thomas smail thank you for joining me today on acquiring minds hey well thanks for having me on thomas you're the founder and ceo of fe international fe as it's often called is a broker of digital businesses it's been around for 12 years quite a long time in internet years and in that time has sold over a billion dollars in digital businesses on behalf of clients so thomas you've been involved in countless acquisitions of e-commerce businesses content affiliate businesses incest businesses and today we're going to focus on the latter of those sas i want to treat this conversation as a primer on buying sas businesses from the perspective of an individual acquisition entrepreneur who's really the acquiring mines audience sas is often touted as among the most enviable business models around so we're going to get into why that is but before all of that let's do an intro thomas if you would a quick bio on yourself and on fe if you would sure well yeah thanks so much for the introduction so uh i founded fe international in 2010 um i at the time was at college i just graduated that year and for those of you who remember it was not a particularly good year to graduate from an economic perspective there weren't that many jobs lots of investment banks which was kind of the industry i was looking to go into uh were sending job offers for graduates so i thought i would go and i guess essentially have a go at launching a business and see how that that went um i've been spending a couple of years at college uh buying and selling domain names websites so i started to get into i guess you call it like technology industry like learning a little bit how it worked um but as a student i didn't really have any money so i was buying selling websites for say a hundred dollars we'll put it on a credit card and then at the end of the month i would sell it for 500 uh and then pay off the credit card and do the same again um so back then obviously it was a very different business to what it is is now um but what i found is that i guess the concept of buying selling and negotiating doesn't really change as deals get bigger it just gets slightly more complex slightly more formalized um so in the year i graduated or in the month i graduated um i published uh a course or like a book on how to buy and sell websites and it was really just my experience kind of turning a hundred dollars into 500 turning 500 into 2000 um wasn't really making a huge amount of the time um but i think particularly given the economic conditions at the time there was a lot of interest in kind of buying selling people wanting to people wanting to learn about it um so that's what i was doing so i published a book and i thought at the time i remember i was selling it for 97 and i was 97 of course 97 i was 22 years old at the time didn't come from a family money really have any money myself so i was kind of 97 on myself three a day and at the time that was a huge amount of money living in the uk um so i thought i was gonna make all my money and my whole career would be selling books and courses essentially but what happened like long story short is people would read my book and say hey thomas actually i have this technology business which is making ten thousand dollars a month or whatever it might be uh i read your book it seems like you know what you're doing can you help me sell my business and back then if you wanted to find a business broker or an m a firm for a tech business it's worth five hundred thousand five million twenty million there wasn't really anyone that existed you could go to an investment bank if you had a company like goldman sachs morgan stanley jp morgan whatever it be if you had a 100 million dollar business but below that was there was no one so that was i guess the short story on how i stumbled into the space and then i spent a couple more years between 2010 2012 the first two years of fe doing a little bit of everything and then in 2012 we didn't necessarily pivot as such but we went entirely focused on m a we've stopped selling courses uh we stood a bit coaching at the time you name it we'd probably tried it um and then since then we've really just been entirely focused on m a like you said we primarily focus on sas e-commerce and content-based businesses but a lot of businesses that will fall under the i guess the technology um technology kind of general descriptor um and it's really just compounded from there the industry's grown we spent very many years publishing a lot of content i've been interviewed on many podcasts spoken at lots of events um i guess as people sell businesses they also talk about it so we're fortunate if a client has a good experience they will not necessarily go around telling everyone how amazing we are but they'll go around telling everyone how amazing they are with the business they created and they they sold and then that gets more people interested in the industry and over time as you mentioned we've done over a billion dollars in deals works with over 1200 sellers that starts to build that's quite a lot of people out there who are talking about the industry so it's really just compounded from there and now we have a team um over a hundred people across everything we do uh we have diversified a little bit outside of just m a um most of our team are in either new york london miami or san francisco we have some remote as well um we're now at the stage where if you have a say a sas business itself for example you call us whereas 10 years ago firstly that wasn't really a thing and there wasn't really anyone you could call if you had a business worth one million dollars 10 million or whatever it might be um and two follow-up questions so yeah in terms of where you are in the market one million dollar 10 million dollar sas businesses uh where is that kind of is that kind of your range 10 million enterprise value down to one or half a million uh no that was just an example we're going to up to 100 million i'd say generally most of our deal flow is below 50 um so in the sas space up to 50 we would work on larger deals as well um but it's not like we're selling 20 80 million dollar companies a year um and then we go a little bit a little bit smaller than that generally we don't go much below a million for a sas business but occasionally i find us representing something a little bit smaller than that so i say one to fifty is probably our our average steel size at this stage particularly for sas okay and when you said you diversified outside of m a what into what so one of the things we've done like since we founded the business is i've always well founded the business buying selling businesses myself so that's what my business partner and i've kind of continued to do on the side so sometimes we've done that we generally buy one business a year um and i guess as we've grown years ago it would be we're buying we're buying a 500 business now we're buying substantially larger businesses um running them inside sometimes we work with investors sometimes we do it ourselves uh sometimes it might be a past client someone who sold a business they've made 20 million dollars and they want to kind of deploy some of that capital um yes that's part of how we've been i guess diversifying or making sure we can offer more to people we generally run that as a separate business but at least in my mind it's all kind of under the same similar kind of umbrella and you're still doing uh the the one acquisition a year cadence yeah we we do about one one per year it's just uh i guess the average size each year is it is growing so as well beyond that five hundred dollars now i want to circle back to something you said at the very top in the story of effie international um you actually had this posted on linkedin this week or recently you were asking people about their career pivots and you said of yourself i pivoted from teaching people how to sell their businesses to selling their businesses for them and you just explained to us how that was the evolution for kind of how the international came to be i'm just curious um is there some bigger insight there uh that it you know because a lot of people in the online world want to teach they want to do courses uh you just you know that that whole world just is is growing and their courses are proliferating and um one of the first ways people become entrepreneurs often if they want to be digital entrepreneurs is by teaching something just like you selling a book selling a course um that that trend is only intensified in the 12 years since you did it but you chose to get away from actually doing the teaching and just do the work itself people would read your book and they they would they would you know they would pay for the education that you were providing but still just not want to do it themselves um i just i just wonder if there's an insight to be to be had there is there always more money in doing the thing rather than edu educating people how to do the thing i think firstly maybe overthinking the sophistication of the decision i made at the time i was not necessarily a kid but i was just opportunistically trying to find the thing that would make me the most money uh and to my my or like a build a business around quantity to my my previous point as an acquirer if you're willing to put the work in then that creates opportunities other people are not willing to do so i think with a servant like see i run a service business we represent lots of different types of businesses one of the big opportunities within a service business um i think one thing thing's effie's done really well since we were founded so always willing to put the work in always available not necessarily you can call our office at 11 pm on a sunday and someone's gonna like be sat at their desk and pick up the phone but we're generally very good at being available we're very consistent very reliable and in a service business that goes like a very long a very long way so i don't necessarily know if there's a lesson to be learned on that but i think as an acquirer you need to think about like what you're actually what are you like good at and what you're good at might be working hard being available being reliable and i think a lot of people particularly over like a 12-year time span i'm not the smartest person in the world didn't really know that much about the industry coming into it but if you consistently work hard and you're always available and you kind of do what you say you're gonna do then over time people will start to talk about you you don't necessarily have to do that i think it's if you are a naturally reliable and hard-working person i think a lot of people don't realize how many people out there are not hard-working and reliable so often you can get ahead just by being yourself and doing a good job um so i think a lot of people kind of get obsessed over different business models whatever they like to buy yes i think there are pros and cons of lots of different business models but sometimes like a boring service business can work quite well if you're willing to kind of put the work in so maybe maybe that's really the lesson it's kind of find something that works for your kind of skill set personality particularly if you're an individual acquirer and do that i never suggest people buying something you have zero understanding of either conceptually or technically that doesn't mean you need to be able to do physically every element of operating a business you acquire i think it's important to at least have a a working understanding or have a propensity to learn or kind of find someone who can teach you how it works great well in that answer you've really segued us nicely into into obsessing about a particular business model which is going to be the meat of this interview which is sas you assass software as a service i'm sure folks know um is essentially just today it's just software the software business um but th this sas saas acronym is kind of a holdover from when software wasn't all delivered in the cloud uh and you know 12 years ago when you got started sas was it probably the term probably existed but it certainly wasn't the norm or or as popular or as hot as it is today give us a quick history lesson if you will on on on the evolution of sas as you've observed it over the last 10 10 or so years yes i think as you rightly say like in 2010 i mean i'm sure sas did exist but if you ask people in the industry no one was doing sas or talking about sas almost all software was downloadable desktop software that was basically the vast majority of the industry cloud-based was not necessarily completely uncommon but generally the most common thing you'd have is you'd have a desktop download and then the only cloud element would be some sort of like piracy verifier to make sure you haven't kind of stolen the product or downloaded it from somewhere you you shouldn't um and then that started to really like pivot and transition over the last 12 years and to your point now we actually do sometimes sell downloadable software still so it does exist um but it's way way less common um things like for example like wordpress plugins technically we would generically describe it as sas but generally wordpress plugins just have a one-time license fee so they're probably closest in their dynamic to um kind of the the software businesses of old yeah yes there are some wordpress plugins you might pay for on a subscription but that's not the the most common um type of plugin most of them might be 47 97 whatever it might be and then maybe pair back end subscription for support so that's kind of really how the industry developed is you'd pay a one-time license and then sometimes you'd pay either for updates or you'd pay additional for support on a subscription and then the whole industry really pivoted to entirely cloud-based the vast majority of lower-end software or sas now is a subscription which includes your support includes access to the product includes updates and then i think as you go more b2b more enterprises software it's quite common to pay for professional services and support separately but that's generally because the integration of a software product let's say every team of 200 people is much more complex and you and i signing up for a new project management tool or whatever probably don't require a huge amount of thought or service to integrate that whereas if you're switching from an existing solution in a bigger company it can be much much more complex um yeah so that's really how the industry's changed and yes you can certainly find products out there now which is still a one-time payment i think most people even though sas is really referring to the kind of cloud element so it doesn't necessarily have to be a recurring subscription almost all the time when people are talking about sas they're talking about a recurring subscription business usually monthly or sometimes annually right and and that point is probably the the what makes it the most attractive element of it is the recurring nature of the software so whereas you know buying something once versus having a monthly recurring revenue everybody in in the acquiring minds world um just appreciates the value of of recurring revenue and business valuation and type of business you might want to buy um so that one speaks for itself but are there other what other pros what other um you know positive attributes of sas are there that make it such a a desirable kind of category in a hot category yes i think one of them um is really that in a software business and this does not apply to all software businesses but in a good software business particularly if you're selling to businesses the switching cost is relatively high so if you're selling to individuals it's a little bit different so if i'm just selling a product to you or just to me if you want to cancel at the end of the month it probably doesn't really cause any disruption to your business where if you have like i said like 100 people using a software product um whatever that might be it might be zoom is i guess a good example that everyone knows about at the moment if i said and we actually don't really use zoom that much internally we use a different product but if i said to my team hey we're all moving to zoom next month there's actually a huge amount of work that goes into moving because it's all of our kind of automated sequences email signatures all of these things that link to vonage which is the system we use at the moment so we have to move to zoom then we have to figure out security settings loads and loads of different things so the cost to us for switching even if the product might be cheaper or even better is quite significant so yes you have the recurring element which is great but you also have the fact that a good software product should generally have relatively low churn because there's high switching costs um so i think that's what makes it attractive as well like yes you have recurring element um but the way i i kind of think about it is as an acquirer maybe this is my british risk-averse nature but your number one priority or at least one of your number one priorities is capital preservation you do not necessarily need to triple a business for it to be successful but it's if you run it to zero you've definitely failed you can you can live with a small amount of decline but you can't run a business to zero so i think fundamentally one of the best things about sas business um assuming the product does not become obsolete which is very rare i can think of very few examples where that happens even if a way i think about it in really simple terms if you buy a sas business and you are terrible at marketing you fail at marketing you never require one more customer ever that business will still be making some money and in some cases the business could still grow because you could have expansion revenue which outpaces cancellations um so your downside is much much kind of more hedge than it would be in a um say an e-commerce business where you're selling products it could be a really popular product for a year and then suddenly people stop buying it and you're back at you're back at zero um and then i think there's like various other elements i think similar to my point about service business a lot of people don't want to run a service business because maybe maybe this is not a common opinion in the current kind of job climate but yes you actually have to work hard um and like your hours are generally correlated to success yes there are definitely some exceptions yes maybe you could be way smarter than me and be more successful with less hours i'm sure there are some many examples of people who are but generally ours are to an extent and work ethic correlated success in software it's a little bit different it's more your i guess technical expertise so either you need to be able to write code yourself or you need to be good at managing and finding developers and running them managing them in an efficient way um so i think part of it is people like sas businesses because they have a bit of a moat just naturally you can't just you can spin up a service business overnight if you decided tomorrow you wanted to go launch an m a business you could technically roll out a website and say you do m a and if you got a client you could theoretically run some of that process whereas if you say oh i have a sas business you try create a new version of zoom which is bigger better cheaper whatever it might be and you try to roll that out tomorrow it's physically impossible so you also have that kind of technology mo again that really varies depending on the kind of type of product you're you're buying uh but i think a lot of people like it for that reason um i think as well they've got a more the thing that's really made sas popular over the last 10 years or so is really just that a lot of the big companies you hear about companies getting funding companies having exits are now in the sas space so you've saved someone i have a sas business so say you say that's 100 random people way more people are going to know what that is versus 10 years ago you said that 10 years ago maybe two people would know what it is but now almost anyone conceptually understands what sass is if you give them some examples like zoom because almost everyone in the world even my parents who don't really know how to use technology now know how to use zoom so people will just kind of understand sure at this point about moats i actually want to chew on that a little bit with you because actually dom wells made this point when he was sitting in your chair a couple months ago that in fact he he feel he felt that like sas doesn't have the moat that it might appear to um and if you kind of look through the various categories of software out there project management let's take as an example um or crm is another good one like there are just countless products in many of these categories and sure there is a moat there because there's you know you know hundreds of developer hours that go into building a good a good product um but you know what to your point about the the service business just you know hanging a shingle to to open an m a practice there would still be hundreds of hours of expertise that i would have to develop maybe not hundreds but many hours of expertise that i'd have to develop to to to actually perform the service for the client so there is still sort of an expertise moat in both cases um so i i just thought it was an interesting point he made because i had thought of sas as being a little bit sass business as being a little bit better protected than in fact he did and we were having a podcast using i'm using riverside to record this as i was with him and he was like you know if riverside's nine dollars a month and you could probably find 10 other products out there that are similarly priced um that you know have pretty much similar bells and whistles and really take takeaway would just be that um sas is just really competitive uh it's it's not maybe as desirable um as it was five years ago when there were i i think also what happened in the last 10 years is that there were just a lot of opportunities business processes consumer processes industries that had yet to sas if i and these entrepreneurs now have gone out and all kind of conquered that territory and it's hard to find anything that does not already have a sas product attached to it and so there was kind of a kind of a land grab that occurred over the last 10 years that if you were first or second in the market you know could have been great but now now kind of there's blood everywhere if you if you want to get into if you want to get into sas any thoughts on that uh kind of ramble yeah i'm not sure i'm not sure if i really agree with that to be honest i mean i think any bit so i guess my point about sas versus service business is a moat in sas is generally the technology in service it is expertise reputation experience there are lots of things that go into that so if you wanted to compete with fe international tomorrow yes you could spin up a website but you physically can't buy regardless how much money you have you can't buy 12 years of experience i guess you could hire people with 12 years experience you can't buy 12 years of reputation um whereas in a technology business you can always build a better product and if it's better it doesn't really matter how old it is no one really cares i guess the nature of technology is people are always expecting it to improve um i think the the way i look at it like philosophically is the think about the number of buyers coming into the market and industry there are still so many companies out there big and small that still use like they don't use software for anything i think particularly living in the us so i moved to the as we were talking about before we started the recording i moved to the suburbs a couple of years ago and we have at my house have various like service providers that come and provide things for like someone doing the pool someone doing our yard or whatever none of them use any sort of technology our yard guy gets paid by check and he uses text messages so there's i think there's still a vast number of industries which haven't moved to software or the cloud at all so if you're building one of those businesses yes it's becoming more and more competitive um but there are also still tons of companies tons of people who have not kind of fully embraced software and and cloud and to my point about switching costs assuming you have the right kind of product or whatever like with my yard guy for example i've never spoken to him about it but i'm assuming he's like well my clients reply to text messages and happily pay me by check so why would i change exactly the same once you're on a sat product unless it's with your podcast for example yes you might be able to find something cheaper than riverside but are you really going to bother switching a platform that you know and i'm assuming you like for ten dollars a month in almost no businesses do they make that kind of decision to change was ten dollars individual consumers definitely do you look at like products like netflix for example laying off people at the moment because subscriber numbers are down yes people absolutely do cancel if you increase the cost of a subscription from i don't know how much netflix is 25 to 30 a month yes there's a huge number of people out there like i absolutely can't afford five more dollars um been in software if you're in the right industry at least or what i'd consider the right industry shouldn't be losing clients over five dollars a month so yes it's competitive um but i don't necessarily think that should prevent you entering an industry there are numerous examples of companies that have kind of entered software space years after others and sort of improved on it i don't know like years ago for example i think when i started fe everyone used skype for video calls podcasts it was always skype it was a skype video call um and then skype got acquired by microsoft and it's now terrible basically no one uses skype it's almost completely unusable product uh no one uses it but years ago you would have if we had this podcast 12 years ago like thomas why would you bother launching something that competes with skype his skype is so good skype his own i don't think it was owned by microsoft then but skype is owned by microsoft a big company we'd probably say well yeah it actually would be difficult but now you have almost no one uses it people use for podcast for example it's riverside or zoom or they're probably the two main ones i come across so i think there's always there's always new opportunities i mean that doesn't mean it'll be easy but i don't think competition is necessarily a bad sign competition really just shows you hopefully that other people have spotted an opportunity and to your point about how is fe growing yes part of it is we are just getting better as a company but part of it is also the industry i spotted a well i think i spotted a good industry 12 years ago which has grown if you're in the right industry and do a good job your business should grow as well excellent let's talk a little bit about cons of sas what what um what are some of the drawbacks well i think all those same points like also reverse so technology is a mode but technology is also very difficult if you don't know anything about tech you're relying on third-party developers maybe you have to hire a developer in-house maybe you have to use freelancers maybe you have to use an agency maybe we need to find a business partner or some sort of equity partner who does know how tech works and can write write code um so like while it's a positive it can also be a negative like things break it's the nature of software there's no such thing as a passive software acquisition almost any software regardless of how stable it is will at times break if you do nothing with it so you constantly need to have you will forever have some form of overhead whether it's yourself who knows how to write code or a team of developers who need to be available if something breaks and the nature of technology it doesn't have it can break at any time it's not like a a service business if you say hey i work nine till six monday to friday and my yard guy says well the only time you can cut your grass is four p.m friday that's the time you take there's no situation where i would ever be calling him at 11 pm on a sunday and being like hey can you come cut my grass because it's clearly not how it works but in software software i can break it anytime so that is part of it you kind of have to be aware if you're buying a business i think this is saying that i think people hear and they understand or they think they understand we don't truly understand the responsibility of owning a business until you actually own one which is if something happens at 11 pm on a sunday which it will you have to fix it you have to be available yes you can hire a team yes you can delegate outsource hire a ceo hiring manager or whatever but i can assure you that's going to be keeping you up at night and you're going to be making sure that that gets done so that's definitely the pros are also cons if you pick a business which is either high churn or targeting uh i say look i'll describe like a lower end demographic a more price sensitive demographic then i think you're much more susceptible to new competition so if you have a product with a good technological moat high switching costs then even if a better product comes along which is cheaper than yours people will not necessarily switch if you're a targeting either consumers or lower end businesses they might they might switch for five dollars a month they might even switch for for less than that um so you have to kind of all of the advantages are also um disadvantages um and i guess with the recurring nature i don't really know if this is really a disadvantage or such the recurring nature if you're just selling monthly subscriptions there's never going to be unlike in e-commerce for example there's never going to be a day or a month where you suddenly quadruple your sales you don't suddenly go from kind of making a hundred thousand mri to 400 000 in a month like theoretically it's possible but it's highly unlikely whereas in an e-commerce business uh let's say it's christmas or thanksgiving around black friday around that time of year um all sorts of other religious holidays holidays whatever it might be um there's always a possibility you can make 10 million dollars in a day if your product goes viral on tick tock or instagram or or whatever it might be so it doesn't necessarily makes that bad but i think with sas it's much harder to have it's less common to see exponential growth than it might be in e-commerce but it's much more common to see consistent growth which continues for not forever but for for years and what about the valuation of sas businesses the price to get into to sas it's got a reputation for being quite expensive it can be hard to get an sba loan on on sas because the valuation is so high they'll let the debt won't support it uh can you speak to that it's definitely true um we generally find the va i wouldn't necessarily say although i don't want to put people off but i say almost all of the sas deals we do are not people using sba loans people have found other ways to fund them uh because firstly to your point earlier about more qualified buyers ahead of not necessarily less qualified buyers but buyers who do not necessarily immediately have access to capital the reality is if you're working with any m a firm business broker investment bank whatever you want to call it you're always going to have priority if you have cash on hand or have the ability to raise capital without relying on the sba um sba is i mean don't get wrong sba is a fantastic program as a brit living in the u.s um i don't qualify for an sba loan if i did i would also want to use an sba loan to buy a business so i completely understand the appeal of it but it is i guess being government-backed and being with banks it can be slow particularly versus someone who has cash um so i think that one of the things you need to accept if you want to require a sas business is you generally will have to pay a high multiple i think that's kind of unavoidable and if you're to a point earlier about sophisticated buyers passing if you're not paying a high multiple then you probably need to accept that some of the things on your checklist of things you might want probably won't be there so the most common one will be lack of growth if sas business is not growing and it's relatively flat then you probably don't have to pay 10 times ebitda which in almost all cases is untenable with a sba loan maybe you're paying five times which is not necessarily always hannibal but suddenly could be um excuse me so that's certainly a way to to look at it as well like you have to accept kind of trade-offs if you want to use an sba loan to buy sas business then probably the only way you're going to be competitive is buying a business that other people don't want to buy because it doesn't necessarily tickle check all their boxes you're not going to be able to buy i guess i'm not trying to turn people off but reality is you're not going to be able to buy a sas business it's been doubling every single year for the last five years has a management team in place has churn 0.5 the product has a fantastic reputation highly unlikely you're going to be able to buy that business for five times and use an sba loan it's gonna get bought by someone else so i'd say where we do see sba loans for sas deals are generally business which are not necessarily older but they're generally gonna be slower growth so it's definitely possible but i think you really just need to accept the the reality that really this is a little bit different from a lot of people that we deal with who are coming in to buy business might have had a background in real estate also with real estate the value is kind of it was a bit of a cliche saying but like the value your profit is almost kind of made at your buy price how will you do on like what you're acquiring for because you can't really i mean yes arguably over time the value of land should should increase but the only real thing you can do to move the needle on income if it's a rental property is either improve the property physically i guess increase prices if the previous owner has not been charging the right amount of rent you can't physically expand the land you can't double market rents in the the city you happen to be in or anything like that whereas with a business the reality is you can quadruple a business if you do a good job with it so i think if you're going to make a acquisition so particularly in the current market where like sas is hot if you want to buy a sas business you probably have to accept you're going to be paying more than you are comfortable with or you might originally be comfortable with um but if you can double the business in a year does it really matter what you paid i would always say no if you have no idea what you're doing and you have no plan for growing it then i would never suggest while buying any business but you definitely shouldn't be buying a sas business at a premium multiple with an sba loan if you don't at least have some kind of plan or what you might do great um and that would be a pretty stark contrast with e-commerce i mean the the learning curve for e-commerce is way less steep let's say i don't really know i've never done anything with e-commerce other than buy buy stuff myself um it's learnable much more quickly is that a fair i we're generalizing very broadly here but fair uh i'd probably say no actually really um i think ecommerce has small scale yes if you just want to like learn how to sell a product on ebay or etsy or amazon shopify relatively simple so if i just want to sell mugs you can find a supply for mugs and you can sell 100 bugs a month i think where e-commerce gets complex and we actually see quite a lot of deal flow as the business gets to a certain size and it gets really complex and people can't figure out how to grow it further that might be it say 1 to 10 million revenue i'd say where that generally comes in because you get all this additional complexity that you don't have selling 100 mugs a month if you're selling a hundred thousand mugs a month then you add all this complexity you don't have a smaller scale so uh logistics you have to have a warehouse maybe you have to have multiple warehouses maybe you need multiple suppliers the the flip side of it with sas is and one of the best things about sas it's technically and there are some limits but it's technically infinitely scalable if you add a million users or 10 users the products should still work again with some technical limitations in there whereas shipping a million mogs versus 10 mugs is a completely different complexity so i think maybe the initial learning curve is lower with e-commerce but i definitely don't think um if you're operating say a 10 million dollar a year e-commerce business versus a say 2 million a year sas business which is probably going to be making a similar level of ebitda based on average margins off top of my head i don't necessarily think the sas business is easier or sorry harder to run than the e-commerce business they are different so sas kind of really have to be good at understanding tech i'd say is the main part e-commerce a lot more of it is marketing if you're not very good at marketing you're probably not going to run a e-commerce business and logistics which can get extremely complex um not impossible it can get very very difficult to scale beyond a certain size whereas sas it's generally not that generally not the case i mean again i'm generalizing but that's just my experience of what i've seen which of businesses which kind of hit that kind of revenue level for sas businesses again and talking about how competitive the market is and if you know the desirable business is gonna go to somebody who has access quick you know quick to close access to funds in the uh offline world in traditional businesses which a lot of my audience is looking at um there's kind of a a rule of thumb that if you're looking at businesses that are doing a million or more in ebitda then they're going to be those are also going to be going to attract the attention of private equity so at that tier you're going to be competing with heavier hitters you know deeper pockets etc etc and um so you kind of the strategy would be to go a little bit low below that so you know 500 000 to uh to a million dollars in ebitda is too small for private equity so at that level you're competing with other acquisition entrepreneurs like you maybe you know competitors doing bolt-ons and tekkens um so it's it's this kind of it's this kind of threshold that people talk about and think about um in terms of the sweet spot you should target for uh aniba does business uh uh business is ebitda does such a threshold exist in in the world of sas is there an analog here to an extent when we speak to thousands of private equity we're constantly doing outreach to private equity firms to show them deals get them in our network introduce ourselves whatever that might be and we also get a huge amount of inbound from private firms trying to buy businesses i would say firstly if you downloaded a random sample of 100 of them and looked at their criteria there would be i mean some correlation but they're not it's not private equity is only looking for businesses with more than a million ebitda you might find some who are only looking for 25 million ebitda some who are at five some somewhere two some who are at one some who are at five hundred thousand some don't actually care at all they're just interested in revenue because they're going to do it as a tuck-in acquisition to other businesses in their portfolio um so that would be my i guess initial answer but i mean it is definitely true that i say a million and above ebitda to your point that you more commonly gonna be competing against a private equity firm so i say generally when the valuation goes above about 10 million um because of that level there's no sva buyers because you can't get an sba loan level um so it's either going to be a strategic buyer a private equity firm or someone who has access to a large amount of capital and it's highly unlikely to be an individual at that level buying for the first time um just because if you're going to be buying on that level for the first time it would probably make more sense for it to be part of the strategic portfolio or whatever that might be or maybe would have started with something a little bit um smaller one if they are buying at that level as an individual chances are there's a reason why they're doing that maybe they had a 50 million dollar exit and they want to go buy a business for 10 million that would make sense um so i would say as businesses get bigger there's definitely correlation with the number of private equity firms you'll be competing with um but there's not necessarily a hard and fast rule i'd say similar to effie as an m a firm creating a space for itself uh doing smaller deals than a traditional bank will do there were also private equity firms who are kind of continuously coming down market to find deal flow yeah um so if you're buying a business of five million dollars is like usually about the biggest you can buy with an sba loan approximately yep um you're probably still going to be competing with some quite sophisticated um buyers and then say maybe if you get to say a million dollars valuation highly unlikely you're going to be competing with a private equity firm but that doesn't mean you're not going to be competing with something that looks very similar to a private equity firm for a group of kind of business partners who have built up a portfolio and they're doing a little bit of a roll-up strategy um yeah so i guess that would be the way of looking at it um but there's there's definitely no hard and fast rule of when privacy firms are buying or not buying well it sounds like if i want to get a toehold in in sas and become a buyer of sas businesses i really my best chance is to buy something pretty small unless i'm an already wealthy person or already have access to capital but if i'm gonna if i'm a loan acquisition entrepreneur and i'm just really drawn to sas the economics of sas and the future of sas i'm unlikely to do you know a big two or three or four million dollar deal as my first go um something smaller is is i'll probably be able to tackle just because of how competitive the market is fair generalization i would say so i guess from see i'm biased because i ceo of f international i like think we're very good at selling businesses we have an extremely high success rate we sell almost every business we take on so yes if you're acquiring a business that we are representing um chances are if you want to buy anything beyond a certain size in sas you're not going to be competitive using an sba loan that doesn't necessarily mean you shouldn't try um for your it's going to be much harder um there may well be opportunities elsewhere like generally the general correlation is the worst the m a firm or the business broker the more likely i don't mean to be offensive georgia's a less qualified buyer so someone using sba loan versus cash on hand has bought 10 businesses before is gonna get an opportunity to acquire a business but then with that i mean there's always a flip side the likely scenario is that a business represented by like a lower tier or a kind of m a firm who just popped up overnight chances are the business they're representing you're going to be lower quality as well yeah so i think you just need to accept that if you are going to use an sba loan and you want to buy sas business you're not going to be able to check all your boxes of ideals and that really goes for any acquirer i'd say almost all the acquirers we work with most take a while first-time acquirers take a while to figure out what they want to acquire and most of them quite significantly change and usually reduce their criteria over time because we get a huge amount of outreach from people who are like hey i'm this person here's my criteria of 25 things i don't actually have the money i'm going to use a loan to buy this business and it's like well yes everybody out there is looking to buy a business with these 25 things um not necessarily that it doesn't exist but if it does exist there's going to be literally hundreds of buyers making offers so i think as an acquirer to be competitive you really just have to be a little bit flexible and kind of back yourself to do a good job of the business rather than sitting around waiting for the perfect business to come along because highly unlikely you're going to be the only one that think it's thinks it's the perfect business so it'll be competitive so for example we i'm just thinking we marketed a business the other day um extremely high growth um and we had i think something like 10 bids within two days it was crazy number of offers so if you were trying to compete with an sba loan you would have literally zero chance of winning that deal and the end bid ended up going not necessarily above our value well went well above our initial indication with the seller of what we thought it might sell for just because it was so popular and other business just checked so many boxes for acquirers like hot space growing low churn uh great tech all of those kind of things and if you look to if you're a buyer kind of learning about buying businesses and you were looking at what the buyer is going to end up paying for this business almost everyone would say in living i said it's an mba class almost everyone would say oh it's a stupid deal numbers don't make sense can't service any debt but the reality is this acquirer has portfolio businesses they've completed multiple acquisitions they don't really care because they know they can grow it there's um kind of a mini trend of micro sas both launching a micro sas from from scratch but also a few acquirers out there buying micro sas businesses so these are tiny uh businesses but sas businesses may be doing i don't know fifty thousand dollars a year in ar less you probably these businesses are probably too small for you for them to even cross your desk um but there is some market for them and of course microacquire kind of a do it do it um do it yourself platform to sell your to sell your microsas really that's that's probably where the name came from selling a little micro micro digital businesses um any thoughts on that is it as as a first step for uh a first-time entrepreneur for first time acquisition entrepreneur yeah so i mean firstly effie has been representing i guess micro sas before the word micro sas even really got coined i think a lot of people think they were kind of the first to come up with their first start acquiring at that level but we've been doing them since day one of fe i think as fe has grown and we've become more sophisticated in our service our average deal size has increased which does mean that the lower end deals we do far less of now so it's quite rare that you'll find us representing a 50 000 ar dollar business um to your point i i think in almost all cases it makes sense to buy something small to start with depending on your goals and your like financial position i think if you're young and you have no money and you're just starting out it makes sense to do that if you're a little bit older and you have years of experience you have access to some capital maybe you have like good salary or whatever it might be you have a wife or a husband you have kids and a mortgage then you probably need to buy something more substantial if you're actually going to make the jump to quitting your job or whatever it might be to own a business so i think in those cases it doesn't necessarily make sense to buy saying um small the other thing we're buying something small there are definitely pros and cons we could do a whole lot of podcasts just talking about the the pros and cons the other challenge for buying something small is obviously it doesn't really give you the reality of running a business because i think at least in my mind where running a business gets hard where i found it really difficult personally we grew not quickly but we grew to 10 million revenue and i thought all those stages are like relatively easy to figure out as you go once we got above 10 million dollars revenue but yes we're still growing but i found it significantly more challenging the kind of things you're doing day to day are just completely different it's all about team growth team management processes systems culture compensation particularly in the current market it gets really difficult whereas early on it's a little bit more about like can you do marketing do you have product market fit is your product breaking um so some of the things you'll learn buying a micro sas could be helpful but not necessarily reflective of what it might be like buying say a five million dollar sas business or e-commerce business whatever you end up um buying because chances are at that level there's a team you have to start managing people and that's really a completely different skill set and that's often where not necessarily older but people who come from a more corporate background and maybe they've managed people in the past they're generally going to do much bet better with a bigger business where they have to manage people because they've probably done that before and if they earn enough to kind of qualify for an sba loan that's big enough and they have the down payment that probably makes more sense than to do whereas buying a really small business where they have to figure everything out for themselves maybe that doesn't make any sense um yeah so definite pros and cons um i really think it depends on your like risk tolerance um and your the percentage return you can have with a micro business could be but not always but could be higher than um could be higher than like a a much bigger business um but that doesn't necessarily mean it's better if you turn this is what fe did for many years turn fifty thousand dollars into two hundred thousand dollars yes that's fantastic as a kind of percentage return but in absolute terms if you have kids and a mortgage and you live in the bay area like you and i do that doesn't really go very far um so it's all relative all depends on your personal situation i think thomas from your pool of buyers buyers who actually buy not tire kickers or people on your list um do you see many that are first-time acquirers and are leaving a doing are doing a career pivot they're whatever doing something else have a nine to five and they've decided they want to be an entrepreneur and they buy a business as their pathway to do so how common is that in your world all the time so we do over 100 so we're generally doing two to three transactions a week sometimes more sometimes less but we're doing hundreds per year or well over 100 per year um i don't off the top of my head know how many of them are first-time acquirers but it's definitely into the double digits percentage-wise um and then we have quite a few as well who then keep doing it um so by one and then by the end of the year they've acquired four maybe they team up with some friends or investors they know or whatever it might be and they they keep doing it um yes it's definitely common it's not like it's um impossible for you to do it but it's just relatively uncommon on the the bigger deals but there's always room for for first-time buyers particularly those who i guess are somewhat flexible with criteria easy to get on with i think often people misguidedly believe that the most important thing when acquiring a business is the price or the valuation yes it is an important factor but sellers will often go with a buyer that they like the most uh and the one they think might do the best job running a business um and that isn't necessarily correlated with how many businesses they've bought in the past sometimes the seller will look at an acquirer who's bought five businesses and say yeah these guys have a bunch of money uh they've undoubtedly done a bunch of acquisitions um but like i don't really like what they've done with the businesses i was looking up recent reviews and people were saying that support sucks so maybe they're gonna like fire people or whatever um whereas as a first time requirer i guess that variable's never in play because you've never done it before so i think putting the effort in if you are a first time acquirer putting in the effort to make sure that the seller likes you is important if you're tr you think you're being really smart trying to negotiate really like clever terms um then chances are it's not going to work if you don't have any sort of track record because the sellers can say well no this bigger firm is offering me simple terms they can close fast so they have the capital kind of like them they see professional a lot i think a lot of first-time acquirers make the mistake of being way too complex like oh here's my loi it's 21 pages long and we're gonna pay you out in these different seven ways um thomas of the folks who do buy who are not funds or sophisticated buyers who have already done this again and again and again so first-time buyers but those who get across the finish line is there any common mistake that you see them make either before acquisition or post acquisition to the extent that you keep track of of how it goes yeah i think and again i i know i've kind of already spoken about this point earlier when i was giving like a different example the most common reason for failure and this is particularly common with well any size of business any business model is always not doing the work 100 of the time don't bother doing the training properly haven't really done a good hand over with the seller uh believe and this is quite common with any kind of acquirer believe they are smarter than the seller so they'll say oh well the seller's taking 40 hours a week to do this but actually i think i can do it in 20 because i have an mba they didn't even graduate college that's really common that kind of like arrogance or ego i think there's a lot of skills required to run a business which you can't necessarily tell just by like looking at someone or like looking at their resume it doesn't necessarily tell you the the full story it's my point earlier about like turning up every day that's not correlated at all to education um so yeah i'd say that's probably the most common thing like buyers who believe they're really smart and don't necessarily need to do the work or believe that a business will continue to do well by doing so a lot of people think you can do a little bit less work and the business will still be approximately the same but there are quite a few businesses which can do substantially worse if you're doing a little bit less than the previous owner was was doing particularly if you're coming into it for the first time you don't really understand the space you don't really like know what trends to be looking at or spotting or anything like that um so yeah i think that's one way to to look at it but i mean there's i mean there are other reasons why acquisitions may fail but in my experience we don't see it very often just because we're we spend a lot of time on buyer qualification making sure people are a good fit our business model is not and that this is a valid business broker m a model particularly in the traditional offsite offline world there are a lot out there who basically only sell businesses to buyers who are using sba loans and part of their entire business is kind of the sales pitch and kind of getting a buy through the sba process they don't really care how well you're doing with the business uh post sale or how much of a fit it is for you up front because their whole process is is loans whereas because we're not doing that we don't want people to go through a process i also think a part of that kind of just thinking about that a bit deeper is because fe was not quite a first mover i'd be lying to say we were literally the first people to ever sell sas businesses because we're a relatively early first mover reputation was essential there was no reason no incentive for us to ever be in a situation where someone buys a business and runs it into the ground so yes sometimes that's outside of our control but we're not in a big enough industry where we can get away with doing that we relied on almost been that kind of snowball and compounding effective positive experiences someone buying a business doing well with it the factory in the middle is like a bonus for us but the real incentive is the industry growing because people are successful in the space um but i think and this is this is correlated i think with really like anything in life particularly in the kind of working world success is almost always correlated with work ethic and again i know that's not always necessarily a popular opinion and it's exactly the same when it comes to buying a business if you buy a business you don't put the work in then you're not going to succeed yes there are some examples where you can but chances are that's not going to be the not going to be the case the fact that you you keep making this point um tells me that there's probably a lot of people who come looking for online businesses because online businesses have a reputation uh for being passive or potentially passive or semi-passive and whereas in the traditional business world you don't you don't hear that nobody thinks they're going to buy that plumbing business and have it be passive i mean so yeah they definitely can't i mean they can be passive to an extent we definitely see businesses where an owner literally works two hours a week um it might be hard to believe they'll actually work two hours a week the business is really relatively fat and stable but to my point in that scenario often someone might come in and say okay well they're running in two hours a week i'm gonna come in and just do one hour but it might be that in that one hour extra the seller was spending they were i know checking for bugs or checking for support tickets or whatever it might be that you're now not doing so generally it's doing less than the seller that doesn't necessarily mean every business you acquire you have to work full-time that's not the reality at all but if you're doing less than the previous owner in general i think you're not going to be successful particularly if you think you're smarter than the previous owner i think generally people underestimate what it takes to be a successful entrepreneur and build well any business really thomas we've been going here for a while but i still got some some meaty questions for you still got time yep great um talking about how software is competitive and it's always evolving so like a particular product a product within a particular category um two things first uh well i'll just make this two separate questions first question is you said earlier that um you really have not seen or maybe very very rarely assass products just become obsolete so it's not gonna it's it's unlikely to go to zero um unlike maybe e-commerce um or or other businesses when i look at sas listings online though i i will see i i will see some software pro some sas software products that are clearly very long in the tooth and are just desperate i mean they're just competitors are going to come in and eat their lunch there's got to be something more than just mere maintenance to breathe new life into them so kind of square maybe i misunderstood you or but kind of square that circle for me because i'll i'll i'll um run away from a lot of sas listings i see online because the the product seems so um outdated and it's just going to need a complete overhaul to remain competitive and yes it's its revenue is not going to drop to zero tomorrow but it's going to bleed away over the next three to five years probably sometimes that is the to my point earlier that's the opportunity because a lot of people look at that business and say oh i don't want to put the work in to modernize or improve the product um there's a particularly businesses are available to buy at the kind of multiple you can acquire with an sba loan yes it is reasonably common those businesses need a little bit of a an overhaul um but that can really i mean overhaul can be mean lots of different things do you need to complete and i'm not a developer so i might kind of not explaining this very well but like you need to completely rebuild the back end of the product you need to completely rebuild the user interface if you need to completely rebuild and re-engineer the whole thing and move on to completely different platform yes you probably shouldn't buy that business but in a lot of cases old software products maybe you can improve it quite significantly just by revamping the ui yeah maybe user interface maybe you can just improve the the website itself um i'm not necessarily a big believer that the particularly b2b sas that the kind of website necessarily matters that much but sometimes it it can do um so yes and that's the difficulty if you're not technical you don't always necessarily know um what it might take to turn that business around from a technical perspective and even if you are it might be very difficult to estimate how long it's gonna take it might be like well the owner estimates a hundred hours of work to rebuild x that's now gonna be obsolete it might actually take 500. yeah very similar to my real estate example if you're not a builder you don't work in construction how long does it take to do x i personally would have no clue i'd just be guessing and relying on their estimate it's no different with um developers but i say i mean often that's where the opportunities lie if you're willing to put in like 95 percent of acquirers will pass on the business that needs a a rebuild so if you're the one who is willing to do that work maybe you can create a most sellers are obviously aware that that's the case you're more likely to be able to have find a seller who's amenable to a say a reasonable deal structure but deal structure which might incentivize them to kind of help you um improve the the product so yes that product's going to require more work probably more investment into tech whatever that might be but it may well be you can acquire for a lower multiple so there's always going to be there's always trade-offs when you're acquiring particularly if if you're multiple or price sensitive related point one of the things that you see usually more ambitious searchers often maybe a traditional search fund look for in the software world taking an on-premise sys software product and taking it to the cloud and so for folks what that means is going back to thomas's definition of sas or the evolution of sas at the top of the top of the interview um software that is still kind of installed locally uh old you know the way software used to be and has never been refactored into a pr a software product that's served from the cloud and there can be incredible uh value to be created there so any any thoughts on that do you see um on-prem to sas feces from buyers coming through your doors very often yep definitely seen it before we have quite a lot of buyers who might their unique selling point as an acquirer is the fact that they might be a development agency that has access to capital so they might only look for projects like that which are again the ones that are going to be passed on by almost all sellers so almost all buyers um because they want to take it over and they don't want to have to do much to tech in this case there are various firms out there who are more than willing to do that kind of work um so for example with like atlassian apps if you're familiar with the platform atlassian they recently i don't know when they changed policy but quite recently used to be able to get kind of on premise and kind of non-cloud-based apps of them but they're making that version of their product obsolete i think over the next couple of years so every app on the platform is having to pivot to server based or or cloud there's not going to be an optionality to do it any any other way beyond that that date so in the atlassian space for example there are definitely enquiries who are going around and that's their kind of thesis or that's a game plan when they take over a business i i would say if you are a first-time acquirer and you're not technical i would my immediate reaction is it'd probably be a really bad idea to acquire a business with a loan an sba loan where your sole game plan is to completely pivot the the business model i would say that's probably more of a advanced strategy um again maybe that's my cautious nature though various people who would argue against me and say no no that's where all the opportunity is but if you're not a developer you're a first-time buyer and you're taking out a loan i would definitely not suggest buying a on-prem software business and pivoting it to sas but there are many people that do many people are successful but that would not be my personal recommendation great proprietary outreach is something again that you see searchers searches doing where they're sending out cold emails looking to engage an owner of a business and possibly buy that owner's business is that something that particularly in a market as hot and competitive as sas is that something is that a technique that you think could work uh for folks it definitely could work i think a lot of people do outreach really badly though we get because we get a lot of like search outreach i think a lot of people i'm not entirely sure why this is i haven't really put much thought into psychology behind it we get a lot of what i've described is like ego driven outreach so people will do their outreach what does that mean i know like i don't know they'll send you like a one pager and three quarters it will be like their bio and it will have things like almost like i'm married so i don't know really how this stuff works but like a dating profile they kind of like i like walking my dog i enjoy reading books um i live with my wife or husband in san francisco they'll just give you like a pointless bio of stuff that sellers don't really care about maybe they're trying to like build a relationship with the the seller maybe the celebrity oh wow i also like dogs and walking and i also live in the bay area or whatever it might be um i think a lot of most sellers aren't really interested in that kind of outreach they want to know why you're the one that should be buying their their business and if if your business also their business checks some of the boxes you're you're looking for so i think sellers care about more about in general this is not everyone but most of them continuing their legacy building their business retaining their team much more than they care about the fact you have an mba uh or you like dogs or you live in the the bay area like people don't really care about that so i don't know where this like trend has come from but i've definitely seen a lot of search outreach where it's really just focused on them as the acquirer and why that while they're amazing to my point around why a lot of i think sometimes a lot of buyers think they're smarter than the seller it's like they're kind of outlining all their professional qualifications and the seller might say that that's not necessarily attractive to a seller but if if i asked a seller if i surveyed 1200 of the sellers we've worked with so all the sellers have ever worked with and said what were the ten most important things for you when deciding which buyer to go with i would say something like level of education probably would get named by almost none of them um yeah but i think a lot of buyers think that's important maybe that's their in their mind their usp they have an mba they went to a fancy school or whatever that that might be yeah um so i think if you are going to do outreach yes it can be effective but you really have to focus on what you're going to do for the business and why you're uniquely positioned to do that rather than why you as a person are great that's not really gonna unless you get really lucky yes maybe you email a seller who happens to live in the same place happens to have gone to the same college and happens to work to the same company you did or you do now years ago so yes that can happen but that's way less likely people really care about sellers care about playing up to their ego and why you think they've done a great job rather than kind of playing your own ego so that's i think way and that's not just outreach for acquiring businesses i think that's where outreach in general goes wrong people spend their entire time just talking about how amazing they are what they're selling and they don't put any effort into kind of learning about what they're pitching and why they're a good fit thomas i want to ask you the kind of standard market snapshot moment in time question about sas and then i want to close it out with sneaking in a couple ecommerce questions because you also obviously do a lot of e-commerce work um so on the market snapshot question so what are you seeing in terms of multiples and valuations given all that's going on in the macroeconomic climate i think surprisingly steady um all levels particularly the like deals below five million dollars for example that whether generally not private equity funds buying those businesses those multiples have not changed at all like i said we had a business the other day loads of bids went well over our kind of internal asking price was was really popular whereas a lot of people would think oh the markets the market's bad multiples must have gone down not really the case at that end of the market um at the higher end i definitely think there's a a few funds out there who have started to pull back or change their criteria a bit but what that might mean is that previously there was a thousand potential acquirers for business now there might be 750 for that same business that doesn't mean it won't sell it might mean you get slightly less bids but there's there's still many firms out there who are still private firms who are still actively deploying capital um so we haven't really noticed a pullback in multiples um i think where that is happening is like the public markets much bigger acquisitions like in the billion dollar range yeah they are changing a little bit but they're also generally could be more correlated to things like interest rates whereas if you are a fund and you have lp capital and you're buying businesses with cash i mean it does matter to an extent but what the kind of fed rate is doesn't really affect you and your acquisitions whereas much larger acquisitions which are more likely to be leveraged with debt similar to your point about can you buy a like a business with an sba loan at a ten times multiple probably not because you can't service the debt it's exactly the same as you get to much larger acquisitions as well so say so far not really do i have a crystal ball what's going to happen in the next year no um but also as a firm we're i personally sleep well at night we're diversified we work on lots of different business models we have clients all over the world team all over the world so we're not if b to b sas above 10 million dollars valuations come down in the us yes that would affect us a little bit but doesn't really affect us as a as a business as a whole because we're still doing lots of other deals as well and your answer to that question was with respect to sas correct well i guess e-commerce multiples or was that everything i guess i was talking about everything really um some e-commerce has changed a little bit because there was over the last few years quite a few i think they coined the term aggregators for themselves but essentially private equity firms with a fancy name which sounded different from private equity um raised a lot of capital and we're doing uh maybe what i would describe is like stupid deals from multiple perspective um but they were generally not happening through advisory firms they were so desperate to deploy capital they would generally be reaching out to sellers directly persuading them to sell without hiring an advisor generally once if deals came to us they're going to be slightly more rational in their approach so i'd say again hasn't really affected us because we weren't really doing those crazy deals in the first place we've always been kind of quite steady multiples gradually increase every year have done for the last 12 years i expect that to continue to like that but yeah e-commerce has probably been affected the the most from that perspective um so maybe there are now some more opportunities as an acquirer in e-commerce but again if you're looking to buy a business similar to real estate you shouldn't be having a one to three year view you need to have a minimum 10 year view on what you think is going to happen to the business and the industry um so you think you have to be a lot more bullish and just oh i can get a really good deal on the e-commerce business i should buy it that's not necessarily the right thing to do if you're a developer and you know how to build good software products something you said earlier about a difference between e-commerce and sas is how e-commerce you can have these incredible spikes in revenue around whatever a promotion a you know a shopping holiday in a particular country or what have you um you can just see an e-commerce sell-through just explode very very quickly that also i think indicates how why e-commerce businesses can grow to the size that they do sometimes very very quickly so not just necessarily spikes around a holiday but just a lot of growth really really quickly so for example you know fe is currently selling a business a hand tools e-commerce business business says nine million dollars in sales and was launched in 2020 so it's a two-year-old business doing nine million dollars in sales and you just you see this in e-commerce a lot uh where um a business is doing millions of dollars in sales and it was just founded like yesterday like somebody you know during the pandemic decided to just to spin up an e-commerce store and all of a sudden it's doing 10 million dollars two years later um how should i feel about those businesses well firstly it's if you look at again you survey i know a hundred people who've launched an ecommerce business 100 people have launched a sas business you will find more people who got to a million dollars revenue and again arbitrary number but a million dollars revenue in e-commerce in a year they did in sas in sas there'll be almost no one and in e-commerce there'll be a reasonable number because you can i guess the nature of like the trends and things like that you can go from zero to a hundred or zero to a million in this context um quite quickly i think the real thing to think about in that case is yes it's got to that level but how sustainable is it on an ongoing basis and are you able to uh achieve that your yourself um can you continue to operate it do you think it's sustainable and if it's a relatively young business so generally speaking that's where the more experienced acquirers are more likely to be the buyer because they might be very confident in their ability to so the business you're describing relies quite a lot on paid traffic maybe they have a lot of experience running paid ad campaigns um so they're very confident maybe they can reduce um ad spend and increase profitability because they know they've done it before as a first-time acquirer you probably don't have that data or that experience so it's much harder to make that decision so you might be more likely to pass so i think similar to acquiring a say a sas business that requires a lot of like technical changes to get to where it needs to be similar to relatively young businesses you really need to know what you're looking at to make a decision on acquiring that kind of business but doesn't necessarily mean it's a a bad thing like buying a business like old is not necessarily good and young is not necessarily bad really depends some people would say well the young business is better because it's still got more untapped opportunities um and you can kind of argue i think the ongoing trend we've probably noticed in this interview it's like you can kind of make arguments for either side at any any time and the pros and cons of what saying being a pro can also be a con depending who's looking at it let's end on that on that note of uh the subjectivity of all of this thomas uh what's the what would you like my audience to do should they go to fe international and subscribe to listings what what say is there a call to action here for you sure yeah i mean if you're looking to buy a business go to the fe website um we segment people by business model generally but you can also inquire on all business models if you are actively looking to buy a business i would encourage you to inquire and speak to my team we'll get your criteria on file get an idea what you're looking for and then we can start sending you new businesses and i think if you listen to some of the things we've spoken about today i think that puts you ahead of 98 of searchers who don't really put the effort in to kind of learn at all they just think they're going to do it there their own way um so if you've listened to this podcast and you found us in the first place then you're already ahead of quite a lot of people from the fact you've done that right um so just start looking i also say as an acquirer you should never feel rushed into making your first acquisition that doesn't mean you should procrastinate for five years looking um while i say it's very common for first-time acquirers to spend say a year looking or like browsing and then making a decision or not necessarily making a decision on a particular business but figuring out what their criteria should be so maybe you start out looking for an e-commerce business and you decide hey actually you should buy sas business or maybe you start looking for a sas business and say actually no i'm going to buy a service business because there's no right or wrong answer there's no business model you should buy or shouldn't buy i would encourage you to start relatively broad and then get narrower with your criteria once you figure out what you like and what you don't like and are you on twitter thomas or should people connect with you on linkedin personally yep twitter twitter and linkedin active on on both you can find me on some other platforms as well about i'm like daily active on linkedin and twitter great and it's thomas smail pronounced uh spelled s-m-a-l-e of course all of this will be in the show notes as well yeah exactly thomas thanks for giving me so much of your time fascinating conversation really appreciate it cool thanks bill appreciate it