James Li

Founder in Residence at Peak6 | CS + Business Alum at UC Berkeley

[riyanka @riyanka_ganguly]

If you moved to Austin from NY/SF and find it too chill sometimes… this is for you.

Hosting coworking sessions Wed 7 pm onward w free food. 1st hour is community hang to tackle blockers/ learn something new. Rest of the night just coworking.

DM me to get on the list.

https://t.co/6mnTdu2P1f

[Zeno Shin @zenoshin]

That's where we come in.

Peak6 Trials is a 12-month founder residency in Austin with a $100K salary, plugged directly into our customer network, engineering, legal, and compliance infrastructure.

No prior fintech experience required.

Come with an idea, or find a problem to solve from scratch.

Building is free.

Distribution is everything. We give you the distribution.

https://t.co/uE8J8MLfJC

[John Caple @BigJohn043]

In my 25 year private equity career I have seen a lot of things change.

We used to buy companies for 5x EBITDA with 1x equity. The power of financial engineering was awesome. If you could do drive EBITDA in any meaningful way the leverage meant that the path to 10x your money was there. Do 10x on half or even 1/3 of your deals and it didn't matter what the others did.

The world has changed in 25 years. Some big differences:

The generalist model is dead. Even at industry agnostic firms they have industry groups that are focused. If you are not deep into sectors and themes then you are the dumb money at the table.

Operational value add is critical. It isn't enough to just sit on the board and have your monthly board call. Good PE firms are bringing real operational capabilities to the businesses that they invest in.

OTOH, some things haven't changed:

Good PE firms know what "their deal" is. The best PE firms have a pretty tight definition of what they are looking for. There are lots of ways to make money. Some firms pay big multiples for the best companies with the best growth prospects. Others invest in distressed businesses. Both work but you have to know who you are and what your edge is.

Don't fall in love. Having been in this world for 25 years I have seen a lot of PE professionals fall in love with their deal. You can see it in their eyes. They are in love and nothing you can say about their baby will change their mind. The best investors don't fall in love.

Have a happy holiday....

[Connor Abene @ConnorAbene]

There's a difference between KNOWING your financials and UNDERSTANDING your financials.

Knowing metrics like revenue growth, gross margin, and net income is important and every business owner should do it.

But...

On their own they're incomplete.

They're just numbers.

The secret to having a healthy business is understanding WHY certain metrics move the way they do.

"Revenue is growing!"

Great, but why? What's driving the growth? Did the closing rate improve? Are the marketing campaigns performing better? Where should we be doubling down?

Knowing your numbers is the first step. Pay attention and understand what's truly going on inside your business.

[Mike Botkin @MikeBotkin_]

Okay. How did I go from this to easy-peasy uneventful day/week 1s

*This is for small business, home service/blue-collar type businesses*

Like anything in life, it all begins with the preparation. Here are things that trip people up.

Employees
Customers
Vendors
Systems

I am a MASSIVE advocate to have a Transition Service Agreement (TSA). I will look to another post I made about TSAs. You can avoid SOO much of this early.

Prior to closing. Make sure you have...

EMPLOYEES
- Complete list of information INCLUDING the last time their pay increased. Walk through employee by employee with the seller. "Anything I need to know?" Score him 1-3 on crucialness to morale / crucialness to business.

1 = Base relationships
2 = Important, but not essential
3 = Essential, PITA to replace

Also - figure out which employees have REACH within the groups. Who is the 'ring leader'. Get to them early. They will either pour gasoline on the group or water on the group. Hint: It's not the highest paid employees.

CUSTOMERS
- Review EVERY single contract, idc if the owner says they are all boilerplate. Review each one. Line by line. You will start to notice differences. Review with seller customer by customer. "Anything I need to know? Who is decision maker? Who brought this customer in?" Score them as well. Not on revenue, but on priority to speak with and PITA level

1 = Won't care one bit
2 = Will care but...keep quality and they are good
3 = PITA. Get to immediately. They need to be loved.

Understand and have a plan for customer communication.

VENDORS / SYSTEMS
Have a list. MAKE SURE the seller doesn't terminate any or cutoff all systems.

All of the above can be avoided by having a TSA.

Again - be prepared. No surprises. Just kidding. You will be surprised.

---

Ok. Day 1. / Week 1

Here is the most important thing to remember regarding the employees.

A. They only care about themselves. Not in a selfish way, but, they immediately think a) they will be fired, b) if not, their pay will change, c) their duties will change

I don't care how big the business is. This is a 100% reaction / fact. "What does this mean for me?"

In our chats. We literally say "What does this mean to you...this means...xyz"

B. They are SCARED. 10x more scared than you are. You know for a fact that you are getting a paycheck. They have ZERO idea. As crazy as that sounds.

C. Assuming you have no TSA. Make sure you have payroll figured out. Like, do a Fing test run on yourself etc the week prior so you know exactly how it runs and what to expect.

Fun Story: Week 1 of acquisition #2, Amscot (another story) would not accept our checks from Wells Fargo for payroll. I thought I was about to get kidnapped and held for ransom if we didn't figure out how to pay our guys...like ASAP. Had to go all the way to Amscot corporate ladder. F it. Ended up venmoing, cash app, etc. the staff

D. TIP: Find something small you can do that shows the 'changes' will be good. New uniforms, cleaning the shop, etc. Identify it prior and have it ready to go day 2 or day 3.

--

Assuming you don't have a TSA, so naturally...stuff *will* change, and rather quickly.

Tip 1. NEVER do this on a Friday. You do NOT want the employees going home and spending 2-3 days without 'normalcy' and wondering what will happen to them. I prefer to do this during the week on like a Wednesday (close to payroll day) and at the end of the day. Mornings suck (day ruined).

Review with the seller what he is going to say. Challenge him, "what if they revolt?" "what if John says F U?". Very unlikely scenarios but make sure the 'shock' factor is planned.

Anyway.

When you give your opening speech. SHORT AND SWEET.

"I am Mike, glad to be here. Looking fwd to getting to you guys more. We will keep change to an absolute minimum and only necessary. Let me be VERY clear. Nobody....NOBODY is getting fired or pay change. I value each of you. I'm around if anyone wants to chat."

Then go into small group mode. You will see the leaders very quickly. Make sure seller has same message as you have bc he will get pulled.

DO NOT hand them 500 papers of onboarding. Rookie mistake.

Every day, give them a handful of stuff to fill out for the first few days. (Tip, if you have spanish workforce, have it in english and spanish, have spanish speaker available).

This should be done daily anyway (hardly ever is) but the first 2 weeks, I like to do a 'huddle' with entire staff in the AM and highlight 1 or 2 things. Sometimes "sorry yesterday sucked, here is some coffee and donuts for everyone" sometimes it's "please make sure you see Susie so she can get your info for payroll. Half in AM half in PM". Also open for Q&A. Go back to earlier post, find the leaders...probe them for questions and ask if they can ask in front of the group in AM huddles

1. It empowers them
2. You are building a bridge to the employees
3. Questions that everyone is thinking, but scared to say, get answered.

Getting the employees into a normal routine is so key. Anything that throws them off....will be the end of the world.

Vendor won't give them material because you aren't signed up. No gas cards so it's a scramble. Ran out of supplies bc owner / you were preoccupied. etc etc etc.

Easy early wins.
- New uniforms, if it's cold, buy them jackets, etc
- Clean the facility
- Clean the trucks
- FIX broken tools/trucks/equipment IMMEDIATELY (have this planned pre-close.)

Show them you care about THE ENVIRONMENT they work in.

Imo - you can change 1 crazy thing per week.

"Okay guys, new parking system...to make us more efficient in AM"

I like to say, every payroll normalizes the staff by 30%. Make it to the second payroll and you are good.

All of this can be avoided by using TSAs. Literally nothing changes day 1.
- Payroll stays the same (so you avoid stress about that)
- Vendor mgt stays the same (no need to change everything and spend 5 hours on phone with utility company)
- Customer items stay same (no need to jump gun on getting docs changed)

Have a plan with seller on credit cards etc. Tell him you need to keep them alive for 30 days until stuff gets switched. Tell him not to be a PITA about charges. IT WILL GET PAID chief, relax.

Without TSA - this is all on you to handle/change/confirm/pray it works within the first 72 hours post-close.

What else do you want to know?

[Connor Spears @ConnorSpears]

I bought a commercial landscaping business in August 2022 as a 27 year old working in private equity

For someone whose entire life has changed from Twitter, I’ve been a silent observer here for too long. For better or worse, I’ve decided to get more active here ⬇️

[Michael Girdley @girdley]

Businesses die when they run out of money.

There is one tool to survive a cash crisis.

The 13-week Rolling Cash Flow Forecast 🧵:

[Eli Albrecht @Eli_Albrecht]

Lessons from a deal that died today. This was a painful one. This buyer is one of my favorite people. He poured his heart and soul into this deal over 18 months. This one stings.

After a signed LOI, the sellers were still deeply mistrusting. They requested a loan commitment - we gave it. Equity commitment and proof of funds - we gave it. We did QoE, drafted the purchase agreements and all other documents only to find out they still had not engaged legal counsel because they didn't know the deal would go through. Didn't want to give us legal diligence or act collaboratively in any way.

Lesson #1: If every issue is like pulling teeth, your deal has a high likelihood of not closing. You could spend 18 months only to find you have been, "full gas in neutral" (as we said in the military).

Lesson #2: Do not give into the sunk cost fallacy. You have to disregard all the effort, time, and money invested and decide if the deal is worth pursuing.

Lesson #3: Create deep relationships with your partners (e.g., lawyer, accountant). If you treat them like partners, not service providers (e.g., request discounts on fees), they are much more likely to cut you a break when your deal dies and take the hit alongside you.

Lesson #4: M&A is a harsh world. Deals die for all sorts of crazy reasons. As soon as I think I have seen them all I see another crazy reason. You must go into a deal with your eyes open to the risks.

I'll pour one out tonight for this dead deal. Onwards and upwards.

[PrivateEquityGuy (Mikk Markus) @PrivatEquityGuy]

MICHAEL BUYS A $1-5M REVENUE BUSINESS AND DOUBLES IT IN 12-36 MONTHS

Today, he manages 18 companies with a total revenue of $140,000,000

Half of them were bought with zero money out of his own pocket

My convo with Michael Byars

Plus:
– Best & worst deals
– Typical DD process

[Bruce Marks, MBA, CM&AA @sbabmarks]

WSS: I would like to submit an LOI for this business. Before doing so, I wanted to make sure the deal pencils so I don't hear "Congratulations, you have structured a deal that doesn't work"

This deals pretty much checks all my boxes

The purchase price is $1,700,000

Let's see

[Sam Rosati @Sam_Rosati]

The dream 6-year ETA/SMB lifecycle:

Month 0-6: start search, tighten deal criteria after chasing too many deals that would never work.

Month 6: Go under first LOI, it busts in 3 weeks, back to drawing board.

Months 7-10: back to search, more focused, more willing to say "no."

[Sam Rosati @Sam_Rosati]

Just made a "SMB Deal Expense Calculator" to help searchers tally their estimated transaction expenses.

We typically cover this at Bootcamp, but @ChandlerReedSMB and I wanted something more user-friendly for the broader community.

👇

[Ilir Aliu @IlirAliu_]

50 ChatGPT Prompts That Will Run Your Business to Success and Save You Miles of Mistakes:

[Bookmark for later]

1. Life is Like a Box of Chocolates: Adaptability Is Key

Prompt: "Help me brainstorm ways to stay adaptable in the ever-changing business landscape."

2. Run, Forrest, Run: Maintain Momentum

Prompt: "What strategies can I adopt to ensure my business consistently grows and progresses forward?"

3. Bubba's Shrimp Business: Master Your Niche

Prompt: "Guide me through a deep dive analysis of my niche market and its potential."

4. Ping Pong Diplomacy: Build Relationships Everywhere

Prompt: "How can I cultivate beneficial relationships in unlikely places?"

5. Wearing Comfortable Shoes: Ensure Your Foundation is Solid

Prompt: "What are the key foundational elements my business might be missing?"

6. Jenny's Lessons: Learn From Your Mistakes

Prompt: "Help me create a post-mortem analysis template for projects that didn't go as planned."

7. Lieutenant Dan’s Transformation: Embrace Change

Prompt: "How can I foster a company culture that is open to evolution and transformation?"

8. Feather in the Wind: Seize Opportunities

Prompt: "How can I spot and take advantage of unexpected opportunities?"

9. Forrest's Bench Stories: The Power of Storytelling

Prompt: "How can I leverage storytelling in my marketing efforts?"

10. Gump & Co.: The Importance of Branding

Prompt: "Guide me through a rebranding exercise to align more closely with our mission."

11. The Watergate Scandal: Integrity Above All

Prompt: "What policies can ensure transparency and integrity in my operations?"

12. Bubba’s Family Tradition: Honor Legacy While Innovating

Prompt: "How can I innovate while still respecting our company's history and traditions?"

13. The Football Scholarship: Leverage Your Strengths

Prompt: "Help me identify and maximize the core strengths of my business."

14. Vietnam Friendship: Cultivate Team Bonding

Prompt: "What team-building activities can foster stronger relationships within my team?"

15. The Smiley Face T-Shirt: Capitalize on Trends

Prompt: "How can I spot emerging trends and capitalize on them?"

16. The Shrimp Boat: Persistence Pays Off

Prompt: "What strategies can help me remain resilient during tough business periods?"

17. Lieutenant Dan's Investment: Financial Savvy is Key

Prompt: "Guide me on how to diversify my business investments."

18. Running Across America: Building Brand Awareness

Prompt: "How can I increase my brand's visibility both online and offline?"

19. Mowing the School’s Grass: Sometimes Passion Trumps Profit

Prompt: "How can I align my business more closely with my passions?"

20. Meeting Presidents: Networking is Gold

Prompt: "What strategies can help me expand my business network?"

21. Little Forrest: Plan for Succession

Prompt: "How should I start planning for my business's long-term future?"

22. Gump’s House: Importance of Environment

Prompt: "How can I create a work environment conducive to productivity and creativity?"

23. The Broken Leg Braces: Overcome Your Limitations

Prompt: "What strategies can I use to turn my business weaknesses into strengths?"

24. Forrest's Generosity: Giving Back is Good Business

Prompt: "How can my business make a positive impact in the community?"

25. Elvis's Dance Moves: Creativity Sets You Apart

Prompt: "How can I infuse more creativity into my products or services?"

26. Lieutenant Dan's Redemption: Every Setback Has a Comeback

Prompt: "Guide me on crafting a strategy to rebound from a business setback."

27. Forrest’s Mother's Wisdom: Core Values Guide the Way

Prompt: "Help me establish core values for my business."

28. Jenny’s Club: Know When to Walk Away

Prompt: "When should I pivot or abandon an aspect of my business?"

29. Monuments and Reflection: Regularly Assess and Celebrate Milestones

Prompt: "How can I effectively review and celebrate my business achievements?"

30. The Dr. Pepper Scene: Small Pleasures Boost Morale

Prompt: "What small perks can enhance employee satisfaction?"

31. Buying the Old House: Real Estate as Investment

Prompt: "Should I consider real estate as a viable investment for my business?"

32. Shrimp Business Success: Specialization vs. Diversification

Prompt: "When should I diversify my offerings versus specializing?"

33. Forrest’s Running Followers: Lead by Example

Prompt: "How can I set an exemplary leadership standard for my team?"

34. Vietnam Rain: Weathering Storms Builds Resilience

Prompt: "How can I prepare my business to weather economic downturns?"

35. Forrest’s Investments: The Power of Passive Income

Prompt: "Guide me on setting up passive income streams."

36. The Floating Feather: The Role of Chance in Success

Prompt: "How can I position my business to take advantage of fortunate accidents?"

37. Lieutenant Dan's New Legs: Embrace New Technology

Prompt: "How should I evaluate and implement new tech in my operations?"

38. Forrest's Approach to Bullying: Conflict Resolution is Essential

Prompt: "Guide me on effective conflict resolution strategies."

39. Gump's Medal of Honor: Recognize and Reward Excellence

Prompt: "How can I establish a system of rewards and recognition in my organization?"

40. The Reflection in the Pond: Self-awareness in Leadership

Prompt: "Help me assess and improve my leadership skills."

41. The Cross-country Run: Marathon Not a Sprint

Prompt: "How can I instill patience and long-term thinking in my strategies?"

42. The Lighthouse: Guiding Vision and Mission

Prompt: "Help me refine my business's mission and vision statements."

43. The White House Visit: The Importance of Presentation

Prompt: "How can I improve my business's public image and presentation?"

44. The Vietnam Protest: Standing Up for Values

Prompt: "How do I take a stand on social issues without alienating customers?"

45. Gump's Letter to Jenny: Clear Communication Matters

Prompt: "What strategies can enhance communication within my team?"

46. Gump’s Shrimping Partner: The Right Partnership Amplifies Success

Prompt: "How do I choose the right business partner?"

47. Saving Private Bubba: Loyalty to Teammates

Prompt: "How can I foster a culture of loyalty and camaraderie?"

48. Greenbow, Alabama: Stay True to Your Roots

Prompt: "How can I maintain the core values of my business while scaling up?"

49. Tackle Problems by Pinpointing Root Causes

Prompt: "Guide me in applying the Five Whys technique to identify the root cause of a [specific problem or situation]."

50. The Vietnam Experience: Always Be Prepared for the Unexpected

Prompt: "What contingency plans should I have in place for unforeseen challenges?"

[Eric Hsu @lawyer4SMBs]

Never buy a business if the seller isn't willing to carry a seller note for part of the purchase.

Why?

Because seller notes are one of the most powerful tools to get a deal done and protect your interests.

Here are the benefits of a seller note:

A thread 👇

[Bruce Marks, MBA, CM&AA @sbabmarks]

WSS: Bruce, I need your help in structuring this acquisition transaction.

I would like to submit an LOI for $2,250,000

I want to also own 100% and do not want to bring in outside investors and dilute my ownership

But, I don't have much liquid cash to invest

Any ideas?

[Sam Rosati @Sam_Rosati]

When searching to buy an SMB, your lack of industry knowledge will make you the dumbest person in every seller meeting.

Get comfortable being uncomfortable…it’s a rather useful skill. 🙃

[Clint Fiore 🦬 DM for Biz Deals @ClintFiore]

Tips on how to figure out if the SMB you want to buy is over-reliant on the Selling Owner, one of the biggest risks in purchasing a business. A thread. 🧵

[Ben Tiggelaar 🟠 @bentigg]

🔥 Sponsors can submit your profile and deal for distribution here (only those under LOI): https://t.co/wAS6k2fqhH