, Well, that wasn't really my understanding, but both sides were very motivated to make this happen. You know, we were ready to lead the business. My business partner and I were ready to move on, and our COO really wanted to be CEO and wanted to be in charge. So we were motivated, and we compromised on a lot of things. And ultimately ended up in a very good spot and good relationship.

So Alicia, just a quick follow up, in light of your experience. If you could do it all over again, would you have pushed for, as a seller, a more detailed LOI that spells out more specifics than perhaps it did?

Yes, I think that would have been very helpful. And especially since we had had some of those same issues the previous time with the international company, I think it would have been very it would have been better to have the LOI be more than just a few pages, maybe even just a model contract, like just here's here's our standard contract. We would start with something like that.

Rob and David, any near death experiences that come to mind with respect to your transactions?

I can add one. As far as when you start going to through the diligence aspect of it, you obviously bring in external bodies, at least in our cases, they usually brought in external bodies that don't know your business, don't understand what you're doing. And as far as we had an issue where, as far as how we were being classified, as far as a pure software or a tech enabled service type of thing, and I think that could have been managed by us just understanding, I guess, what the outcome was what the expectation was from the view, because we ended up, sometimes when people don't know that right questions to ask, if they ask the wrong questions and you answer them, it'll give them one picture of a business.

If they asked a different set of questions, it would have given another picture. Once that picture is set and especially if there's a vested interest in changing their mind. Of course, everything is colored a little bit, you know, as far as in anything you say. So I would much rather have talked about that ahead of time, instead of trying to justify or explain after a conclusion has been made.

David, how about you any any near death experiences that you had to overcome alongside your buyers?

I think so, I think there's enormous amount of stress because it was so much. Yeah, we had our biggest customer went out to tender during the process. Yeah, they weren't aware. So, you know, we had to win that tender, and which we did. But you know, there's just lots of stuff like that. Yeah, we did, I think we did. One thing I did right was, you know, I hired a US Attorney, so US based attorney to help me during the LOI process. And so we had a really solid LOI, and I remember Kathy saying several times, and, you know, these guys are really good guys, you know, everything she was saying and just gave me confidence that we were dealing with good people and not sharks.

So yeah, there was, there just weren't any crazy things that happened during the process other than the normal stuff. There was a funny moment, well, it wasn't funny at all, but at midnight, you know, the deal got closed at 3am and we had lawyers on the East Coast and whatever. And the lawyers on the east coast have been hard ass saying we haven't seen the share certificates. And so they're ringing me to tell me to go and get my wife back in Melbourne, I'm in LA to go and find the freaking share certificates. And they were threatening to shut the deal down, so we can't go ahead. I'm saying it's midnight here. We're doing this deal. I mean I don't know how we did it, but we managed to get the deal done without the actual hard copy share certificate, so that I'm not sure how close it came there. But that was an interesting moment.

Let's throw one other thing in there as far as, if both sides, sorry, the tax ramifications were extremely important to us as far as and if there wasn't flexibility with how things were structured and how everything went through to help mitigate, you know, the taxes, it would have gotten a lot more expensive or wouldn't have happened. So that was very important.

So I guess, in a similar vein, I'd like to ask all three of you, with the benefit of some time and some hindsight, what was either the hardest or the most surprising thing about selling your company and Alicia, we'll start with you. What was the hardest or most surprising thing about selling your company?

I guess the hardest part was how hard it was to leave after being so immersed in the business for so long. You know, it was almost 20 years, and then, surprisingly, how soon I embraced the freedom of not having all that responsibility.

Rob, how about you?

I think the surprising part would be the relationship developed with the new CEO, the head of you know, as far as the person heading the search and everything else, as far as the connection we have, I actually wish I would have met him. He says I wouldn't have wanted to meet him 10 years ago, but I think we could have done, you know, if he would have been in my life 10 years earlier. There's so many other things that I could have done because his skill set compliments and just a great person to work with.

I think, yeah, kind of similar to Rob. I was surprised at how well I got on with the the new owners. I was surprised, I never have done a due diligence before a transaction, as I call it, and I was running the whole thing solo, right? Because we were trying to keep the whole thing mostly quiet, and just the amount of I had a business that was pretty tough to run, as is going back between US and Melbourne. So on top of that, you know, running it was, I mean, you know, people exaggerate, but I was literally working 100 hours a week for 13, 14, weeks.

And I'm surprised that I actually survived. Like I look back, I just don't know how I did it. I actually don't know how I got through that process. I think Luke and Grayson have said it many times. We don't know how he did that, so that was surprising. And then I think you know that it's going to be interesting post sale. But, yeah, there was some tough times. I think post sales just bumpy, but you know what? It all worked out. I think it's worked out really well.

So as we look to conclude here, a large percentage of the folks listening to this are versions of your buyers a couple years before they bought the companies that you founded. These are aspiring CEOs who are looking for a single business to buy and run and pursue entrepreneurship through acquisition, and they are navigating all of the challenges that we've discussed today. So as three founders who sold their companies to search funds, what do these people absolutely need to know from the perspective of a seller, what would you kind of shout from the proverbial mountaintops as something that these young entrepreneurs need to understand that maybe they don't have a particularly nuanced appreciation for right now? Alicia, does anything come to mind?

Sure. I would say, look for a business that has some advantage over the competition. You know, it's much like buying a house. You don't care about the furniture or the tile or the carpet, but you need a good foundation. So look at the business. Is there something that sets them apart from the other companies that are their competitors? And can you make it more of a success with new leadership? So not just taking over something that's been, you know, moving along, maybe at a steady pace, but look for something that has an exceptional value. And then the other thing is, try to stay away from highly regulated industries. You know, the government caused us a big financial loss in 2017 by slowing down the clinical trials, and again, in 2020 by closing the economy, and that affected the price we were able to get for the for the company. So those would be my recommendations.

Rob, what are you shouting from the mountaintops to these prospective CEOs?

I'd say two things. One, as far as when they on the evaluation stage, as far as the business fundamentals are probably only 50% ofthe company, like there's a lot there as far as the staff, you know, where they fit into the market, as far as not from the numbers side, there's an aspect of like, numbers can lie, figures lie. And liars figure type of thing. As far as we all know, we could have presented our business in a different way, you know, that might have affected the evaluation, especially post type of thing. As far as that wouldn't have made the business any different type of thing. And so sometimes it's how they understand it and perceive it. But that perception has got to come from more than just the numbers on the sheet.

And probably the second one, as far as operating a business, I'd say the one thing is, assume bad things were going to happen, whether it be data leaks. Staff are going to leave. Clients leave and ask if you assume that in your day to day operations, that things will go wrong, odds are you won't be wrong. You know, as far as and it won't surprise you. And because, like we talk about the amount of hours you put in, a lot of this is having that intestinal fortitude to just keep going, like it was a Dora, if I quote Dora, like, just keep swimming. Just keep swimming. And it's like, in order to do that, do the amount of work that you need to do to get a business to grow, you can't actually map it all out beautifully. You just need to have that grittiness and just keep moving. And a lot of that comes from just expecting bad things to happen and you're ready for it.

Yeah, like what Rob's saying. I like what Alicia was saying about the competitive advantage. But then I guess it's so tough though to actually be able to fully assess that I think, yeah, it's like, expect the unexpected when you take over the business. I just think the the human, the relationship's so important that the buyers are genuine and that the sellers a genuine person as well, for whatever that's worth. I certainly if my antenna as a buyer, if my antenna are going off, about the person I'm buying off, I'd be running a million miles I think.

Yeah. I mean, one of the themes that I've extracted from this conversation that isn't terribly surprising, but it's nice to hear it affirmed from from three folks who have sold their businesses to search funds, is the importance of trust and communication more than anything else. You know, I often say that capital is a commodity insofar as my money is just as green as the next person's. And so what else do you offer outside of the money? And when we talked about the Near Death Experiences that each of your deals experienced in every case, I was struck by the fact that the thing that got you through it was trust and communication.

You trusted that your buyers were good, people were genuine in their intentions and that they wanted to do the right thing for your businesses, your employees, your customers, etcetera. So that's certainly one thing I'm going to leave with, is just the critical importance of trust and communication, as important as, perhaps more important than the numbers on the spreadsheet. Guys, I am super grateful for the time that you've spent with us today, and I can see what your buyers saw in each of you as as founders and folks who built Incredible businesses so Alicia. Rob David, thank you so much for your time today.

Thank you.

Thank you Cheers.

Thank you.