Navigating the B2B Software Investment Landscape

@ShaneCheek is the CEO of @ContinuaSoftware which is a private company that specialises in acquiring, operating and growing B2B software companies.

Shane is an experienced founder, builder, business seller and investor. His  expertise and practical insights make this episode a must-listen for #businessowners who are potential sellers looking to understand the best strategies to sell their business, especially when they are selling to an industry buyer. In this episode we cover;

• how to best manage the process of selling your business to an industry buyer
• the fast growing trend of #searchfund buyers making direct approaches to business owners
• how to best prepare for a direct approach 
• preparing for sale negotiations
• understanding the value of your company
• the importance of building relationships with potential acquirers
• how to effectively qualify incoming inquiries from a search fund or industry buyer 
• navigating negotiations with #privateequity buyers like a pro
• preparing for a fulfilling life after selling
• the crucial role of trusted advisors in the selling process

"People are messy, businesses are messy, people are imperfect, and businesses are imperfect as well. Acknowledging that and then approaching any potential transaction or sale with that as a realization makes things smoother and hopefully more enjoyable and fun along the way as well" - Shane Cheek

Visit @continuasoftware.com to learn more about Continua Software and their focus on acquiring businesses in the software and technology space.

Contact Shane at Shane@continuasoftware.com to connect with him regarding business opportunities or discussions related to small businesses in the software and technology sector.

Timestamped summary of this episode:

00:00:06 - Introduction to Small Business Banter podcast 

Michael Kerr introduces the Small Business Banter podcast, highlighting its focus on business owners and their advisors at various stages of business ownership.

00:02:34 - Continua Software and Outreach Model 

Shane Cheek discusses Continua Software's focus on acquiring B2B software companies and their outreach model to directly connect with business owners. He emphasizes the importance of building relationships and understanding the people behind the businesses.

00:10:14 - Reasons for Considering an Exit 

Shane highlights the reasons why business owners consider selling their businesses, including reaching a plateau, feeling tired, and personal factors such as upcoming travel or personal fulfillment.

00:14:30 - Importance of People in Acquisition 

Shane emphasizes the significance of prioritizing people in business acquisitions, focusing on aligning values and building rapport with business owners. He discusses the importance of understanding owner's goals beyond financial aspects.

00:17:22 - Flexible Operating Model and Partnership 

Shane explains Continua Software's flexible approach to business acquisition, accommodating varying levels of owner involvement post-acquisition. He emphasizes the importance of aligning owner's strengths with the business's needs for mutual success.

00:20:46 - Challenges in Business Transition 

Shane discusses the tensions and challenges in making new business decisions, especially for sellers who have built successful businesses.

00:23:39 - Key Elements of a Good Business Opportunity 

Shane highlights the importance of consistency, predictability, and clarity of roles and responsibilities in evaluating a business opportunity.

00:27:28 - Importance of Building Relationships 

Shane emphasizes the importance of building a relationship with the owner of the business, comparing it to dating and marriage, and the role of a good advisor in the process.

00:31:48 - The Role of an Advisor in Selling a Business 

Shane discusses the significance of having an advisor to guide the seller in the sale process, and the impact of having an advisor on the certainty of closing the deal.

00:39:32 - Managing Inquiries and Interest 

Shane addresses the increasing inquiries to owners from various sources, emphasizing the need for credibility and genuine interest in potential buyers, and the importance of managing the pipeline effectively.

00:41:47 - Qualifying Inbound Inquiries 

The owner needs to quickly validate the quality and intentions of inbound inquiries. Key questions to ask: Why do you want to buy my business? What is your capital source? What are your values and alignment?

00:44:28 - Evaluating Potential Buyers 

It's important to assess the track record and intentions of potential buyers. Owners should approach incoming inquiries as they would a long-term sales prospect or a potential business partner.

00:47:48 - Initial Steps in the Sale Process 

After an initial conversation, gathering historical financials, customer lists, and staff lists is crucial. Advisors can help prepare the business for sale by cleaning up and organizing key information.

00:55:53 - Reflecting on Business Performance 

Owners should reflect annually on their business performance, similar to the process of preparing for an exit. Making 1% improvements in the business can have a significant impact over time.

01:01:34 - Understanding the Buyer 

Understanding the motivations and playbook of potential buyers, such as private equity firms, is crucial in the sale process. Each buyer may have a different approach and set of expectations.

01:02:14 - Private Equity Playbook 

Shane explains the private equity playbook, including initial approach, attractive evaluation, period of exclusivity, and strict due diligence process.

01:03:24 - Understanding the Buyer 

Shane emphasizes the importance of understanding the type of buyer and being prepared for potential retrading, annoyance, and invasive due diligence process.

01:04:50 - Post-Sale Considerations 

The discussion focuses on the emotional impact of selling a business, filling the void after the sale, and the importance of planning for life after the sale.

01:07:18 - Setting a Walk-Away Number 

Shane advises on setting a walk-away number and emphasizes the significance of understanding the cash flow implications of the headline offer.

01:13:03 - Embracing Imperfections 

Shane discusses the importance of acknowledging the imperfections in businesses and how being upfront about them can lead to smoother transactions and problem-solving approaches.

Thanks for listening.  Visit the Owner To Owner Podcast website to subscribe, listen back, or check out any resources or information mentioned on the show.

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Reach out to Michael Kerr via the website if you need personal assistance or advice for your small business.

michael.kerr@kerrcapital.com.au

www.ownertoownerpodcast.com.au