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How To Avoid Disaster Once Under LOI (As a Buyer)
Software engineer Ahmed Raza is the Director of Due Diligence at Rapid Diligence, a group of experienced acquisition and merger entrepreneurs providing due diligence consulting for small business buyers. Additionally, Ahmed is the former Founder, CEO, and exitpreneur of Sitevestment, a small private equity fund that purchased e-commerce businesses. Before joining the acquisitions and mergers industry, Ahmed worked as a java software engineer and earned his BS in computer science from the University of Texas.
Here’s a glimpse of what you’ll learn:
- [03:11] Ahmed Raza discusses his background and how he started buying online businesses
- [07:09] What is technical due diligence?
- [12:22] The number one thing sellers fake in a Profit and Loss (P&L) statement
- [18:09] What is Revenue Per Visitor (RPV)?
- [21:10] The importance of using a due diligence firm when buying a small business
- [24:15] The lessons Ahmed learned after purchasing his first small, online business
- [25:56] Rapid Diligence’s area of expertise regarding deal size or age
- [31:16] What is the Acquisition Lab?
In this episode…
As internet access rapidly improves and grows worldwide, more and more people have been acquiring online businesses. Purchasing small businesses such as e-commerce platforms is a quick way to add to a financial portfolio. But how safe is the buying process?
According to Ahmed Raza, an expert in due diligence, the smartest act you can perform when purchasing an online business is to hire a due diligence firm. Why is that? Because blindly purchasing a business can lead to headaches, and in the end, could potentially lead to profit loss. So, how does one prevent this from happening?
Join Joe Valley, host of the Quiet Light Podcast, along with co-host Deanna Berardi, as they chat with Ahmed Raza, the Director of Due Diligence at Rapid Diligence, to discuss the importance of hiring a due diligence firm when purchasing an online business. Ahmed explains what a due diligence firm does and how sellers try to cheat on their profit and loss statements. Plus, he shares the lessons he learned from his first small business purchase.
Resources mentioned in this episode:
- Ahmed Raza on LinkedIn
- Ahmed Raza’s email: [email protected]
- Rapid Diligence
- Quiet Light
- Quiet Light Podcast
- Quiet Light on YouTube
- Joe Valley
- Mark Daoust
- Deanna Berardi on LinkedIn
- 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
- Steven Pope on LinkedIn
- My Amazon Guy
- Walker Deibel on LinkedIn
- Buy Then Build: How Acquisition Entrepreneurs Outsmart the Startup Game by Walker Deibel
- Acquisition Lab
Sponsor for this episode…
This episode is brought to you by MyAmazonGuy, an Amazon agency to help level up your PPC, SEO, Design, and manage your entire Amazon catalog.
This episode is also 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.
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 0:18
Hey folks, Joe Valley here, along with Deanna Berardi, welcome to another episode of the Quiet Light Podcast. As in the past month, this podcast is sponsored by My Amazon Guy. I know the founder Steven Pope, personally, we’ve had lots of clients that a tremendous amount of success with them. You can learn almost anything you want to about how to grow your Amazon business through Steven’s YouTube channel, My Amazon Guy. If you need someone to help you level up your PPC, SEO design, manage your Amazon catalog, whatever it might be. Check him out at MyAmazonGuy.com. Now, today’s podcast again co-hosted with Deanna Berardi. Hi Deanna, how are you?
Deanna Berardi 1:16
Hey, how’s it going?
Joe Valley 1:18
Fantastic. So you and I just had the opportunity to talk to Ahmed Raza from Rapid Diligence talking about the importance of hiring a due diligence firm, when you buy an online business, how do you think that call went? What are folks going to hear in the next 30 minutes?
Deanna Berardi 1:35
It’s pretty awesome. I mean, he talks about some of the obvious things, which is, you know, don’t think you know it all. And definitely outsource that expertise. But he talks a little bit about what can happen if you have the wrong due diligence partner, and how you can actually lose a deal that you have on the hook, that might have been a great deal that you lost, because somebody else derail your due diligence. Plus, you can also talk about the other big problem that can happen, which is when you simply just buy the wrong business or overpay for an existing business. So I think he just talked about a lot of pitfalls to avoid.
Joe Valley 2:07
And one of the things that he will tell you folks are what to look for where things are wrong in a profit loss statement where it’s not necessarily done, intentionally, but mistakes that are generally made and where to find them. That could cost you some money if you don’t find them. I think the due diligence pays for itself. And one of the things that we talked about in there and I’ve seen over the last decade is that, you know, a good due diligence firm, like Rapid Diligence will tell you not only what’s wrong with the business, but highlight the areas that you can change fairly quickly to get some instant scale. So let’s jump to it. Ahmed Raza for Rapid Diligence, talking about how to safely buy an online business. Here we go.
Ahmed, welcome to the Quiet Light Podcast. How are you?
Ahmed Raza 2:54
Hey, thanks for having me. I’m good. How are you?
Joe Valley 2:57
I’m good. Glad you’re here. We’re going to talk about due diligence and the do’s and don’ts of that process. And and the reason folks should pay attention to it what you guys do over at Rapid Diligence. Can you give the audience a bit of a background on yourself first, though?
Ahmed Raza 3:11
Yeah, absolutely. So I kind of got into this space almost eight, nine years ago at this point, I started off with buying a few online businesses myself, right. So this was primarily e-commerce businesses, SaaS content, kind of all the good stuff, did that for a few years, both with Personal Capital, and then on behalf of investors, and then I went on and started a small cap private equity fund where again, the focus was on e-commerce businesses, SaaS content, primarily online businesses, ended up exiting the fund and started doing private equity consulting, so helping various PE funds and search funds with their due diligence process. And after that kind of like, like most people, I was like, Hey, I kind of want to do this for myself. So I started Rapid Diligence a couple years back and have been mostly focused on buyside due diligence process for online acquisitions. So most of the businesses we look at are anywhere from under a million dollars all the way to 2030 $40 million. And we usually step in when an LOI is executed. So we do that by side due diligence, that exclusive due diligence period.
Joe Valley 4:16
Yeah, I was just going to address the timing of it. I think it’s important to do it when under loi as well. At Quiet Light, you know, for the last decade or more, we’ve been referring folks out so excited to have the team listen to the podcast, learn more about Rapid Diligence and refer folks out to you as well. And one of the ways you can actually find Rapid Diligence because you can just go to rapiddiligence.com But if you go to the QuietLight/partners page, we’ve got a link there that you can click as well learn more about what he does. Deanna you said you had a question here that you wanted to jump in and ask have Ahmed.
Deanna Berardi 4:50
Yeah, I have a really good one for you, Ahmed. I you’re ready for me?
Ahmed Raza 4:53
Deanna Berardi 4:54
So okay, Quiet Light. Every time we close one of our deals Do we actually do an internal debrief, and the advisor does a deep dive on, on what a lesson learned might have been from a closed deal. So that they can pass it on to the one of the other 14 advisors on their team. And the concept is we all learn, you know, right from each other. And so when there’s a mistake that’s made, or something that could have been done differently, let’s talk about it, let’s process it, and let’s share it out. So every quiet lead advisor is growing in knowledge and expertise with every deal that’s closed, quiet late. So we had an advisor, who sold the SaaS deal recently, I’m not gonna keep all the names out. It was an advisor that sold the SaaS business, it was a health and wellness niche software business that was $420,000 in deal size, it was a good multiple for x. And the big lesson that this advisor learned was the importance of getting the buyer, who was the first one under that loi to plan, their due diligence process on the technical aspects of the business, especially around evaluating the software code. Because this require, they love the guy, he went out and he hired somebody that wasn’t with rapid due diligence. And that technical expert totally derailed the deal. Because they just drove the technical due diligence aspect, like into this weird rabbit hole. And it actually disenfranchise the seller and the advisor. And so that buyer was just like, Oh, I thought he hired someone that was going to do this right for me and, and rabbit hold and, and then the buyer was like a little bit pushed back on because the advisor a Quiet Light and the seller found themselves defending themselves against this kind of misinformed note buyer, who’s really misinformed. So then somebody else, they lost that loi, and then now there’s another buyer that came in and that buyer close, they had a much better due diligence process, and they closed the deal. What would you say to that first buyer that hired the wrong technical expert and or tried to do it themselves and just ended up derailing a really good deal and actually lost the deal because of that?
Ahmed Raza 7:05
Yeah, no, that’s an excellent kind of scenario and a question. So I think the thing that I tell a lot of buyers, especially when it comes to technical due diligence, is that it looks very different. When you’re doing technical due diligence for a business, you’re looking to acquire, like the objective and goals look very different than if you’re doing technical due diligence, for example, if you’re looking to start, like, essentially take over a project, right. And so what I say when I say that, I mean, when you’re buying a business, and you want to do technical due diligence, the importance is always around the processes, right? So I’ll have buyers tell me, Hey, like, have you reviewed every single line of code? And the answer to that is, that’s almost impossible, right. But what we review, we review the overall overall code, the overarching code and the infrastructure. But the main objective there is to understand that, hey, if you as a buyer take over this business, are those processes in place that the buyer has? Are those going to serve you? Well, when you decide to kind of enhance the software and whatnot? So to emphasize that a little bit more, you know, what we look at when we look at what kind of how many developers are on the team, right? Like, who has the ability to push into production? How are their release processes? Like are is this all living in the head of the developer themselves? Like, are they going and pushing code into production by themselves? Or do they have processes in place that when someone takes over the business, those processes will kind of serve as a failsafe. So I think that’s always important to look at the business from even when you’re doing technical due diligence, look at it from an acquisition perspective, because that’s going to look very different than, hey, if you’re just trying to rabbit hole into something like there’s always going to be things wrong with with code, and I have a software engineering background. So I’ve actually written code, I’ve done development, and there’s no perfect software out there, right. And anyone that’s written code long enough will tell you that code, like software will always have bugs, it will always have complexities. What you really want to figure out is what those risks are, and are those complexities and bugs acceptable, as well as like, once you take over is that going to serve you well as a new buyer. So I understand exactly the scenario you’ve described. Because it’s, it’s, it’s something that if you’re just someone with just a software engineering background, but you’ve never bought a software business, your perspective is going to look very different, because you’re going to try to figure out everything that’s wrong with the business and present it for a lot bigger than it is, when a lot of times a lot of the issues we catch, we say hey, here’s the risk, and here’s how you can fix it right? This business doesn’t have proper release processes, but you can implement this once you buy it. So it’s not the end of the world.
Joe Valley 9:37
I love that aspect of it because it’s a rope. What what people learn most often in due diligence, if everything in the financial side works out and the coding or whatever, depending on the kind of site, what they learned are, what’s wrong with it, and how to fix it and scale it because they fixed it and implemented better SOPs or better processes. And I think that’s an important part of due diligence. Step people don’t know they’re getting, right. There’s a lot of information in a report that may come out say this is wrong, this is wrong, this is wrong. The key thing is that now you know what’s wrong, the seller didn’t know that and you could fix it and scale your business higher. What would you say? That is? Some of the top one or two mistakes that buyers make when there are red flags for them to look at as they’re analyzing the business?
Ahmed Raza 10:25
Yeah, that’s a great one. So are we talking from a technical perspective? Or just overall, just overall? Sure. So I think one of the things I always say, especially to first time buyers, is that a lot of buyers get obsessed with validation of revenue. Now, I know that’s important. And I’m not discounting that. But the way I always look at it is that when you’re buying an online business, validation of revenue is a relatively simple process, right? Because we’re not dealing with, you know, a corner store that they’re taking cash or a laundromat or anything like that. Virtually everything is recorded. That’s easy. I think the difficult part is understanding where costs come in. Right. So it’s much, much more difficult to fake revenue than it is to omit costs, right? So I think that’s the one thing I always say is like, look at those costs, look at those add backs, make sure those are justified, because that’s kind of where we’re, if something is going to be hidden, that’s where it’s going to be hidden. So from a financial perspective, I always say to look at that. And then from an operational perspective, and funny enough, I think you had this individual on your podcast a few weeks ago or something, but she mentioned, kind of like the importance of operational due diligence, and we worked on that deal with her. But from an operational perspective, I always say, hey, just ensure that you know that there’s good SOPs in place, especially if you’re buying a business that has been around for a long time, right? So when someone comes in, and they say, Hey, I found this business, I have it under contract, it’s been around for 15 years. So that’s amazing, right? There’s no way this business can fill. I’m like, Yeah, that’s great. There’s good longevity here. But the one thing is that if they if this same owner has been running the business for the past 15 years, like 90% of those operational procedures are in their head, and they won’t get transferred over as part of like an official transfer process unless you ensure there are SOPs in place. And there are processes in place to ensure that as the new owner, you’re not going to just try to inherit knowledge from from the existing owners brain. So I think those are two things that definitely come to mind.
Joe Valley 12:22
So that that’s fascinating. And it’s so critical. And I agree 100%, because so many people, so many people just think, well, the numbers, the numbers that generates the value of the business, that’s how the value of the business is determined. And it’s actually only one component, what you’re talking about is, is that I call it the fifth pillar, we’ve got risk growth, transferability. And documentation, I guess it’s really built into risk is everything that can go wrong with the business or can be improved in the business in the owners head. That’s not really transferable. So you’re gonna have to have a longer trend training and transition period after closing, and hold back some money during that training and transition period to then be released to be a carrot. So the seller of the business sticks around and make sure that that knowledge is transferred. As far as hidden costs. What’s the number one thing hidden cost wise that you’ve seen people maybe not put in their p&l? Or do they actually cheat? I don’t know if we’ve ever have I say I say ever I know one deal. We found somebody that did some fraudulent stuff. But it was $125,000 transaction, which was big for the buyer big for the seller, we were able to unwind it, but what’s the number one thing that people would fake or cheat or or do something that you’ve seen inside of the expenses category?
Ahmed Raza 13:52
That’s a great question. And to clarify, a lot of times this is inadvertent, right? So people like you know, as you’re looking to sell this business, you might put together the p&l you just forget, right. Like you forget, hey, I spent this much to do this type of marketing at one point, and I didn’t add it and
Joe Valley 14:05
You’re right, let me You’re right. It’s inadvertent. It’s a mistake I sold. My jacket is business break a brilliant entrepreneur, and had a very, very experienced bookkeeping firm. But the bookkeeping firm, made a mistake with the currency conversion. And it inflated discretionary earnings by about it wasn’t much, but by about $3,000. And so we had to adjust the due diligence, the price down based upon the multiple times to $3,000. So yeah, what’s what’s kind of the number one or two areas where people maybe make mistakes? Like you said,
Ahmed Raza 14:42
Yeah, I think a lot of it has to do with like marketing where it can’t be tied back. So you know, a lot of times if they’re doing like SEO work, so we had one where this this individual, you know, they weren’t doing any marketing work, so to speak, but essentially what they had was to VAs that would go on specialty forums and post about the best In this right so it like, I guess without revealing too many details it was it was car related it was an e-commerce business that sold car related products. And so the owner had to VAs that were on a bunch of these, like car enthusiast forums. And they were just like active participants with their website on the bottom right, like on the footer. And so that way, anytime they posted, it would bring back, it would bring back folks to the website, this was something that they didn’t disclose. And again, I don’t know if it was inadvertent, I don’t know if it was intentional, but it was something they’ve never disclosed, because to them, it was like, hey, this VA is part of our our, like our umbrella companies. This is not a cost particular to this business. But in reality, that was a business cost, because it was a marketing cost, because that’s what was bringing in a majority, or at least a good chunk of users. So that was one. And overall, it’s like marketing costs experimental marketing costs that can’t be traced back directly to the business, that’s a big one. And then with e-commerce will sometimes see certain Cost of Goods get kind of omitted, you know, and again, this isn’t often as you said, because most of the deals we do we also work directly with brokers. Right? And that’s the thing with brokers is that a lot of that a lot of those costs a lot of those p&l, so they’ve been perfected to a degree, right? So we’re much less likely to see any of these issues when we go with brokers versus when we do deals that are through private sellers, right? And, or Yeah, to private sellers, where they’re putting the PnL together, no one’s really vetted or anything like that. So that’s also a testament to you guys, right? Because we’re much less likely to see these issues come up. But overall, it’s like cost of goods sold are parts of cost of goods sold, obviously, they’re not going to omit the whole thing. But like, hey, they’re shipping from China to the US and US out to the customer. They’ll show the US out to the customer, but they might omit the China or vice versa, or certain parts of it. So I would say those are those are typically the two main things.
Joe Valley 16:46
What do you think of if a, if a client came to you directly, and presented p&l, either on a quarterly semi annual or annual basis that that’s all that was presented? What What would your thoughts or words be back to that person that was buying that business?
Ahmed Raza 17:03
So when you say just quarter, like do you mean just that like this current quarter?
Joe Valley 17:07
That all the seller is providing? No is quarterly financials, they’re not given month to month financials?
Ahmed Raza 17:14
Yeah, I don’t love that. And I think the only exception to that is that if they’ve just been around for a long time, because the benefit of monthly financials, right is you get this, you start to see trends and patterns, right. And that’s, that’s a big deal. So if you have three months of or three years of financials on a monthly basis, you now have 36 data points versus quarterly, which now you only have 12 data points, right. And so I think that’s the main thing is that it’s much harder for us to, like, figure out what the trends are, what the patterns are. And a lot of the times those trends and patterns indicate strength growth, but they also help us understand where we can find issues, right. Like, if we see a random month out of the year, in the last six months, that’s the RPV is, is three times the average RPV. There’s something going on here that I think is at least worth discussing. So I you know, I wouldn’t love it. But you know, it’s not something we’ve seen a lot, except for businesses that have just been around for a long time. And they just do quarterly.
Joe Valley 18:09
I can’t let you get away with saying RPV without telling me what it means. Because I don’t know.
Ahmed Raza 18:15
Sorry. Yeah. Right. So revenue per visitor. So it’s like when we’re looking at, like, various metrics. And I mean, that was really just an example. But it could be anything where, you know, we’re looking at metrics across the different months.
Joe Valley 18:27
Gotcha. Okay. What are the typical packages that people reach out to you for? And, again, when should they reach out to you?
Deanna Berardi 18:37
I have, I have a question, too. And when they reach out before they reach out, I also have like a cool privilege of getting to talk to a lot of these new SBA buyers. And you know, they just got their funds. So they got their loan approved. And they’re planning on buying one business. And they are, you know, they say they’re buying smaller size business, so their budget is already limited anyway, I have a hard time talking to them, talking to them sometimes about hiring a due diligence firm, because there’s their philosophy, so I’m just buying one. And I’m budget sensitive. And I’d rather apply the due diligence budget for professional services over the acquisition price, and I know what I’m doing, and the package I got from Quiet Light was so complete. You know, there’s a lot of detail here, but I’ve got 45 minute interview and a P&L and
Joe Valley 19:28
I’m going to jump in and answer this, Ahmed, and then you can answer it as well. So I sold my last e-commerce business through Quiet Light in November of 2010. I took 2011 off, and then I went on the hunt to buy another one and I bought a content site, and I bought it it wasn’t from Quiet Light. I thought I’m pretty smart. My e-commerce site was built on content being produced every month. So it was kind of a content site, I got it, I understood that I’m pretty smart. I just sold a pretty savvy business. I don’t need a due diligence firm. Well, the turns out that the site that I bought, was built on poor link building practices out, there were maybe they were maybe five pages that resulted in 90% of the business. And then when you found the links that were, you know, the traffic that was being driven to those pages, they were all completely random, unrelated sites, I bought a business that was in the auto insurance industry, and a couple of the stuff that were driving traffic somehow, were porn sites. Well, I got caught up in the Penguin update. So I bought it, I think I closed on March 30 2012. And this is a quiz I give to people. And I had, and I say, I bought a site on March 31 2012. And I had 42, amazing days. And then something happened. And all of my page one, articles went to page two, and then three, and then four. And before too long, I was out, you know, over $200,000. If I had hired Rapid Diligence, you weren’t in business at the time or a century ago, one of the others in the space, I never would have bought that site, you would have said this, there’s too much traffic coming from these links. And these links have nothing to do with your business. That said, it worked out well, because I took on that and during Quiet Light at the same time, Quiet Light’s worked out. Okay. But you, I think you have to regardless of the size of the business, especially with SBA, when 90% of it is a loan for 10 years that you should absolutely invest in due diligence and due diligence firms because of what you’re going to learn what to fix in the business as well. But answering answering questions about yourself, what would you say to folks that say, yeah, no, I could do this myself.
Ahmed Raza 22:05
Yeah, no, I think you really, you really got it there? Because that’s exactly it. Right. And and I think what you that scenario you described with the content site, that would have been a very simple check in terms of like, this is something we do for all content sites, right, where we see one keyword exposure. So is there any particular set of keyword that results in more than 10% of the organic traffic to your website? And then is there any particular set of backlinks? And then we do like a backlink to referring domain, stuff like that would always end up showing up? So kind of going to that question, though, a lot of it, you know, what I say is that, especially if you’re a first time buyer, I understand budgets are tight, I understand that. But I think it’s even more critical that you hire a professional firm, right? Because when you’re a portfolio buyer, or if you’re a PE fund, and this million dollar acquisition is 5% of your portfolio, it’s no longer an existential issue, right, it’s just a part of a much larger portfolio, you can afford to make a riskier decision. And either, you know, not hire a due diligence firm, or just buy a more riskier business. But when you’re buying that first business, in order for you to buy the second business, and ultimately build out that portfolio, which is, you know, a lot of a lot of the folks that come to us, that’s kind of their ultimate goal, if your ultimate goal is to, you know, either just have that business succeed or go to that second, third or fourth one, you have to get the first one, right, right, like you have to give yourself the best fighting chance. And the only way you’re going to do that is ensuring that you have the right people on your team. But then also obviously sticking to the correct principles, right, like sticking to your investment thesis going after businesses that you know, that work with your strengths, right, that work with your background and stuff like that. So I would say it’s, it’s even more critical to reach out and have the right people on your team, because otherwise there’s not going to be a portfolio of businesses.
Joe Valley 23:49
Exactly. You know, once you once you take a certain amount of your funds, especially if it’s family funds, and you’re married, whether you’re a husband or wife buying the business, if you screw it up, your spouse is probably going to be really reserved in allowing you to do it again. So you do want to do get that that first one, right, so that you can build that portfolio.
Ahmed Raza 24:15
Exactly. And you know, that example you gave was fantastic because I’ve actually been in the same shoes myself. So when I first was buying businesses just by myself, they were a bit small. On the smaller end, this was eight, nine years ago, I was buying smaller, like sub 50 sub 60k businesses and again, the online business space, the world was a bit different back then you could find a lot of business, this price point, we started a small cap PE fund and bought an e-commerce business that was well into you know, I think it was like half a million or something for our first one. And there were components of that business that I had never dealt with. There was a physical component. They had a warehouse all of these things. And I was like, Hey, I’ve done this a ton of times, right? I’ve bought a bunch of businesses. I’m smart, I can figure this out. I don’t need to hire someone. And really I wish I did because it would have saved me a lot of headache because of the things We found out afterward, you know, that wasn’t, you know, I wish I had known when I bought the business, I would have paid differently for it, I might have never bought it in the first place. So it’s one of those things where like, it sucks. I know, it’s, it’s not cheap, right? Like Good, good due diligence isn’t cheap, it’s time consuming, we spend a lot of man hours working on these deals. So it’s not cheap, and I completely understand that. But at the end of the day, it’s like, Hey, you either pay now or you’re gonna pay him many times over, you know, a year from now. And like the choices you’re so I think that’s, that’s the way I look at it. And funny enough, if I were to buy a business again, I would, you know, I would also do that I would consult either my own firm or like other firms and make sure that that process is beyond myself as well, because there’s also that emotional component too, right? We become enamored by these businesses that we’ve spent the last three months looking at, and you need someone to come in there and objectively say, Hey, this is a good decision, or this isn’t a good or here are your risks and opportunities.
Joe Valley 25:56
Yeah, one of the things that we say in my house, or actually, it’s just me that says it cuz I’m me, I say, I got this and it’s become a joke in our house. Because generally, when I say I got this, it means I don’t. And I’m smart enough to know that I don’t my wife knows that. I said that when I bought the business, and I hope to never say it again. Deanna is laughing. She knows me well. Yeah, I do the same thing. I mean, look, I sold the, you know, personally over $100 million worth of transactions with Quiet Light, we’re approaching a billion dollars in close transactions. If I were going to buy a content, SAS e-commerce, business, anything, I would absolutely hire due diligence, right? There’s just no question about it. And as I’m looking at one of your reports, we’re talking folks listening, we’re talking about CPA review of all financial statements, unlimited customer support, assessment of web traffic, 25 plus test to identify risk, opportunity and growth analysis. And look at this, review supplier agreements. That’s kind of important once you say all of it is just critical, critically critical stuff. valuable, valuable, critical stuff. So I don’t I don’t know how much we could drill this into folks head. But if you’re buying a business, get it done. Let me actually, very few people do this. But if they’re selling a very large business, you know, at least eight figures. I’ve seen some people pay for due diligence to see what’s wrong with their business, and then fix it. Right. It’s part of that opportunity and growth analysis. But they’re not selling right away. They’re generally selling in 12 to 24 months. Have you had anybody come to you? That’s on the sell side that says, Tell me what’s wrong?
Ahmed Raza 27:45
Yeah, no, that’s that’s a great question. So it’s, it’s certainly not common, right? I would say it’s less than 5%. Not even of our deals where we represent sellers or we have sell side due diligence. But we have done this. So we have mostly will do a sell side quality of earnings. Right. So we’re we’ll go in there, we’ll assess both the business from an operational perspective, but the financials as well. And the biggest benefit to that is that we can then put everything together, we can clean it up, we can make the financials look really nice and kind of make sure that they’re accurate. And then we can work with the seller, when they’re, you know, looking to sell that business. And usually a lot of these folks are doing it privately, if they’ll reach out and they want something from us outside due diligence perspective there, they might be looking to go privately, they might be looking to go with the broker, but will essentially be able to, like represent them throughout that deal. So it’s not common, but we’ve certainly done it.
Joe Valley 28:35
Gotcha. All right, Deanna. Any last questions before we wrap this up?
Deanna Berardi 28:39
Yeah, Ahmed. So tell us a little more just about your sweet spot? Well, you know, I know your e-commerce and your SaaS and you’re in all these different verticals. But do you have a sweet spot in terms of deal size or age of business, just so I can kind of make sure we’re talking around the same circle? Because we can send people back and forth to each other?
Ahmed Raza 28:59
Yeah, absolutely. So most of the our sweet spot is essentially what we call like online, right? So it’s like, hey, anything like e-commerce, content, SAS, anything that we can, you know, trace the traffic and the foot traffic back to an online presence. And then in terms of size, you know, we’ve done a lot of deals under a million dollars as well, I think over the last year, so we’ve kind of moved into slightly larger deals, but most of the deals we work with are anywhere from two to eight to $10 million. We’ve done larger, we’ve done smaller, but any any online business, you know, again, SAS e-commerce content works. And then I think you asked this earlier about, like, when should clients approach us or when is that like sweet spot in terms of like, Hey, is it just after LOI? So we have we have like two separate offerings, right. So one is where, you know, I would say 70% of our deals come in, where someone has an LOI signed and they’ll come to us and they want due diligence on that particular deal. And then we also have what we call our Start to Finish plan which is where clients will come to us they’ve been searching for a deal for like the has six months year and they need a bit more help and they’re still in that search phase. So they’ll come to us and they’ll say, Hey, I kind of need help with with finding the right business. And I want kind of by site advisory, even before that loi is signed. So we’ll bring them into our Start to Finish plan, which is a bit more comprehensive. And I would say almost all of the folks that come on that plan are first or second time buyers, and they just want that additional support along the way,
Deanna Berardi 30:23
Are you talking about? So tell me one last couple of key points on your buy side search services, because we get a lot, I get a lot of requests for people that can’t find that one business, they’re just buying one. So what do you how deep? Do you go into search?
Ahmed Raza 30:37
Yeah, so we go fairly deep. And I think like, so a lot of a lot of those clients that are coming in, they do need help with search, and then some of them just need help with by site advisor as a whole, right? Like, how do I even know which business to bring under LOI? So it’s like this. It’s it’s more of like a much more supportive process from the start. So I know like the folks that acquisition lab, they kind of do a similar thing where they’re kind of helping even before that loi stage, but our search side, you know, we go as deep as online businesses, so we can’t help with Hey, we’re looking for like an H HVAC business in southern Florida. We can’t help with that. But anything like if you’re looking for an e-commerce content, SaaS, we can definitely help with that.
Deanna Berardi 31:15
Joe Valley 31:16
I can’t let the mention of the Acquisition Lab go without commenting. Folks, y’all know that Walker Deibel, one of the most handsome advisors on the Quiet Light team,
Deanna Berardi 31:27
Because his hair who it was he was way hotter with long here.
Joe Valley 31:30
You liked his long hair, I thought I thought he looked like an overweight, older Tarzan that had become domesticated. Walker is the best selling author. Now he’s the Wall Street Journal Best Selling Author of Buy Then Build. And that has morphed into the Acquisition Lab. And they have cohorts at the Acquisition Lab where they bring a fixed amount of buyers in on a quarterly basis to go through a full training program on how to negotiate and acquire all sorts of businesses, not just online businesses, you can go to AcquisitionLab.com Or BuyThenBuild.com. I don’t have any photos when he’s looking like the older Tarzan, but you can you can listen to a podcast we did a month or two ago. Really quick, embarrassing story. Walker, he’s kind of like a mini celebrity at this point, Ahmed, and he actually on the podcast we talk about it. It’s he was in the men’s room at a urinal and I hate urinals where they you know, it’s like a very thin little barrier between and somebody else sitting standing beside somebody walks up
unzips his pants, goes to the bathroom looks over he goes, Hey, aren’t you Walker Diebel? This is this is not when you want to be recognized.
Deanna Berardi 32:51
As one of the first times among your cash, you slip into potty talk, I feel like
Joe Valley 32:58
We dip into potty that’s awesome, much as we can. This is great. Ahmed, thank you. It’s great to have you on the podcast, looking to helping your business grow and helping our clients use your services, Deanna’s right there with you as she’s talking to a lot of buyers on our team, or they come to us and she’ll refer folks over as well. How does? How does an audience member reach you? What’s the best approach?
Ahmed Raza 33:24
Yeah, absolutely. So if you go to RapidDiligence.com, you can book a free intro call. That’s just our our consultation call. It’s not a sales call. It’s really just there to understand like, hey, where you’re at in your buying journey, what we can help with, I mean, we have folks that will reach out, you know, a year before they think they’re going to make an acquisition and we have folks reach out two weeks after they’ve already signed the LOI. So if you are at any point, considering it, please reach out. It’s always good to at least have that discussion. You can always email me as well at Ahmed, A H M E [email protected].
Joe Valley 33:54
So we got the email address and rapiddiligence.com. Awesome.
Ahmed Raza 33:59
Joe Valley 34:00
Ahmed. Thanks for joining us on the Quiet Light Podcast. I look forward to staying connected as as the years pass by.
Ahmed Raza 34:08
Awesome, thank you guys for having me.
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.