Broker Roundtable: Deal Difficulties Now vs. 2021

Brad Wayland is a Business Advisor at Quiet Light, a brokerage firm that helps online business owners execute successful exits. As a thriving entrepreneur, he has almost 20 years of experience marketing and operating online businesses.

Starting in 2003, Brad helped create an online custom t-shirt company that became a multimillion-dollar enterprise. Later, he started building other e-commerce businesses and investing in existing companies. Over the last 10 years, Brad has constructed, purchased, or sold more than 30 web properties.

Chris Wozniak is a Business Advisor with Quiet Light and the Founder of The George Ryan Group, LLC. He began his career as the Founder, Business Broker, and Mergers and Acquisitions Intermediary of Lesdon & Associates Business Brokers LLC.

Through his work representing hundreds of sellers and being a member of the International Business Brokers Association, Chris has earned accreditations of Merger & Acquisition Master Intermediary and Certified Business Intermediary. He also earned the Board Certified Broker designation as a member of the Texas Associations of Business Brokers, the Broker-Dealer license issued by the Texas State Securities Board, and the Real Estate Broker license issued by the Texas Real Estate Commission.

Here’s a glimpse of what you’ll learn:

• [03:49] Brad Wayland and Chris Wozniak compare the behavior of business buyers between 2021 and 2023
• [12:05] How aggregator deals have changed from 2021 to 2023
• [17:42] What e-commerce businesses generate the most profit?
• [20:14] How do you know when a buyer is interested in a listing?
• [26:12] How to recognize a reasonable multiple for a business in an M&A process
• [31:21] How the lending market for business buyers has changed from 2021 to 2023
• [37:47] The benefits of rolling equity with examples
• [45:29] What Pat Yates, Chris, and Brad are working on

In this episode…

Amidst the evolving business world, what do entrepreneurs need to know to keep up and stay ahead?

The pandemic drastically changed business as usual, especially in the M&A space. Brad Wayland and Chris Wozniak discuss the changes to be mindful of in buyer behavior, multiples, lending, and interest rates in e-commerce, SaaS businesses, and content sites. What are their recommendations for maneuvering and flourishing amid these shifts?

In this episode of the Quiet Light Podcast, Joe Valley and Pat Yates sit down with Brad Wayland and Chris Wozniak, Business Advisors with Quiet Light, to discuss the evolution of business and the effects of the changes since 2021. They share their insights and recommendation in many areas, including what e-commerce businesses generate the most profit, what multiple to look for in an M&A, and how the lending market has altered.

Resources mentioned in this episode:

• Brad Wayland on LinkedIn
• Brad Wayland’s Email: [email protected]
• Chris Wozniak on LinkedIn
• Chris Wozniak’s Email: [email protected]
• Quiet Light
• Partners at Quiet Light
• Quiet Light on YouTube
• Joe Valley
• Pat Yates on LinkedIn
• Pat Yates’ Email: [email protected]
• Mark Daoust
• Quiet Light Podcast email: [email protected]
• The EXITpreneur’s Playbook: How to Sell Your Online Business for Top Dollar by Reverse Engineering Your Pathway to Success by Joe Valley
• Steve Chou on LinkedIn
• The Family-First Entrepreneur: How to Achieve Financial Freedom Without Sacrificing What Matters Most by Steve Chou
• “How to Balance Two 7-Figure Businesses and Still Be a Family” with Steve Chou on Quiet Light Podacast 

Sponsor for this episode

This episode brought to you by Quiet Light, a brokerage firm that wants to help you successfully sell your online business.

There is no wrong reason for selling your business. However, there is a right time and a right way. The team of leading entrepreneurs at Quiet Light wants to help you discover the right time and strategy for selling your business. They provide trustworthy advice, effective strategies, and honest valuations. So, your Quiet Light advisors aren’t your everyday brokers — they’re your partner and friend through every phase of the exit planning process.

If you’re new to the prospect of buying and selling, Quiet Light is here to support you. Their plethora of top-notch resources will provide everything you need to know about when and how to buy or sell an online business. Quiet Light offers high-quality videos, articles, podcasts, and guides to help you make the best decision for your online business.

Not sure what your business is really worth? No worries. Quiet Light offers a free valuation and marketplace-ready assessment on its website. That’s right—this quick, easy, and free valuation has no strings attached. Knowing the true value of your business has never been easier!

What are you waiting for? Quiet Light offers the best experience, strategies, and advice to make your exit successful. To learn more, go to quietlight.com, email [email protected], or call 800.746.5034 today.

Episode Transcript

Intro  0:07

Hi folks. It’s the Quiet Light Podcast where we share relentlessly honest insights, actionable tips, and entrepreneurial stories that will help founders identify and reach their goals.

Joe Valley  0:32

Hey folks, Joe Valley here with my co-host, Pat Yates. Welcome back to another episode of the Quiet Light Podcast. Pat, how you doing today?

Pat Yates  0:41

Doing great, Joe, how are you?

Joe Valley  0:43

Doing well, man, this is an interesting podcast that we just did. This is our first broker roundtable. We’re gonna try to do this once a month or so. And we’ve got two of the most epic brokers at Quiet Light, Brad Wayland and Chris Wozniak, talking about all sorts of things, right? We’re talking about buyer behavior now versus 21, seller behavior, multiples, interest rates, all sorts of things. A lot of history, you pipe them a little bit there as well, right?

Pat Yates  1:11

Yeah, definitely. I mean, I had some stuff to add to it, the opportunity to listen to laws and Brad talks is really incredible. So much experience, you guys have closed so many big deals. And it’s hard to imagine being able to talk to two guys that have close more eight-figure plus deals, it’s incredible. They have their pulse on the market. And they really understand I learned stuff from them every day. If people we keep repeating it, we have some of the best advisors in the world to work at quiet like he got an MBA every time you talk to him. It’s just amazing

Joe Valley  1:39

And the key thing we do always go back to the data, because sometimes it feels like it’s taking longer to close deals. It’s not 54 days from LOI to close in the last three months versus the first three months of 2021, which was 58. Right? That feeling is strange. Like it feels like multiples are down. They’re actually up a little bit in certain segments. FBA businesses that are trending down, hey, surprise, those multiples are down. But they’re trending down. And it’s a very small niche. So lots of good information. These two are full of wisdom and experience. They can both be rich [email protected] [email protected]. And of course you [email protected]. At the end of the podcast, folks, we talk about what they’re working on. And if any of what they’re working on sounds of interest to you just reach out to them directly. All right, here we go. Brad And Chris, how are you guys?

Pat Yates  2:39

That didn’t know. That’s what you meant. I thought you were talking about the word intro. Good. Anyway,

Joe Valley  2:43

So Pat’s asking me folks how to do the intro. And that’s it. I’m welcoming Chris and Brad to the podcast, Pat is Co-hosting. And this is a broker roundtable where we’re going to talk about all sorts of things, mostly comparing 23 year to date to how 21 was and what it’s like to get lending and multiples and things of this nature. But first and foremost, Woz you’re in Texas, right? Yep. Dallas, Texas. And Brad, you’re in, you’re in. You used to tell me you were in Nashville. But you’re actually in Bowling Green, Kentucky.

Brad Wayland  3:15

I said North of Nashville.

Joe Valley  3:17

Okay, north of Nashville, which technically is correct.

Brad Wayland  3:22

About 50 miles north of Nashville. Good, good. Good.

Pat Yates  3:25

All right, great city.

Joe Valley  3:26

Well, between the three of you guys, you probably produce the majority of Quiet Light’s, revenue and closed transactions in the last 12 months. So even though Pat, you’re co-hosting with me, I want you to put your broker hat on here too. Okay. Yeah. Fair enough. All right, Brad, why don’t you kick it off what’s going on this year compared to last year and 2021? A record year?

Brad Wayland  3:49

Yeah, sounds good. It has been an interesting, it’s funny, we didn’t put the year 2022 in there, which is the year in between. And it’s interesting when you’re brokering deals. It’s painful when you’re in transition. And so I really think as we look at 2022, I would call 2022, for me, a big year of transition in terms of things changing, but I think we’ll want to talk a little bit about those two ends 2023 versus 2021. I don’t know if everybody else kind of sees it this way. But I really think back to 2021 is like peak euphoria. For Buyers, in terms of what I’ve seen in you know, almost 20 years of kind of being in this industry. And being in the buying and selling and brokering deals space. In 2021, money seem to be flowing more freely than it ever had in my entire lifetime. Lending was very loose interest rates were zero or close to it. And so what we saw on that was just behavior that I actually at the time thought, man, you got to really appreciate these bull runs. If this could last for like five years, that would be amazing. But it seems like the euphoria ends a lot quicker than you want it to. And so, from my personal experience of 2021, was a year that I wasn’t even working as heavily as I had been, as I had closed a lot of deals in 2020, and really wanted to take some time off. But I had a bunch of carry overs, and they were some of the easiest closings I ever had, and really just did not have trouble finding buyers for just about anything. And I think that had to do with a lot of factors that had to do with a lot of the things that were going on with COVID. In the after effects, the COVID, a lot of loose monetary policy, they injected a lot of liquidity into the system. And so as we look at 2021, I think that we were seeing that when there’s a lot of liquidity in the system that risk assets and assets in general start to go up in value. And people are willing to be pretty aggressive in terms of buying them. On the flip side, for me and 2023. After going through kind of coming down and 22 what I’m seeing now is kind of a flight to quality. I feel like definitely the monetary policy is tighter. And that has affected how deals are closing the speed of which they close, we can dig into those things more on this, I’m sure, but I’m definitely seeing a much more measured buyer that’s wanting to kind of like consider the cost of what they’re going to do. But we are seeing buying activity. And I think that we’ve seen a really nice positive uptick. I’ve seen it since about mid-December with my deals. And so in 2023, it’s starting to look more like business as usual to me. And I would call 2021 more of an outlier. 2023 looks more like what I was used to in almost six years of Quiet Light doing these deals. So that’s kind of how I would kick it off is like a general comparison. Chris, what do you think about that?

Chris Wozniak  7:04

Yeah, I agree. I think you almost have to talk about Amazon a little bit FBA, because I think, clearly, with the aggregators and all that committed capital, I think it created kind of a clearly like a bumble. And so 2022 from that standpoint, I think was down. I know me personally, anecdotally, I think I did 10 or 11 deals and 2022. And my 22 was better than my 21 and 21 was great. And out of my deals, I think I did two FBA deals. And so I think the market is still really strong for you know, whether it be straight up e-commerce, SaaS businesses are always sought after content sites. And still, Amazon deals are getting done. When I look at like multiples, I haven’t seen a too much of a downward trend and multiples, if any, at all. And that’s, that’s hard to really say, because it’s sort of like on a case by case basis, if the business is trending down, because we’re in a kind of historically inflationary period and interest rates are high. And there’s businesses out there where the trends are down. I mean, it’s kind of expected that those particular businesses, the multiples are going to reflect that kind of downward trend. But on the flip side of that coin, where you find businesses that are thriving, where they’re having either they’re kind of normalized and stable or even growing, you can almost make the case that you can almost showcase those businesses and kind of make maintain a multiple that’s similar to 2022, or 21. Or maybe you can give it a little bit of a premium, just because those businesses that are experiencing positive trends are competing with businesses that in quite a few of them that have are having negative trends. And so when you have a pool of buyers, I think they’re gonna gravitate toward potentially the higher training businesses, even if they have to pay a slightly higher multiple for those. So I think that’s what I’ve seen, but it’s really hard to tell, because, again, it really boils down to the business that you’re launching, and all the metrics that go into it.

Joe Valley  9:27

I pulled a whole bunch of data from the dashboard before the call here, guys. I want to point out, we all know that 2021 was a frenzy and in all of M&A not just the digital world because of the aggregators. Yes, in 21 in the first quarter, we closed seven deals with aggregators, we had 26 deals in the first quarter seven of them with a word with aggregators, big, big percentage, year to date, we’ve done 24 deals, and just one, two aggregators you want to hear a really funny number is that in 2021, in the first quarter, we did 34 million in closed transactions. In 2023 we’ve done 55 million in total, close transactions. Now, what happens as Quiet Light grows, what happens our deal size grow right? In quarter, one of 2023, David Newell close one for 26 million. So that one alone is what puts us 20 million ahead of q1 2021. I personally know that I came out of 2021 just wiped out and exhausted, it was a euphoric time, but trying to keep up with 10 or 15 offers per listing, even though as I say that one more stat is I think the offers per listing is actually down slightly, but as you pointed out, Woz the multiple hasn’t changed all that much. Now, it does on deals that are trending down, there’s no question about it. But the mean multiple in 2021, first quarter was 3.04. That’s not including inventory, the largest was 5.7. With inventory, it was 3.3. Year to date, or in first quarter. So I pulled comparable stats, it’s 3.1. So 3.0, for two years ago, compared to 3.1. now,. Now, again, though, everything has to be taken with a grain of salt, because our deal size is a little bit bigger. And that $26 million deal may bring things up a little bit in terms of the numbers. But it’s feels so hard. As you pointed out, Brad, sometimes you’re working on financing for a deal. And it feels so much more challenging today, because it was free money. It felt like at zero interest rate back in 21. And I think that feeling is absolutely accurate, because we’ve all seen deals go sideways or take a little longer to close because of the financing component that may come along with it.

Brad Wayland  12:05

That’s an interesting point that you’re making, because the data actually kind of shocks me, which actually, I will say, I don’t know what the stats are Quite Light on aggregator deals, but I think I’ve closed 13 or 14 of them.

Joe Valley  12:20

Oh, you’ve closed the most Yeah.

Brad Wayland  12:22

So May my 2022 felt so rough because I had grown very accustomed to the aggregator buying my deals. Now I will tell you, I feel like this is anecdotal as well for one Woz was subtly letting us all know that he’s outperforming everybody around here.

Chris Wozniak  12:44

Volume to the number of deals Brett?

Joe Valley  12:47

Was that subtle was that subtle? I think we all got it.

Brad Wayland  12:51

Yeah. Hey, it wasn’t subtle. No one Woz doing great. Everybody’s got him, he’s in my sights. So I’ll just say that.

Joe Valley  12:59

That’s what about me now. I’m just a distant memory. It’s Wozniak, now. I like it.

Brad Wayland  13:04

Yeah. It’s gotten to the point where he doesn’t have to do deals anymore. He’s actually where my sights are.

Pat Yates  13:10

We don’t have to do deals when you’re Cooperstown. That’s kind of what you said.

Brad Wayland  13:14

That’s right. That’s right. If you’re in the Hall of Fame, it’s just kind of like whatever, man. But no, that’s interesting. You guys say that? Because I’ll give you an example. And I won’t be too specific. But I have represented a lot of Amazon FBA sellers did sell many to aggregators. And I felt like I kind of accidentally caught an early wave on the aggregators, couple of the big ones. I was involved in either first or second deals. And I felt like that gave me some exposure to some higher ups that I even got to a point where when people on their teams would say, no, I’d go directly to the CEOs and founders and say, hey, man, this seems like a deal you guys would want and then they’d scoop up and buy it anyway, which I’m sure their team really loved, that I was out there doing that. But one point I’ll make about it. So I’ve got a deal that’s in the closing process right now. And really great Amazon FBA business high margins, pretty large deal in terms of our average size, and got it under LOI with aggregators in the fall and really started to feel the pain from those aggregators, due to internal problems with those companies, a lot of shake up in teams, a lot of people being let go, or we talked about fall of 21 or 22. We’re talking to fall of 22. Actually, okay. They backed out in a couple of times. And this is a business that’s growing like a rocket ship. But one thing it’s such a it’s five years old, but one thing is interesting there is when we were going to first listed in 2020. Before COVID hidden we put a pause on it when COVID hit. We were looking at a multiple around Forex, and it’s a pretty sizable business. We ended up coming in on this and we’re going to be at like, right around three all in on a business with around 2 million in EBITA, and really high margins. So it feels like things have pulled back to me a lot because I’ve had trouble with some of the Amazon FBAs specifically. So I wonder if inside this whole like euphoria, non-euphoria kind of situation that we’re in, if Amazon FBA has pulled back more than others, I don’t, I don’t really have much real data. But I just kind of wonder that, anecdotally, and I will say, content, for me has continued to do extremely well. No matter when I get it, no matter where I get it. And even when I do like distressed content, things that have a lot of problems on it, I still get lots of calls, and get things set up where I’m able to still find buyer, for those now that on the content, it’s always interesting to me, because I don’t have the 15 offers ever with the content. But I always have a steady like 2 3 4 or five people that are like super interested that’ll take them.

Joe Valley  16:02

That’s because people will understand what a physical product is, versus and how to make money just sell it versus how do you make Galleon content, but I’m with you, I love content too. It’s just the margins are huge. There’s danger, if you got one content business, it’s better to have five or six in case there’s an algorithm update. But for sure.

Pat Yates  16:21

Brad were saying just to kind of elaborate a little more, I kind of saw the same thing. I had one that got 19 offers, which just is insane. It just ran so fast. And then so many businesses that I saw when they went out they were going down really quickly. If nothing else, you had to say it’s 5 6 7 meetings quickly because people are trying to beat everyone to market but if you look at it and reflection, there were a couple of things that really sort of buckled aggregators bought quickly had a little problem integrating and they kept buying, buying, buying versus going to integration. I think that sort of buckled some of them a little bit, at least on a pause, which could have been a great thing. Some of the good things that could come out of this is that they watched their books a little close. When you know interest rates got, you know, in a position where they started to go bad because there’s always ways you can save somebody I feel like coming out of this in late 2324 is going to be really strong because I think there’s a lot of sellers out there that probably went through some difficult years with the shipping issues and whatever you have inflation that may be pausing because they’re SDE could have gone down or their trends are a negative because we did a good job reinforcing and 21 hey, you need to always be on an uptrend be on an uptrend be on an uptrend, that people that are smoother down now are probably waiting a little bit of time. So I think it’ll be a boom of a lot of people. And I think the market will recover. I think it’s getting better. I’m just not back to the levels. It wasn’t 21 Because those were kind of crazy. The money was just too easy. And keeping buying they you thought it could never go bad and clearly some people misjudged whether that was a possibility or not.

Chris Wozniak  17:46

Right. Can I ask you a question kind of around that? Like? Do you think that they’re like, when you’re read you mentioned getting a ton of buyer volume? Is that for Amazon FBA businesses are general because then you said kind of content, you don’t get that type of volume, because what I’ve experienced, it’s so deal specific, and I just haven’t had a lot of big deals, honestly. So I can just go off of the ones I have, but like I just launched a tiny SaaS business and we got I got really good response on it. Really good interest, really good buyer intent that I launched a it’s kind of a content site. It’s more like a newsletter, and the interest has been very mediocre. And it’s I feel like it’s priced very well, it’s a not seven-figure EBITA high six figure and it’s at a three, flat multiple. And there’s some things about it that, you know, are a little bit different, which may be part of it. But like, I’m interested to hear from you guys. If you feel like it’s the type of online business has some bearing on the type of volume and kind of interest you get on those launches.

Joe Valley  18:57

100%. I mean, you could launch two businesses that are doing equal amount and revenue and profit, and just get 10 times the response on one because it’s maybe even like the cool factor to it, or the amount of workload or the age or history of things of that nature. I do want to touch on something. Because Brad, you said Gosh, it feels like multiples are lower now. I wonder if it’s just Amazon specific and things of that nature. I’m a little shocked and I want you guys pull this data from the deal dashboard, but I had to run it three times when you guys were talking. What I did was I just went specific to Amazon, ecommerce, Amazon. So a combination of Amazon and just Amazon and their own website. The average multiple for those businesses in 2021 q1 3.5 multiple for Amazon and Amazon e-commerce combined. q1 2023. What do you think it is? Higher or lower? Let’s just go that way.

Chris Wozniak  20:02

I would have thought lower. I would still say lower. I’d say pretty close, maybe shockingly lower 2.14.

Brad Wayland  20:14

That’s my experience with that, personally, that there’s been now it started make sense to me that was because, you know, all I do is look at what was his closing, and then I’m jealous. But I don’t look at the actual deals. So what you just cited Joe, is kind of what I feel like I’ve lived through over the last kind of year and a half, because I’ve indexed pretty heavily on Amazon and E commerce sellers. I do get a fair bit of content. And kind of back to your question before, Chris. I mean, for me content since the day I started, never gets the inquiries, not even close to what I see on e-commerce. But the buyers are very serious. Yeah. And I don’t know how I would like measure it exactly. But I will tell you, when a content when someone comes along and says, Hey, I’m in content, I’m interested in this, like, I think to myself, This guy could be the buyer. I see that with e-commerce all day long. And I’m like, Who knows who’s gonna be the buyer, but I’ll see one person come through. And I’m like, you know, I had a deal recently, another I’ve done quite a few in the finance space in the last several years, I got a deal that I listed for a previous seller three weeks ago, like a $500,000 finance deal, and had two calls, two calls on it from two really good buyers. I knew they both were like potential to buy it, wasn’t super thrilled with the response. Otherwise, you know, it wasn’t like I had tons of people, you know, coming to the table. And then the other one guy I knew from dealing with him before that he was very methodical about how he moved through the process that he was not a guy that like, rush to go to LOI. So I gave him a couple days, I sent him a note, hey, just wanted to check. And he’s like, yeah, I’m still thinking about it comes back three days later, he’s like, Hey, I am still thinking about it. I’m thinking about a full price cash offer. They said I need a couple days, you know, then I come back, we negotiate a tiny bit on it. And he said, hey, we’ll get this done. I’ll get it done by May 15. And they texted me two days ago and said, hey, we’ve been working together on this. And sorry, we accidentally left you out of the loop on it, we’re ready to close right now. And so they’re in the closing process. That is a very typical situation for me with content.

Joe Valley  22:24

We’re recording, we’re recording April 26, folks, so that’s like, almost three weeks faster.

Brad Wayland  22:29

So and that is something I’ve seen over and over again, contents, the only area where I’ve had one week closings, but two deals that closed seven days on content. So I feel like content is one of those things, it’s like, the supply of good content is much lower than the supply of good e-commerce. And maybe the buyer pool is smaller too. But when people see what they want there, they move fast. Because like Joe said, the margins are really high. And if you know that industry can be a really lucrative kind of space to hang out. But back to what Joe said, that decline that you just cited, I feel like I’ve lived through that, like then that’s been hard. So just if you’re listening to the pod, and you’re thinking about this, like, yeah, 3.5 down to 2.14, is what you said, yeah. So that drop just sounds like wow, I mean, it’s down. But you got to think about, think about it from the advisor perspective, or we’re launching a listing, we got to base it on data that we have in the past. So when we get to early 2022, I’m using data from the last six months to figure out what multiple lists at so I’m out there listing at 3.5, let’s say. So I listed 3.5. And then I don’t get good response. And I’m like, huh, what’s going on here? And I’m telling you, and the seller is like, Hey, you told me that your data showed this. I’m like, that’s true. My data did show that you know what we might need to consider a price drop, or might you consider waiting, we talk through these things. And on some of those listings, we end up lowering the price. But getting those expectations of buyers and sellers to align as the market is moving. That’s why call 2022 a year of transition for me because that move from 3.5 down to 2.14. On some of those businesses, I feel like I was living through that transition. And, and I didn’t know what it was. So I’m just like, I’m using the data I had. And then I start closing deals at lower numbers. And that becomes the new data. And then that’s create a bullish activity for me for this year. Because now I’m like, hey, we were listing here, but now we know to be more conservative. So I’ve actually been quite a bit more conservative, especially on Amazon FBA.

Joe Valley  24:24

I want to I want to throw a grain of salt to all of this for people that are listening because I don’t want you to go, oh, well, multiples are down from 3.5 to 2.1 for Amazon businesses, because it’s not necessarily just that we do have a smaller data set. Right? This for q1 of 2023 versus 2021. There were more Amazon businesses sold than this quarter. And the other piece of information is that look, we came off of a record 2021 for everything shopping online and everything that drove revenues up that created part of the frenzy 2020 It was your transition there selling in 2023, q1, what’s happening in a year of transition, you’re coming down, you’re leveling off, you’re not growing as rapidly as you used to, you had freight charges, your margins are tighter. And your discretionary earnings are probably trending down or off compared to the same period 12 months ago. So all of that would indicate a lower multiple and push multiples lower on top of this smaller data set as well. Go ahead.

Pat Yates  25:29

Let me ask this to you because I started thinking about this one time, too, I think Quiet Light is, multiples should be inherently higher than most because like, if I hear someone that’s coming in, I don’t know what your mentality is. Coming 21 23 24 they’ve had this business 10 years, I’m like, maybe give it nine months, if you’ve gone through a tough inflationary thing, and we turn away people, they’re gonna have lower multiples, so they work on their businesses to help them maximize that exit. Typically, we’re not going to list things, or hope to not list someone that’s going to have a really low multiple, because we want them to improve that that’s kind of when we become educational, do you think that has any impact on how our numbers would be seen against others? I’m not sure if you think that might be a factor. But I know our approach is different, which means some of those lower multiples will not even be selling out anyway.

Chris Wozniak  26:12

That’s a good question, Pat. I think, you know, it’s hard to say because one, I mean, me personally, when I talk to a seller, and I’m doing evaluation, one thing I make sure to tell them is, what I can guarantee you is when I give you a valuation range, it’s going to be something that I think I can achieve and it’s definitely not going to be something that I think you want to hear. And I tell all potential sellers that and I think they’re either appreciative of that because at least they know I’m going to shoot them straight. But it also I can’t speak to how other companies do it but if somebody comes to me and they’ve been quoted as like a much higher multiple than maybe what I think the business is worth, I think Pat to your point that the education part of that is so important. You know, you got to establish credibility when you’re talking to sellers and find out look Is there a reason why he was quoted a four 4.5 Multiple maybe there is like maybe there’s something…

Joe Valley  27:17

Probably includes inventory, that’s number one. So they have a quota with inventory included?

Chris Wozniak  27:22

Yeah. Like that multiple patents in the product or whatever is truly unique. You know, those are other considerations. There’s a million considerations but yeah, I think we’re such a white glove service it’s not we’re not so much a marketplace but we put these factors together ourselves. So we really get to learn the business but yeah, I think all things being equal I mean, I think Quiet Light reputation I think we can be on the higher end of a range of multiple for comparing apples to apples I would think so.

Joe Valley  27:55

I think so as well. So I again, I want to throw something in there go back to the data, we’re showing that the Amazon oriented businesses the multiples are down, but the multiples are up overall. And so that means that there’s other businesses that are filling up sort of that Amazon frenzy void that is straight up e-commerce or content or SaaS. Now content in SaaS multiples tend to be higher anyway so that’s probably what’s pushing it up a little bit. I think David’s bigger deal was a SaaS deal and well as you just closed a very large one Didn’t you know that that took a while to close? I think you did close it but that was that was ecommerce right there.

Chris Wozniak  28:37

Ecommerce in an agency that got to a really good.

Joe Valley  28:41

I was naming the agency and the e-commerce business on the tip of my tongue and I’ve got don’t do that don’t do that.

Brad Wayland  28:49

I was about to do a B but at the same time you know what, actually, to that point, I have dropped my multiples on some of these things myself, but not to the level of the data that you cited. I found that I’ve gotten really strong interest just by taking it off a little bit. There was a period in 2021 where I would call peak euphoria it was around May of 2021. Where we were listing Amazon FBAs at extremely high multiples. There was even an email that was circulating one point where someone was saying like I’m looking between five and six for everything I’m looking at I’m going there’s something wrong here like this is not gonna last but no, I haven’t like 2.14 Like I’m not out there. Listen, any Amazon FBA is at 2.14. I’m still seeing strong activity there. And if you go pre-2021 If you go to like 2019 Amazon businesses were selling at a discount back then. They used to be a lower. They used to be our lowest multiple from what I remember. And they really have gained a lot of credibility over the last several years.

Joe Valley  29:59

A big and further into the stats, maybe I should have done this to begin with. But it’s interesting. The mean multiple with inventory is 3.55. But the mean average multiple is 2.14. And as I look at the dotted chart, there’s a sizable business that was sold. I mean, for next to nothing, I think actually, it’s not the one where it was negative 70,000. Somebody did a deal where I think the seller had to give the buyer some money, and then they bought all the inventory, or something along those lines can be skewed in the data. It’s definitely even though it says mean, it’s still skewing it a little bit. For sure.

Chris Wozniak  30:36

Reseller and they’re to Joe.

Joe Valley  30:39

Yeah, exactly. So small data point and a couple of funky ones in there. I wanted to talk about lending, because, again, our deal sizes are getting larger in 2021, it was 1.4 million in the first quarter. And year to date, well, I’m sorry, it first quarter of 2023. It’s 2.2 million. And so as deals get larger, there’s generally more of a need for some type of financing. Woz I think you had a call with Steven spear from e-commerce lending today or yesterday, just to get a vibe from him on what’s happening in the lending market. Can you talk about that a little bit?

Chris Wozniak  31:21

Yeah, I just wanted to call him just to get his perspective on it, because he sees a lot of deals. He said, year over year 23 to 22. So basically, January through we talked last week, so about mid-April the volume on deals is basically the same. So not much difference there. Where he saw differences are with kind of the underwriters scrutiny of deals. Not that they’re putting the businesses under a microscope way more than they did last year or anything but more so they’re asking more questions there. And this was on SBA side, by the way, not the like capital markets program that he has, but from a seven eight loan world. He’s seeing the underwriters requiring buyers to have more kind of transferable relatable experience. He’s seeing deals maybe taking a little bit longer than normal. Which we’ve all been through, like, how long is that? Who knows?

Joe Valley  32:36

Yeah, why are they scrutinizing things more on SBA deals? It’s the aggregators that imploded? Is it just because banks are nervous?

Chris Wozniak  32:48

Yeah, I think they’re seeing because SBA preferred lenders are not steered away necessarily by declining trends, like the Big e-commerce deal, I closed, they were on a roll of probably 10 months of pretty substantial year over year trends, downward trends. So I think they’ll still do the deal. But I think they’re more concerned about their debt coverage. Because it’s coming from coming out from both sides, you’ve got higher interest rates, I mean, prime is like, whatever it is, six or 7%. And they’re usually two and a half above that. Whereas like, I think last year, at this time, they were still some three, maybe, maybe that’s 2021, early 22. But so they’ve got the payments are higher, the debt services higher, you’ve got a business that is maybe trending down a bit, but hopefully maybe kind of bottomed out and normalized, a little bit not normally bottomed out. And so I think they’re just, they’re not worried, but just a little more, they want to give it a little more time through the underwriting process to kind of see how the company’s doing. And then that’s also the reason for wanting to make sure they’re lending to a borrower that I think can run the business well, and hopefully turn it around. So I think that’s probably a couple of reasons.

Joe Valley  34:13

Are they looking for more financial stability from the buyers? Because of the potential fluctuation in interest rates? Because correct me if I’m wrong, all three of you, but I think the SBA deals that I’ve heard about recently from Stephen, our variable interest rate so as interest rates go up, the payments go up as well, or at least maybe the payments stay the same. helped me out guys did the payments stay the same, but the interest rate goes up and it’s just the amount going towards the base goes?

Brad Wayland  34:43

It depends but most seven A’s are variable and over a 10 year term. It doesn’t change their payment that dramatically even when the rates go up, but it does increase the payment and I’ve I’ve had sellers cite about a 20% increase in payment cost on their loans due to the rates moving, prime plus, which I think was actually that prime might even be higher than that, I think it might be like, eight point. Sometimes I think it’s in the eights now maybe I’m wrong about that, but and then they’re adding maybe two and a half on top.

Joe Valley  35:22

I think it was interesting how Chris duty pointed out that he actually feels badly for the people that got those low interest rate loans back in 21. And now they’re at eight 9%, because they weren’t prepared for that financially, versus the people that bought the business where it was, financial model included interest rate to eight or 9%.

Brad Wayland  35:45

That kind of cuts both ways, though, too. It’s kind of like if someone buys a house today, if we, sometime in the next two, three years get back to business as usual, what has been the monetary policy of the last 2025 years in this country, most people will be refinancing those loans and seeing their payments cut in half, if it goes anywhere near what we’ve been used to same thing on the SBA side, people that do businesses now through us through the SBA might see some nice reductions in kind of payments do I’ve seen a little bit of caution just to Woz’s point. I feel like there’s a little bit more caution in the air in general. And I’ve seen it on the legal side, I actually had some deals get more caught up in legal than I was prepared for. At first I thought it was just a deal by deal. But I’ve actually had it happen on several deals now where I can tell that the legal is getting a deeper look from both buyer and seller or lender, about terminology about things that are written in there. And I think that that really just kind of speaks to that we’re in more cautious times that people are just trying to be really careful with their things. It’s I’ve had deals drag out I don’t think I’ve I don’t think that they’re not closing I’ve closed quite a few this year, and have quite a few that are in the pipe to close. But I have seen a little bit of a delay on the legal side as it sometimes it relates to the lending, but sometimes it’s just on legal.

Joe Valley  37:07

Yeah, I think when so much is up in the air with the economy and the war and inflation and all this other stuff. People always get more in tune to the fine details business, for sure. And understand that it’s not always gonna go up, things can go down as well too.

Pat Yates  37:24

Woz, let me ask you a question about did it come up in your meeting about the new SBA regulation where you can either I don’t think it’s really equity, I think it is rolling equity versus or seller notes that would be allowed. I think it’s May 1, they talk a little bit about why that change? Did they just miss out on a lot of deals? Because those were part of the structure? And now they’re going to address it from that standpoint. Is that’s talking about that?

Chris Wozniak  37:47

Yeah, we did. That was kind of towards the end of our conversation. But yeah, he said that the SBA, as early as May, I think he said the end of May, but maybe he said May 1, I thought he said end of May. According to him, they’re going to allow for sellers to roll equity. In the new CO that’s actually borrowing the money from the lender, the SBA preferred lender. So, previously that was allowed, a seller could retain any equity period. In this case, if the seller were to retain up to 20% equity in the new company, they’re not required to sign a personal guarantee. So I think that’s going to be a kind of a game changer because there’s our grocery you guys see it, like there’s this kind of area where, if it’s a five, six even $7 million deal back deck that can be an SBA deal all day long, and my e-commerce one, which is larger than that was an SBA deal. And we were able to kind of structure it up to get it done. And there’s a little, it seems like there always has been a little gap between what’s an SBA deal and then a deal that’s too, too small for financial buyers, you know, where you’re at 2,000,002 and a half million dollars that you’ve done and multiples go up. And you’re kind of, you know, if something’s in that one and a half to $2 million range of adjusted EBIT as D and you know, you’re in that kind of no man’s land if it’s too big for SBA, like you could instruct your way to get it done. And then it’s below the radar for the financial buyers. And so I think this this 20% equity, in my simple way of thinking would basically allow for a 20% increase in potential value on any deal that went SBA, if the seller is willing and wants to retain equity and if the buyer of course wants that as well, but I think that’s your point. The reason this is happening is because I do believe a lot of lenders missed out on a lot of deals, where some type of equity role is desired by both sides of the of the deal and So they finally I think, went back to the drawing board. And yeah, hopefully we’ll see those changes by the beginning or end of May, which will be huge.

Brad Wayland  40:07

That’s really exciting. So Woz are you saying like, let’s say that there’s, I did hear this, but I’m just was not I wasn’t thinking about how this would help us structure larger deals when I was thinking about so with a 5 million cap on SBA, if I have a $9 million deal, and the seller was willing to roll, let’s just say, 40% of that deal. Someone could go get a max $5 million loan, and the seller could retain 40% of that, and you’re doing a $9 million deal on valuation, but you’re only doing $5 million loan.

Chris Wozniak  40:40

I think, if I understood correctly, you could do that. But then the seller would be required to sign personally on the loan as well. Gotcha. Because it’s 20.

Joe Valley  40:50

Up to 20…

Brad Wayland  40:51

Without a PG. Yeah, things go good. I still like it.

Joe Valley  40:55

I like it, too. I like it, too. I’m gonna call on you bread? Will you explain to the people that are listening the benefits both to a buyer and seller of rolling equity?

Brad Wayland  41:05

Sure. So the benefits to the buyer of someone rolling equity is key man risk is a huge problem in our industry, you get into any large deal, and the buyers, especially for private equity are going to be very concerned about what does this entrepreneur know about this business that we don’t know, we don’t want to write this guy a check, and have him just disappear off into the sunset with his money we’d like to keep him tied in. And so in private equity deals, it’s very common that equity is rolled. So basically just you’re keeping some percentage of that company, you might create a new entity, but you’re creating some percentage of that company. On the same hand. On the other hand, from a seller’s perspective, equity roll creates kind of two benefits. From my perspective, one, it increases the buyer pool, creates more of a market for your business is one big thing with the other. Like, in the case of my larger private equity deals, I’ve had two larger private equity deals, where my sellers rolled equity, that ends up being an opportunity for them to get a second exit. So take an instance, like, like my friend, Johnny, you know, we sold his business, and he rolled some percentage, you know, into the new entity. And so when he rolls that percentage in the private equity firm comes in, they put all kinds of input, they hire new CEO, they hire a new logistics manager, but all kinds of infrastructure in place, start scaling up the operation, and he’s got equity in that and five years down the road, when they go sell it for three to five times as much, he’s gonna get a check that looks similar to the one that he got, when we exited the first time. And so that’s the benefit I see for sellers is gives them a bigger buyer pool to choose from, because people are more comfortable buying businesses that keep the key man involved, and also gives them the upside down the road.

Joe Valley  42:56

In Johnny’s case, what kind of work on a regular basis did he have to do?

Brad Wayland  42:59

Well, that was a big deal. So you know, that was a substantial, you know, eight-figure deal. And so in his case, he was CEO for two years, he was a CEO. Yeah, he stayed on CEO. But it was one of those things, when I started talking to people that are going to be doing like a 20 to $50 million exit, I’m telling them upfront, hey, there’s probably not a great path here for get your check and just run away, you’re probably going to need to be prepared for this to be a process and we’re going to plan for your exit. And it’s going to take some time to get through it. But we can definitely get you there.

Joe Valley  43:38

Now was your bobbing your head up and down. You just closed an eight figure deal. What happened to the seller there? Did they have to stick around for a while.

Chris Wozniak  43:45

It was an SBA deal. And it was just shy of 10 million and the owner, so two guys rented Business One was the owner and then his good buddy was not known or buddy profit share. And so to get to the deal that we wanted to get to, they had to retain some equity. The issue is, it was being financed by the SBA didn’t allow it. So the good news is we were able to get the guy not the owner, but his buddy that profit shares in the business and works in the business. He retained 50% equity and the new co got the deal to where it needed to be and then the owner in the new equity owner in the new CO are gonna work that out themselves. And they are and then we had I think a little bit of solid no, maybe that was attached to the inventory.

Joe Valley  44:38

Did the sellers have to help operate the business like Johnny did for two years was where he retained the CEO title. Did you guys have to do that at all?

Chris Wozniak  44:47

The owner has a one year employment agreement with the pre-established salary, and then the guy that’s retaining equity, there is nothing e-comm called permanent place beyond like a three month pretty intensive, sort of training transition period.

Joe Valley  45:06

Cool. I’ve got three of the most prolific brokers on our team on the call right now. So I’m gonna switch it up here, guys, as we move towards wrapping this up, what are you working on? Like? What’s coming up in the month of May 2 half of May that you’re working on? Pat, you want to kick that off? You’re working on anything now that will list that?

Pat Yates  45:29

Yeah, I mean, I have some listings I’m working on they’re becoming a market some pretty good ones as some current ones that are have some success, some that are struggling a little bit, I think the thing that I’ve tried to do, I’m working with a lot entrepreneurs that I have in my active lists that I’m working with month to month to try to continue to work with them. People who have a stagnant or dropping business a little bit that still are focusing on how they can improve it over the next six to nine months and resetting their day to being able to do it. I love investing that time with those people. And then in time going through the financials, spent a lot more time laying seeds with people helping them improve their business to get ready to sell that I’m taking to market. But I still have some good things coming up this year. That’d be good. A couple of big ones that have a chance to close. But I like how the market looks and actually liked this kind of opportunity because I think we had Quite Light always want to be as educational as we can possibly be. And that’s what I’m being way more of than anything that’s not listening.

Joe Valley  46:22

And that pays off. Great. pays off. We all know that that helping first comes back around for sure. For sure.

Pat Yates  46:29

I’ll also be going to think I’ll be in Puerto Rico a billion dollar seller Summit. I think Brad, Woz I’m not sure if you’re going to Fort Lauderdale. I’m gonna be out for a lot of shows. We’ll be in Vegas for the Shark Tank reunion and see 150 200 companies there. It’s exciting.

Joe Valley  46:42

I’ll be I’ll be here in Davidson mowing my lawn. Like you guys know. Woz, what do you got coming up? Are you working on anything now that’s gonna be listing in the next 30 60 days.

Chris Wozniak  46:54

Yeah, I’ve got a couple. It’s been kind of weird for me in the past few months. I had some good closings, three of them. So I’m probably half of Brad’s clip right now. So that’ll probably keep going.

Joe Valley  47:09

Let me just say it for Brad, are you kicking back? Because you’ve been crushing everybody. Historically, like you brokered more deals last 12 months than anybody. So you’re just taking it easy. Is that? Is that what’s going on here?

Brad Wayland  47:20

Me? Yeah, Woz you met? You met the new Brad.

Joe Valley  47:24

I got the new Brad.

Chris Wozniak  47:31

You run into these sit when you do this long enough. You run into these weird, like, they’re not ruts. They’re just like, people maybe put a pause or something happens in their life where they’re just not responsive for a little bit. I feel like I’m kind of coming out of the other end of that after a couple months. Kind of weird things. But that’s just part of it. But yeah, I’ve got a couple good businesses that will be launching probably within the next couple of weeks. I just launched a little SaaS business $95,000 STE. In four and a half multiple on it. So that’s awesome. And then, Amanda and I are working on a pretty sizable one that we’ve been talking to these sellers for a year. And really, it’s really revolved around valuation. So I’m hopeful on that one.

Joe Valley  48:25

Sizable and what kind of category we talk about how big is it and we talk in e-commerce content, SaaS, what are we talking about

Chris Wozniak  48:33

is Amazon and E commerce and they’re about they’re getting to the point where they’re about half and a half about 2.4 $2.5 million EBITA, adjusted EBITA. Okay, yeah.

Joe Valley  48:45

All right in the audience if you’re if that’s what you’re looking for reach out to Woz or Amanda? It’s woz@quietlight or amanda@quietlight. Very cool. Very cool, Brad, what you got going on. I’m busy. Managing director now. That’s taking up all your time.

Brad Wayland  49:01

That’s taking time for sure. But also busy with deals and got a couple that are coming up in the next few weeks got an Amazon FBA business, that’ll be SBA pre-qualified, that will be somewhere around 1.2 1.25 million plus inventory. Good business with good margins. Also have an interesting one that’s a guy that’s selling Shopify stores that are ready to for dropship businesses are selling plug and play. And they’ve done really well building this out, and they’re making really good money on both Shopify affiliate commissions. And by selling the service of building these stores out for people kind of in upfront, so I’m excited about those but have a lot going on. In fact, Pat I may not go to billing or sell or something because I’m worried I’ve got too much work to do you know Puerto Rico for a week does sound like a lot of fun, but I’m worried about getting too far behind.

Joe Valley  50:05

Wait a minute. Wait, it’s in Puerto Rico. Oh, my wife can mow the lawn maybe I’ll go.

Brad Wayland  50:10

You might have to take my spot. I’m I really am struggling. I’m doing a kid’s camp the week before. So I’m like really worried about not having the office time but I will be in Fort Lauderdale with Pat and a couple of weeks and looking forward to that. Is that for Seller Summit? That’ll be a great show.

Joe Valley  50:31

Yep. Steve Chou has got a new book coming out called Family First Entrepreneur Folks.

Brad Wayland  50:35

I saw him speak about it at ECF, great guy.

Joe Valley  50:42

Yeah, his podcast airs. I think the first week of May here and we’re try to help him get to the Wall Street Journal, bestseller list. So he can be just like Walker. Hey, I wanted to mention something going back to you was I interviewed a former client of yours last week, and I’ve been on frenzy so his name escapes me at the moment. But what he said does not. He said, Chris Wozniak has no pulse. I’m like, what are you saying here? What do you mean? He goes, He’s so calm, cool, collected, his pulse never goes up, never goes down. His tone is always the same. He’s awesome. So there you go. Guys very happy with you.

Brad Wayland  51:23

No better thing you can say about an M&A broker than to have nerves of steel.

Joe Valley  51:28

That’s it? Yeah. That’s really what he was saying. No pulse means nerves of steel. For sure.

Chris Wozniak  51:34

Thanks for sharing that with me.

Joe Valley  51:36

Yes, you’re welcome. Well, guys, any last minute thoughts you want to share with the audience in regards to deal flow, acquisitions, trying to sell lending anything else that you want to share.

Pat Yates  51:47

Commission around you as you can, if you’re wondering about your valuation, or where you want to go reach out, let us try to help and talk to you doesn’t cost anything, we just help God.

Brad Wayland  51:56

I think the market is in a better place than the News is reporting right now. There’s a lot of especially if you hang out on like financial Twitter, of everyone saying like, oh, the wheels are gonna call out wheels are gonna come off, the wheels are gonna come off. We’ve already been through a pretty substantial amount of pain. And we’re watching that inflation number tick down. And I think that earnings of publicly traded companies continues to surprise people, we’re seeing that right now is the third earning season in a row and the quarters, where I’ve had friends in my trading groups and stuff saying to me, oh, man, this is it, that everything’s gonna go everything’s gonna tank all the stuff. And I’m thinking, you know, the economy actually is showing some resiliency against some of that. And so I feel like we’ll bottom we might have already bottomed and we’ll show resilience first, because we got hit pretty hard as the market came down, in my opinion. So I really think that the market is in a good spot. And if you’re thinking about allocating some capital to new business, like I think this really is a good time to be buying, it seems like the activity is really starting to pick up and I’m seeing a lot more stability there than I did last year, personally.

Chris Wozniak  53:06

Yeah, I’d kind of piggyback on that also, just for sellers, and even buyers that are listening that, I went through, I was in the industry, basically right off of the.com bubble, but I was right there when the financial crisis happened. And you can read all the stuff in Google everything that you want on the economy and all that. But what I know from experience is that at the end of the day, sellers still need to sell their companies and they will still be buyers in those periods. Matter of fact, I even think that even if the volume of buyers drops off the cream rises to the top a lot of in those situations where you have buyers that have more liquidity, they may be savvy or they may not be as afraid of downward trends, because they know historically, those are going to turn around probably sooner than later. And they have the financial wherewithal and experience to pay a premium for something that’s doing well, so I just wanted anybody listen to keep that in mind that I think we’ve to Brad’s point weathered the storm really, really well.

Joe Valley  54:09

I think you’re absolutely right. And to your point there we’ve had an average of 2.9 offers on every listing so far this year. That’s typical for us sometimes it’s a little higher, but you’re getting almost three offers on every listing tells us that there are plenty of buyers for these types of businesses want to throw out one more thing and that’s quietlight.com/partners. For those that are listening going, what Brad? Brad Woz and Amanda we’re gonna have a big deal SBA qualified, Brad’s gonna have one I’ve got to find a lender. There’s a list of lenders on the /partners page that you can work with that we’ve all worked with before. All right, well, guys, this is our first podcast with brokers roundtable and I loved it. Thank you so much Woz and Brad Thank you. Pat is going to do the next one with I think maybe Elaine and John We’re gonna try to do it once a month. Appreciate you guys coming on. Thank you.

Outro  55:08

Today’s podcast was produced by Rise25 and the Quiet Light content team. If you have a suggestion for a future podcast subject or guest, email us at [email protected] Be sure to follow us on YouTube, Facebook, LinkedIn, Twitter and Instagram, and subscribe to the show wherever you get your podcasts. Thanks for listening. We’ll see you next week.