448 How to Sell a Midsize Digital Agency w/ Amanda Dixon (Barney)

10/12/2020

Amanda Dixon is the cofounder of Barney, a mid-market M&A firm that helps entrepreneurs buy and sell digital businesses. They boast a database of more than 15,000 buyers and a dynamic portfolio of past mergers and acquisitions.

Before starting Barney, Amanda had previously started and sold two businesses. After successfully selling both businesses, Amanda became painfully aware of the challenges associated with selling a business worth less than $20 million.

Now, Amanda leverages her learnings to helping others exit their business in a way that is simple, focused and financially advantageous. You can see the companies that are currently for sale through Barney on their website.

When she's not working, you can find Amanda with her husband and daughter at the beach or watching Frozen for the 1,000th time.

In this episode, Amanda and Aaron discuss how digital businesses get valued, why you shouldn’t share your customer list during due diligence, and what she learned selling her own businesses.

Sign up for a Weekly Email that will Expand Your Mind.

Amanda Dixon’s Challenge; Make a stranger smile this weekend.

Connect with Amanda Dixon

Linkedin
Barney Website

If you liked this interview, check out episode 269 with Brent Beshore where we discuss selling family businesses and the unique models of private equity.

Underwritten by Piper Creative
Piper Creative makes creating podcasts, vlogs, and videos easy.

How? Click here and Learn more.

We work with Fortune 500s, medium-sized companies, and entrepreneurs.

Follow Piper as we grow
YouTube
Instagram

Subscribe on iTunes | Stitcher | Overcast | Spotify

Watson: Amanda, welcome to Going Deep with Aaron Watson, I'm excited to be talking with you.
Dixon: Thanks Aaron, happy to be here.
Watson: So you have a really interesting business that you're running, and it is, I mean, a little inside baseball because I run a digital agency so it would make sense that this would be hyper relevant. But I think that this is representative of a kind of larger theme that I see coming across a bunch of different markets, which is using, you know, creating these marketplaces, bringing digital tools and digital connective tissue to arenas that otherwise wouldn't be there.
So I'm excited to have you on the show. And I wanted to basically just kick things off with having you explain Barney. And then maybe we can talk a little bit about how you got to starting this company.
Dixon: Yeah. So we're an M&A firm, for lack of a better term. We feel like we fit that perfect void in helping entrepreneurs sell their business, sometimes buy a business, that it feels like they're too big and too sophisticated to go with the local business broker that's maybe selling a refrigeration company down the road. But also, they're just not quite big enough or quite sophisticated enough where they're dealing with that kind of private equity investment banker that's ready to help them.
So we're filling that void of selling businesses between 500,000 and 20 million. We typically work just with digital companies. And what we're seeing a lot is, you know, really a unique shift in the people that are buying and selling businesses, you know, in our parents' generation people sold their business when they were ready to retire.
And what we're really seeing now is a massive shift in people, you know, working a business for two or three years, growing it up, bootstrapping it from the ground up and then saying, you know, Hey, this has been really fun, but I'm ready to try something else and become an expert in something else. So that's really where we come in and help either buyers take advantage of acquiring what those people have built or sellers who want to exit and have some cash to show for it.
Watson: Anf the way that we actually got connected was through a cold email that came from your team to me. And I was just fascinated by the outreach about, Hey, we can either help you sell business, or if you're in the market to buy. And then you, you come to the website here and maybe we can link this for people so they can check it out at the, in the show notes, but there's like the list of these different companies.
There's a web design company that, you know, they have the income stated and the revenue and what the asking price is. And they've got another one that is doing UX and UI design. And like you're saying here, so some of these companies, you know, two, three years old and someone looking to flip it, other ones have been in business maybe a little bit longer, but the narrative here is if it's a digital agency, it's unlikely that it was founded by someone at the latest stages of their career. It was probably created by someone, you know, earlier on in their career that understood the digital opportunity. Maybe they had built that skill set in some capacity and then went and built a business on the back of that ability.
Dixon: Yeah. And you know what we're seeing, especially in the digital agency space, I think this really rings true with a lot of industries, buyers are really looking for businesses that are hyper niche. Now, as the market has gotten so big and kind of oversaturated that businesses that sell the best, especially on the digital space, are hyper hyper niche.
So what that translates to from an entrepreneur side is people were doers. They were maybe coders. They were really good at outbound. They were really good at emails. They were really good at one skill and were able to turn that into a business 10 or 15 years ago that wasn't a full advertising agency.
Now I just, I talked to a seller this morning. They only get backlinks for people and they're making a million dollars a year. Their only businesses getting backlinks. So we love that that shift has, has come and with that comes the need to be able to, you know, more easily connect buyers and sellers without having to go through some of the old school, super strenuous ways to buy and sell businesses.
Watson: Yeah. And we talked in the past with, you know, companies that are providing liquidity to people with like land rights and these other kind of difficult businesses. Part of the reason the investment banker exists, part of the reason the private equity investor exists, part of the reason that those characters are there is because it is messy and there's complicated terms to every single deal.
And there is a degree to which not all of it can be automated away, but by, you know, finding the right targets and collecting the right info off the bat, you can hopefully reduce some of that friction and make it a simpler transaction to complete.
Dixon: Exactly. And yeah, I definitely don't mean to say that we have this totally automated because we're still in a very, very high touch business.
You know, we, when we're selling a business, we talk to those sellers almost every day until that business is sold and the same thing when we're representing buyers and helping them go acquire other businesses. It's not a hundred percent automated, but because we're, so hyper-focused in the digital space, we know how this business operates kind of inside and out, so where we can utilize automation technology we certainly do so.
Watson: And it's safe to assume that most of the listeners out there will have not successfully sold or bought a business before. I'm sure there's a minority that have, but just, you know, in terms of other forms of sales, like when we get new clients for Piper, it's funny how often, like the sales, the best sales, but just the sales in general, they close on a relatively quick turnaround.
You have a qualified buyer. They know that they have the budget for it. They know that it, you know, they have a kind of, a couple of filters just decide whether or not it's right. And then they're ready to act. And sometimes like the characters are tire kickers. They're slow moving.
So can you create a framework for us? Not universally across the board, but with having facilitated these transactions, how long it might take from someone first, you know, identifying something that they want to buy to that transaction being completed, or to some degree, like, you know, final signed copies and everything and they're now the owner of that business?
Dixon: Yeah. So if you're working with an advisor who understands your industry, that process should take four months. If you're working with just kind of a generic business broker or maybe MNA advisor who works all across the board, they might not have a buyer pool or a seller pool that's as specific or hyper niche as maybe you would like, and then I would expect it to take closer to six months.
And I can walk you through the process kind of from start to finish, if that would be helpful.
Watson: Yeah. That's all super educational. Yeah. We'd love that.
Dixon: Okay. So I'll just talk about from the sell side, you know, if we're representing a seller, that process starts with a valuation. So the big question is how much is your business worth?
And a lot of times it's really fascinating, especially with people that have never sold a business, they don't know that their business is actually worth something to someone. If you're making a salary or you're paying yourself money out of the business, it's worth something to someone. So generally speaking and of across the board and every industry's a little bit different and we're going to use tech and SAS kind of as an outlier that we won't talk about.
I'm talking about more service businesses or, you know, other maybe brick and mortar businesses. You're looking at a multiple of net profit or EBITDA. And that's kind of what you make at the end of the year and the standard multiple for businesses making under a million dollars is going to be somewhere between two and three times your net profit or EBITDA.
So if you're making at the end of the year, $250,000, you could expect to sell your business for somewhere between $500,000 and $750,000. Once you get above that million dollars in EBITDA or net income, net profit, your numbers are going to be a little bit, your multiple is going to be a little bit higher.
Again, once you, once you hit that million dollars in money that you're bringing home, you become just a heck of a lot riskier for buyers.
Watson: If you're under that number, that's what you're saying?
Dixon: If you make more than a million dollars a year, you are a lot less risky. So we're going to see your multiple go out from two - three to maybe five - six.
So if you're making a million dollars a year, again in profit, not in revenue, not top line number. If you're bringing in a million dollars a year, you could expect to sell for five, six, $7 million.
Watson: And on the valuation front, you know, like we just saw an IPO here a couple of weeks ago snowflake, which helps people implement like cloud databases.
They're getting like a hundred X multiple on revenue. And they're like not even profitable yet, which is kind of a different game. We're really talking about businesses that are like, actually bound there, not just balance sheet, but their PNL. And it is a basis of that profit and loss, which is 99% of businesses.
Dixon: Exactly. Once you, again, we're talking about businesses under $20 million too, so once you get above that point in valuation, multiples are all over the place. and people are paying for a lot of factors other than just the bottom line numbers. And a lot of factors do go into that, you know, the type of revenue stream.
Again, I'll just use the digital space because that's what I know really well. If we're talking about a website development company that's 100% project based and 100% recurring revenue based paid media agency, where they have everyone on retainer that peat paid media agency, where everyone's on retainer is going to trade at a higher, multiple than somebody whose revenue comes in at project-based, even if they're making the exact same amount.
And those are idiosyncrasies for every industry, but generally speaking under a million, you're going to trade for two to three times your profit over a million, you're going to start to slowly creep back. And again, tech and SAS is just, it's a whole nother, it's a whole other world that we don't have to get into today.
Watson: And so we've got the valuation in place. What's the next step?
Dixon: Okay. So after the valuation the most important thing from our standpoint as your advisor is to make sure that we're on the same page with that. So, the way that traditionally business brokers or M and a advisors get paid is at close.
So you're not paying us until the business closes. So if it doesn't close, nobody wins. So we want to make sure that you're realistic about what it's worth and that we think we can get it sold for that amount. And then we have a really serious discussion about terms, because when I say, Hey, your business is worth $5 million, that doesn't necessarily mean you get a $5 million check at close. So it's really important for people to understand the way that deals are financed when you're talking about a small business transaction like this. So again, businesses under $20 million are either purchased through debt financing, which would be like a bank loan where they have either it's under five and a half million they could use SBA financing, if it's over that maybe they have some private funding or they're cash heavy.
Traditionally the way that we see deals structured is 20-30, maybe 40% of the deal is going to be cash at close. So again, in that million dollar business, maybe you get two, three, $400,000 at close, and then that other portion is going to come and payments that are going to be spread out over three, four or five years, depending on the amount of the term.
So that's also really important for people to understand, because when they think, okay, I'm ready to sell my business, I'm going to go buy a big house and retire. The reality is most of the time you don't get paid all of that cash upfront like you would, if you were selling home. So we have that discussion.
If everyone is on the same page, we take it out to our buyers. We take it out to the market and kind of see what's out there. In any business a broker M&A advisor is going to, you know, take that four to six week period to really test the market and start providing feedback from their buyers are going to start submitting offers.
And those offers are just going to normally just be emails and, you know, outline, Hey, this is the amount that we think the business is worth just based on looking at, you know, financials and some basic information. And then from there, you know, if it seems like they're on the same page, they would submit a formal letter of intent.
And a letter of intent is kind of like when you're buying a home, it's like that initial contract, it's not legally binding. You can still get out of it. They can still get out of it. But at the end of the day, it's a starting point. It's it at least gets the conversation going and you can, at that point, sell to anyone else, they have kind of the first right of refusal.
From there you work into due diligence, which again, using the home analogy is kind of like a home inspection. It's really the buyer's opportunity to look under the hood. Assuming everything checks out, they're good to go with close.
Watson: Right on. And it sounds like if, you know, I'm applying the lens that I have from other types of businesses, the real kind of leverage point,the real challenge, is finding buyers. Everyone's looking for consumers, customers, clients, whatever the terminology is. And really it's the same thing. Here. You need people who are willing to open up a pocket book. And start spending some money on these things that you're facilitating the sale of.
And so can you talk a little bit about how you thought about building that pool of buyers and how that's- and maybe if I'm right or wrong about that really being kind of like the ratchet of, Hey, if we can say we have all these buyers, you know, on our list or, you know, waiting in the wings, you're going to get some seller volumes and people wanting to sell it out.
Dixon: Exactly. You're 100% right. Having 10 really great agencies to sell for us or 10 really great businesses for someone else in a different industry to sell. Yeah. It doesn't do any good if you don't have anyone to buy them. So absolutely for us, again, being hyper niche was the only way that we were able to really effectively advocate on behalf of our sellers and truly build up a buyer database.
So for us, it's just been, you know, we've been doing this for about four and a half years. It's really just outreach. We just did outbound outreach. We do it every day. Just building that buyer pool, Hey, if you're ever interested in acquiring, you know, we can either represent you as a buyer and/or you can just join our buyer database and be in the loop.
You would be shocked at how many people just are really interested in growth through acquisition. So over the years we've built a massive, you know, a massive buyer database. And it's really interesting because we're hyper niche. There's not that many buyers out there. So, you know, in the grand scheme of things, having a database of 15 or 20,000 really well qualified buyers in this space, we feel like it's a really good, you know, strong hold on the market.
Watson: Absolutely. Talk to me about how you came to realize this opportunity. Because there's multiple layers here of, you know, understanding the world of M&A, understanding the world of digital agencies, understanding even just like the kind of metrics of facilitating a marketplace like this since seeing the potential opportunity, like, can you paint a picture for people of how you would come to even realize that this was something?
Dixon: Yeah. So I started, after college I started a business, and I honestly want to say, I got a little lucky in that exit. I sold and, you know, I didn't come from any money. I don't have a business background. I have a college degree, but you know, in nothing, I, I don't feel like I learned a lot about anything that I'm doing today for my college degree.
And then. I met my husband. We started a business together. We worked really, really hard on that one, but did exit and got a little bit lucky on that one too. And then we started another business. This will be my third one. And we were in, it was more in the digital tech space and we were approached about an acquisition.
It was much larger than our other two. And, I looked everywhere, everywhere for an advocate. Someone who could be on my side, who could tell me, you know, how to structure deals. What's right. What's wrong. Am I selling myself short? What should I do? I couldn't find anyone who could help me. Like I said, at the beginning, I found a lot of business brokers who, you know, said they understood the digital or tech space, but then, you know, you asked about their past listings. Maybe they had sold one agency or one technology, but they also sold, you know, the taco restaurant down the street. And then I reached out to the big M and a folks that work predominantly in that space. And they're like, you're under $20 million. We're not even talking to you until you're three times that size.
So I went through that acquisition and it, it did end up working out well, but I have learned so much by just going through three of those on my own. Because of that last experience and really being in that, in-between what we call the middle market. It's really still very, you know, these are still small businesses when in the grand scheme of things, but we call it the mid-market. And there's just there wasn't anyone there.
So that's really why we founded this business. My husband and I are co founders and he handles really the buy side of things. I really handle the sell side of things. And we fill that void that we so desperately needed that advocate for when we were going through that acquisition of our own business.
Watson: What were the previous two businesses? The first one you made out of school and then the one you guys started first?
Dixon: Yeah. So the first one was a mechanical contracting company. So I had worked for an air conditioning company after college, just doing like outbound sales and marketing, nothing, you know, an entry level, like $35,000 a year desk job.
I got promoted a couple of times. And then I was traveling a lot on the road and my husband who's from a, you know, from Southern California, has seen kind of the power of entrepreneurship, like really, you know, pushing me off the ledge. Like you should start a company, you should start on me. So I did, and I did that one on my own.
And at that time, you know, we were living in South Carolina. I think our mortgage was like, 800 bucks a month. We lived in like a 4,000 square foot house. A different, you know, back then a different time. Andhe just kinda pushed me off the edge and, and I ended up selling that company 18 months later.
And that really spring-boarded me. Like, I don't think I could ever go back to working for someone else again. And then the second one was a real estate brokerage that actually was pretty tech heavy. And we grew that one to 30 agents and then sold it to the largest brokerage in that, in that market.
Watson: Wow. Okay. I mean, I, I love that too, because the listeners are going to almost be like nodding along. They know what's coming, but they're like stair-step approach to these businesses where you kind of learn like the basics. Like the first time you were just like, how do I even not go out of business in any way, shape or form. And then you kind of start to learn how to create more leverage for yourself and these opportunities. And I'm sure you've already alluded to you're partially kind of scratching your own itch that you couldn't find that partner for a sale. But there's also a degree to which you recognize how many of these businesses are getting sold and your model, which is taking a piece of that deal for facilitating it.
If you hit scale with that marketplace, and it becomes the de facto place that someone wants to go, if they need to sell. And like someone saying, like, you got to go to Barney, if that sells, that are going to occur, then that becomes this really kind of virtuous flywheel. One sec, it's going. Exactly.
Dixon: Totally. You know, something else we really discovered along the way was many people in my position are much older. There are people that sold a business in their fifties, maybe sixties, and then said, okay, I've done this retired, but I want to help. I want to consult other people that have done that.
And what we realized is we are people that aren't going to be doing the same thing for the rest of our life. We're going to do things. Our life is not this linear upward path until we're working in towards retirement. And I don't feel like we're alone in that. I feel like there's this whole generation of folks that really acknowledge the fact that you want to learn something and get really good at it.
And then maybe you want to do something a little bit, a little bit different. So for right now, yes, we want to become that de facto place where people go and they're looking to sell a business. And if you're an entrepreneur looking to buy or sell a business, that's really where we want to go. But the key word for us is entrepreneur.
And that mindset is totally different than someone who started a business 30 or 40 years ago and has run it for 40 years. And, you know, and is looking to exit. Those typically are not the folks that, that we work with.
Watson: And so another thing that I wanted to, to help you to discuss too, was a lot of these digital agencies have almost no tangible assets on their balance sheet.
So you were talking about that delineation between project based clients and clients that are on a retainer. And that's kind of a more familiar way of analyzing something. But when you're talking about the non-specialized broker, they're used to selling, Hey, well, we've got this building, we've got this machinery, we've got these kind of very tangible valuation elements that will inform our evaluation.
And then you've got someone who just has a track record of, you know, putting websites at the top of a Google search. And that's a big deal. Like this is a massive amount of value, but it's not even remotely close to the same type of levers that a standard person doing a valuation might do.
Dixon: Exactly the buyers in this particular space are super, super unique. They really, really, you have to understand that digital space before you can come into it. We have seen since COVID just a huge influx of buyers trying to get into the digital space, especially when we list any e-com anything. I listed an e-com development agency last night, and it's under contract last night.
People are going crazy about anything. Anything dealing with e-com, buyers are hopping in like crazy. And then we get down the road in due diligence and we do talk about deal structure and they just, they just are not comfortable in the digital space. They just don't understand the way that assets are classified.
To your point when we classify assets in the digital space, you look at obviously client base, you look at, you know, the way that your revenues coming in, you look at the way that your team is structured. A lot of these teams are structured with freelancers that are located all over the world. Oh God, anyone traditional, they're running for the Hills when you hear that.
So we have to classify everything as Goodwill, and again, it takes, it takes the right type of buyer who's used to operating in this space.
Watson: Yeah, that seems like the other big part of it. I see these different threads of people talking about like small businesses and you can use an SBA loan to help with the buying. You can do seller side financing where like you're saying, they get those payouts over different periods of time. And it's like this great way for someone who feels like a high paying corporate gig, but they don't want to be in that role. And when they want to transition to something where they have a little more autonomy, it's kind of pitched as this great avenue for that.
And there's a ton of people that do that and they find success and it's the right fit for them. But there also is that kind of skills gap as well. And I guess that'd be kind of another lever of evaluation, which is how much of this business is able to, I don't wanna say run autonomously, but run with like, Minimal management because it has processes and systems in place versus something where it's basically a big hustle where, you know, there's multimillion dollar businesses that are really, you know, held by a string by a single person and then they leave and that valuation or that value can evaporate.
Dixon: Yeah. So, you know, listen in the digital agency space, a lot of times it's still held on by a string. The businesses that aren't are SAS and technology. And that's why they're getting those massive valuations, because there is a point where the product is created and then you just sell it. In the digital agency space, even if it's a hundred percent recurring revenue, somebody who just does, you know, SEO on retainer for clients or something like that, there's still such a human element. And anyone listening, who's an entrepreneur, who's started a business, knows that they work their butts off to get to this point.
So what happens a lot of times is when buyers want to come into this space, there's this misconception, especially with digital, that it's going to be glamorous and easy and it's tech. And you can work from anywhere. And it's so fun because you can be in Mexico working on your laptop. And anyone who's started a business and who has run a business, and including those in the digital space knows that that's just not how owning a business is. It doesn't ever really run itself. So when we're looking at buyers, we really, for the most part outside of financial buyers, we really look at two types.
You've got your solo preneurs, who you just said, those folks leaving corporate America. They maybe want to try and get a massive loan and pay it off over 10 years and take over the role of kind of the founder without having to bootstrap it up, makes them feel more comfortable about leaving something steady. And then you have a strategic buyer who's an agency who wants to just use this new acquisition that's kind of a bolt on to their existing services. When we're looking at success rates one year, two years, three years down the road, those strategic buyers by far are outpacing or more successful than those solo preneurs who are coming in kind of thinking they're going to live this magical dream life of entrepreneurship.
Watson: And there's also in this family that we talked about, you know, having the pool of buyers for your own platform there's a similar thing where if it is bolt-on and they're almost able to value the thing differently because they know they already have, you know, client ABC and D all could use whatever bolt on service there is.
And now we're able to kind of facilitate that connection in addition to whatever assets were already there in place.
Dixon: Yeah, strategic buyers either come in one or the other way with valuations, they're either saying, Hey, we're just basically buying your portfolio, that's not worth that much to me. And it's an undervalue or they're valuing it, you know, with an upcharge and exactly what you said. They can upsell their existing clients. There's a lot of synergies there.
Again, let's say you have like a front page SEO company who just does, you know, on page SEO. And then you've got a backlink SEO company. They may be a perfect one, might be perfect to buy the other because there's a lot of synergies there.
If they were to buy a video production agency, not sure there's, there's really a whole lot that makes sense there.
Watson: Yeah. So tell me, tell me on the other side, the sellers, they come to you and you maybe like you help them understand the valuation. And it's not one of the characters that, you know, it's like, wow, I didn't know it was valued so much, but the opposite. They think it's inflated and you kind of have to bring them back to reality.
I would imagine that some folks say, 'for that price I can't make it happen, but I still want to figure out how to, how to unwind this thing, how to get out of it eventually.' What advice or what kind of metrics will you point them towards to help them maybe better prepare the business to be sold?
Like, you know, some people they'll put a fresh coat of paint on their house and they'll, you know, find the other kind of superficial things that can be amended, or they'll fix the roof or fix the basement or the thing that's like actually, you know, sending buyers in and then immediately back out.
Dixon: Yeah. That is such a good question. To your point, that's most of the time when people say their business is worth more.
Watson: Yeah. Everyone has the inflated self, right?
Dixon: The same thing with your house. So that's a great question. I'm so happy you asked that. So a couple of things that buyers are always looking for: staff, people in place leadership team. So depending on your size, obviously this is gonna, this is gonna fluctuate dramatically, but having us. Staff in place that can take over the business once you cash out is really, really advantageous to getting top dollar.
From a buyer standpoint, they know that once they pay you, even if it's 20%, 30% cash, there's a chance that you may not be as engaged. So having a really good leadership team with processes in place really helps. When you're looking at staffing your business and where to staff.
Buyers look most commonly at business development, that process, how is business development running? Are leads coming in consistently? Are you able to capitalize on those leads and are those people in place doers? Again, in our space, that's coders and writers. That's easily outsourced. That's easy to add on.
It's not easy to systemize business development processes. And that we think is kind of universal across all businesses. So I would say one is leadership team and two is making sure that you have the business development staff. Three isshoring up your revenue. So in our space project-based versus retainer, obviously retainer's training and a much, much higher, higher rate.
What we do when we help branding agencies or web development agencies that are almost all project-based come to us and they're just not quite happy with the valuation, we suggest that they shift their clients to a retainer-based contract. Even if that just means they're getting paid over the course of 12 or 18 months versus all upfront, and showcase that you can implement a retainer based model.
And then come back to us in 12 or 18 months. So working on your revenue stream, if you have contracts, making sure that people are, they're actually legal and working, that that's really important to buyers. They're going to dive into that. And then I would say, lastly is making sure that you are happy and you know you're happy with the exit number that you have in mind.
So if you've got an exit number in mind, working towards that and then selling. People sometimes say, 'I'm making good money, I don't think I'm ever going to exit.' And then they wait until the business has bottomed out. Unfortunately we're getting a lot of things right now. Not because of their own doing, but because of COVID.
So selling when you feel like, 'okay, I I've met my number and I'm going to be happy with that. I think it's time.' I think it's time to do that.
Watson: Makes sense. And I would imagine like, I'm just even realizing now, I hadn't thought about it in these terms, but there's so many analogies to the selling of a home and the selling of a business. Like you were saying, like the employment of certain characters or these other kind of like, they're just be like little warts.
Like the same way I wouldn't show my house if like the bed wasn't done. And like I had my shoes left out everywhere. Like you want to kind of just tidy up everything, even if that's not necessarily how you've been living in the space, but to create that appearance for the person that is basically getting their first impression.
Dixon: Exactly. And you know, the more that you can systemize and document the better. We don't necessarily say to document because buyers are looking for this huge manual like we kind of read about in books, like the E-Myth or things like that. That's not as tried and true, I don't think any more today. But with that being said, systemizing and documenting really helps you dive into your own processes and find the holes in the words, because buyers are gonna find those during due diligence.
So it helps to acknowledge them and then fix them pre going to market.
Watson: Gotcha. Cool. Can you talk a little bit more about the due diligence process? How that actually works? Like I'm sure there's NDAs signed, but what else goes into that?
Dixon: So before we ever bring a buyer to a seller, and really, I think this is pretty standard in the M&A world, NDAs should obviously always be signed.
We take it a step further and we have, you know, LinkedIn verification. We verify your business address. If you don't have a business address, we verify your personal address before we give any information, because we are dealing with, you know, confidential, confidential things. So obviously the NDA assigned, the due diligence process typically involves tax returns, bank statements, credit card statements, and all of those things compared to your financial documents that you've already provided them.
So they're going to compare your bank statements and your credit card statements to your P and L, balance sheet and cashflow reports. All of those things are pretty standard. From there they typically want to dive into customer lists. It's really important that even doing the due diligence process, it doesn't matter what industry you're in, you never give buyers your customer list.
So if they say we want to see your customer list and how much each customer has spent over the last year, two years, three years, five years. That's great. Export it from QuickBooks, but then change the name of your customer to the industry that they work with them. Or, you know, if you're a different type of business, maybe it would be like customer 1, customer 2, customer 3.
That's super, super important. We have seen some things go sideways because folks provided a full customer list there. So they're going to want to know customer lists. They're going to dive into other things in our industry, like churn rate. For some buyers, things like geographic location are going to matter.
If you have like a lease or any sort of legal documents, contracts that you're in, they're going to want to dive into all of those and make sure that it's nothing that they're going to be binding. Any debt that you have, any personal debt that you run through the business or debt that the business has, they're going to want to look at that. And most of the time they're going to want it paid off out of the money at close. So it depends on the, you know, the transaction, but those are kind of the generics.
Watson: I don't know if I have any other questions, it's been incredibly educational. I'm sure that you've kind of clarified it and help people understand the space a lot more.
Anything else that you're hoping to share about Barney specifically, or this space of selling these types of firms that you were hoping to share?
Dixon: You know, the only thing I do want to share with your listeners is that it's, you know, one of the things we're trying to do is to downplay the stigma of you know, doing multiple things throughout your life. And our generation, you know, really is the first generation to embrace that. But we still see some hesitation with people selling their agencies and, and fighting that kind of internal demon of, 'Oh God, I thought I was going to do this forever. I don't really like it anymore. I don't really want to do it, but I should.'
You know what we're trying to tell people is this process isn't that scary, selling is not bad. It's a really fun process. If you have an advocate on your side throughout the process, and it's great to end up with, you know, enough cash to be able to keep learning and doing something else in your life.
So big part of our mission is trying to, you know, tell people that, that linear path just, it doesn't have to be for everyone. And that's okay.
Watson: Right on. Well, if people want to learn more about Barney, check you guys out, check out some of the businesses that are currently for sale and it's changed.
Like even literally, since we booked this interview, I see new ones up there. So I know you guys are making moves. Where can we direct people who want to learn more?
Dixon: Yeah. Our website, we are barney.com spelled just like the dinosaur.
Watson: Right on. You guys are going to have a tough go of eventually, you know, owning that name of that IP.
Dixon: Hey, we've made offers on it. I think it's actually owned by Mattel.
Watson: That'll be tough. That won't be an easy one.
Dixon: That's not going to happen. That's okay. We're fine with just, "We are Barney."
Watson: Well, that's all going to be linked at the show notes. I'm also going to link some of the socials and, and Amanda's LinkedIn profile. It's in the podcast notes where people are by listening to this on their phone, or at goingdeepwithaaron.com/podcast for this and every episode of the show.
Amanda, before we let you go I want to give you the mic one final time to issue an actionable personal challenge for the audience.
Dixon: Okay. So this is not in any way related to anything that we've talked about, but I think it's important given our world today.
So my challenge to your listeners is to make a stranger smile Saturday and Sunday. This weekend go out and make a stranger happier than they were before you interacted with them.
Watson: I love that challenge. That is so good.
Dixon: Good. Thank you. I thought about it actually last night it woke me up like, 'Oh shit, I don't have that figured out. I got to think through this one.'
Watson: I mean, so there's multiple layers to this. Cause if people are wearing masks, you're going to have to like, get the visual comfort confirmation. Maybe they can like smile with their eyes. And there is the degree to which like you can't, you know, they used to be like, I used to be like the high five to like a stranger type of guy.
I'm not going for that anymore. But there's other ways to make people smile, you know, basic common courtesies, you know, other things like that.
Dixon: Yeah, that's my favorite right now, because of all the things you just said, it's hard. It's just at the grocery store, just like the person in line behind me or in front of me and or the checkout person just being like extra nice.
Because you just never know what people are going through right now. And I just think it's important for everybody to just stay as positive as we can.
Watson: Totally. And we had like, kind of a weird phase where I would say the first couple of weeks, you know, you're at the grocery store, you're anywhere, every stranger was just kind of like check it in with each other. Like they were giving each other smiles cause everyone was so stressed out. And then we like crossed a threshold, I don't know if it was like late May sometime, I think it was sometime in May. And then everyone just kinda like settled back in and you stopped getting like the thumbs up from like the stranger across the street. So let's bring that back.
Dixon: I love it. Let's bring back the thumbs up. I love it.
Watson: Awesome. Amanda, this was great. Thank you so much. I learned a ton. I know the audience did well.
Dixon: I really appreciate you coming on. Awesome. Thanks, Aaron. Talk to you soon.
Watson: We just went deep with Amanda Dixon. Hope everyone out there has a fantastic day.

3 Comments

Going Deep with Aaron Watson

450 Save the Environment AND Healthier Plants w/ Better Soil (Brian Scott, PittMoss)

Connect with Brian Scott

449 Setting Safety Standards for Driverless Vehicles w/ Michael Wagner, CEO of Edge Case Research

Connect with Michael Wagner

448 How to Sell a Midsize Digital Agency w/ Amanda Dixon (Barney)

Connect with Amanda Dixon

447 Climbing the Entrepreneurial Ladder & Equity Crowdfunding w/ Dawn Dickson (PopCom)

Connect with Dawn Dickson

Show Notes

Archives

Subscribe

Details

LOGISTICS