Jack Wei

CPG M&A. RE Investor. Contact: [email protected]

[Jack Wei @goallthewei]

@DavidPawlan just followed

[Jack Wei @goallthewei]

@nicochristie This is unreal! Can’t wait to try it.

[Jack Wei @goallthewei]

@unusual_whales @grok Has this ever happened before?

[Jack Wei @goallthewei]

@Restructuring__ Interested

[Jack Wei @goallthewei]

@MaxMulvihil There’s a time in a start up’s life where it’s extremely valuable to bring in people that know what excellence looks like in order for the company to reach the next level.

Agreed that they’re not the best hires when execution is the priority but that only goes so far.

[Jack Wei @goallthewei]

@dorse054 Used to be a competitive powerlifter! Love talking about lifting - was commuting home and missed it

[Tyler Bruno @tylerbruno05]

Regret is the absolute worst feeling. Stop letting regret happen

[Jack Wei @goallthewei]

This has been my experience too - the highest quality “searcher special” brokered deals get obscene amounts of interest in a very short time frame

My mindset now is that it’s more realistic to close on a business that has risk(s) that will cause other searcher to pass on it, but that you can get comfortable with due to unique skills/experiences/insights that you have.

[Jack Wei @goallthewei]

@PhillySMB The NRA and Trump flags are such a classic part of the SMB experience

[Jack Wei @goallthewei]

@CPG_Precision @bibelhausen @whentheresawill Thank you! Will definitely take you up on that.

[Jack Wei @goallthewei]

Hello SMB Twitter! I’ve been lurking and soaking up knowledge from the community for months now but with inspiration from @bibelhausen on his episode from @whentheresawill’s Acquiring Minds - I’m going to start building in public and figured I’d start with an introduction.

[carried_no_interest @carrynointerest]

THE STATE OF SEARCHING / ETA / LOWER MIDDLE MARKET ACQUISITIONS:

I get a lot of people DMing me talking about searching / ETA / smb acquisitions. I'm going to word vomit some thoughts I have on the state of things. Lots of people have spent 6-10 months searching with nothing to show for it. How do I look at things / deals lately?

1) FIRST THINGS FIRST: if you are a spreadsheet warrior, and your only true skill in capitalism is navigating corporate america, you should probably not do a deal right now. You are probably not ready. I mean that. The price of assets combined with your inexperience operating could lead to rough outcomes. I met someone who spent their career in United Health Group trying to acquire an SMB. If I could short their company; I would. Why? THEY HAVE NO TRANSFERABLE SKILLS LOL.

So what do you do? GET SOME SKILLS! Every business on earth needs to know how to do some combination of the following:
a) Scale inbound (PPC, SEO, Print Ads, etc)
b) Scale outbound (cold email, cold calling, optimized CRMs, whatever your method of choice here)
c) Optimize Operations (optimizing call centers, optimize lead -> booking, optimize a manufacturing floor, optimize a sales team, optimizing route planning, integrating software e.g. service titan)
d) Selling. That's it. Can you f***ing sell. Have you ever tried to truly sell something? Learn to sell. This skill matters. If you can learn it, you might even be able to teach it.

It is WILD how much of large corporate america teaches you...none of these. Learn some combination of these. I promise you won't regret it. You are much better off having some level of transferable skills before you start your search. OK onto the NEXT THING

2) Competition is insane. I am seeing truly bad deals trading hands at 4-5x. That means even diamonds in the rough trade at 3-4x. What does that mean for you? You need to make a choice. You're either going to overpay, or you're going to pay for something other people reject but YOU see TRUE potential in.

For me and my PERSONAL money, I LOVE option 2. Every deal I do personally, I try to find something everyone else HATES. Based in Estonia? Great. Complex Carve out? Great. Weird tech company with difficult to migrate back end? GREAT. Will it destroy me? POSSIBLY! But, i'm getting a good price.

AKA, I find businesses where I love everything about it except for XYZ, and XYZ happens to make most of my competition disqualify it. 9/10 of these deals are still duds. but that 1/10? oh man. XYZ should not be related to industry or tailwinds btw.

I want the WEIRD STUFF. Why? Because I know I can handle it and all the others in the space will pass 4 minutes into the CIM. That means I can get a good price, and that gives me a TON of leeway. That brings me to 3.

3) PRICE IS SERIOUSLY SO IMPORTANT. You might think the price you pay is important. I am here to tell you it is more important than you think it is. Just because everyone else is paying 5-6x for LMM companies that are frogs DOES NOT MEAN YOU SHOULD. If that means you don't do a deal for another 6 months, you should not do a deal for 6 months.

4) FIND YOUR REASON TO WIN/SPECIALIZE. Whenever I buy a company (either in my day job or in my personal account) I constantly ask 'why do we have a right to win'. For most of you who are looking at generalist deals (aka industries you don't have a specialty in) it is very likely you have NO right to win. Now, if you are someone who has been working for 7 years in PE as a generalist I could understand your purported right to win.

However, for most of you searching, unless you have serious industry experience OR intense expertise in one of the skills outlined above, you are unlikely to have a right to win. What's next then? Find an industry that checks all the boxes and go ALL IN. I've seen a few others on this app say 'dude, pick an industry, master everything you can about it on the internet, and go all in.' I seriously agree with this advice for searchers. You have no right to win looking at random widget manufacturers you know nothing about. @paulswaney3 probably DOES have a right to win here.

ANYWAY, TO SUMMARIZE:
1) build a generalist business skill
2) Find a way to embrace the competition (for me thats finding weird deals)
3) PRICE. DO NOT OVERPAY. EVER.
4) Find your reason to win.

[Jack Wei @goallthewei]

@CBarrett_CPA @on_searching Thanks Chris! Hope you’re having a great weekend too 😊

[Jack Wei @goallthewei]

@PhillySMB Let’s go!!!

[Jack Wei @goallthewei]

@chrissundberg @on_searching That’s clear - probably will have to chat with them directly to learn more. Thanks Chris!

[Jack Wei @goallthewei]

@chrissundberg @on_searching That makes sense - thank you! Any recommendations for SBICs to connect with that are willing to do smaller deals?

[Jack Wei @goallthewei]

@Sam_Rosati SMB

[Jack Wei @goallthewei]

For our last deal, we really liked the business and thought that we might’ve been able to tip the scales in our favor by building a relationship with the seller, so we played the long game and didn’t retrade right away.

We talked to SBA lenders and forwarded emails to the broker saying that the price was too high/debt coverage doesn’t work. We also had lenders come up with term sheets that changed the deal structure so it pencils.

That way, we weren’t the bad guys - we wanted to pay as much as we can for the biz! It’s the lenders that are saying this.

At the end of the day though the changes were too much for the seller and he wasn’t motivated enough so it didn’t work out for us.