Webinar: Mergers & Acquisitions with Chris Lubkert

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Chris Lubkert of Extendify was our special guest at this live webinar.

Chris and his partner ran M&A at Automattic for a while, including the Tumblr acquisition, and now runs Extendify.

Watch the replay with Cory Miller and Jeff Meziere to hear the key takeaways Chris learned from his experiences.

About Chris Lubkert

Chris Lubkert Co-Founder of Extendify

Chris started his career in management consulting at Bain & Company and in the operating group at Bain Capital after studying biomedical engineering at Duke.

From there he led the carve-out acquisition of PowerReviews and served in a variety of leadership roles to return the business to high growth.

Chris then joined Automattic where he and his partner ran M&A at Automattic for a while.

Chris then left Automattic with a colleague of his to start Extendify, a platform for premium WordPress solutions. His aim is to help create opportunities for entrepreneurs in the WordPress community.

You can find Chris on LinkedIn and Twitter.

Machine Transcript

Cory Miller: Hey everybody. Welcome back to the Business Value Academy as always. I feel like we're getting to the tail end I think of the pandemic, but I still feel like we're all juggling, all kinds of stuff. Jeff's got some big, heavy stuff going on with his family health situation. We're thinking about you Jeff and your family.

[00:00:24]But wanted to welcome a great friend of mine and an awesome person for the topics that we talk about at Business Academy, Chris Lubkert of Extendify.  Formerly of Automattic. Formerly of all kinds of things. But Chris, thanks for being here today. Can you share your little quick bio? Because I think I know some of it, but I'm going to butcher it if I keep trying to introduce you properly.

[00:00:52] Chris Lubkert: Sure. Yeah. Thanks for having me. I started my career in the business world. I studied engineering in college, but probably did nothing with the degree and was all in, in the business world. I did management consulting, which was working with generally large companies on a variety of.

[00:01:08] Strategic projects before joining bank capital, which is a private equity firm. So we were doing large, kinda like multi-billion dollar acquisitions of different businesses. The premise was to acquire the businesses, improve them over time and sell them for more than they bought them for.

[00:01:25]And I was doing that. Both of those were with very large companies or both the acquisition targets are the clients we're working with where it is like large multinational companies. But then I switched to the kind of startup earlier stage world. So I joined a company called power reviews, which is an enterprise SAS solution.

[00:01:42] We actually acquired that business. We're growing that a little bit over time before joining automatic. We were doing both acquisitions and investments in and around the WordPress space. And I'm also working on some internal projects as well. And that's where I was up until about a year and a half ago when I left with one of my colleagues there, Artur to start Extendify so that's my background.

[00:02:06] Jeff Meziere: Cory, can't hear you. So tell us a little bit about Extendify? Oh, Cory's back. He's got another question.

[00:02:29] Cory Miller: That's a great question, Jeff. So if I back up for a second, I love the way Jeff and I had a different route to entrepreneurship and I love your coming through some of the financial world and things like that to get to where you are.

[00:02:43] And Jeff, I don't know if I told you this, but Chris actually, and his partner Artur led and brokered the deal for Automattic which undergrads WordPress to acquire Tumblr and Chris, you've got a lot of accomplishments, but that's a headline for me. And I know we're going to talk maybe a little bit about it more so for tips and takeaways for founders, from buying and selling businesses.

[00:03:05] But I love now you're in WordPress. Like you're operating man on a level here with WordPress and I love that, like you went from, automatic and. All the acquisitions that happened over there, including tumbler and now are in the WordPress space operating cool businesses. So yeah,

[00:03:25] Jeff Meziere: I was just going to say, to hear such a huge transaction like that, he looks spry and good, man. I imagine there were plenty of sleepless nights going through something like that.

[00:03:33] Chris Lubkert: So yeah. It's definitely, that was a tumbler. Yeah, it was a fun one to work on. It was impactful. It's automatic really added a new division to the business. But yeah, it was certainly a lot of work. I think my, I had more bags under my eyes then than I do now. Fortunately. And it's funny that's an issue that's in time when I'm a big proponent of the distributed work model. I think it can make things, it can allow people to bring the best talent from all over the world.

[00:03:58] But when you're all trying to work together on something, that's very time sensitive, having people spread out all over the world. Yeah, it is a more challenging aspect of it. So I think I was in Europe at the time actually. And so saw the sunrise too many times too, to care, to remember there because where you're working with people, in both these customs and west coast and things like that, but yeah, it was fun.

[00:04:18]Jeff Meziere: Cool. Yeah.

[00:04:22] Cory Miller: So tell us a little bit about what you do at Extendify.

[00:04:27] Chris Lubkert: Yeah. So when we left to start Extendify it's squarely in the WordPress space, but Artur and I, we had a few reflections and none of which are particularly novel about, kind of WordPress in general.

[00:04:37] Most people recognize but one is that, for a lot of people, WordPress remains hard, the, getting started, it's something that takes time to, to learn and to figure out, figure your way through it. Tens of thousands of plugins out there, you need to navigate and tens of thousands of teams.

[00:04:56] And, it remains a challenge for many folks to get started with. Some people will come to WordPress, they expect a Wix or Squarespace or a Shopify like experience and that's not what they get. And then another reflection is that. Specifically around Gutenberg and the new block editor, just how transformative that can be toward. Press and how at the time, and still even today it's largely a tool.

[00:05:17] It's something that, is getting better and over every release gets better and better, better, and becomes a better tool, but it's not yet a full solution. And so we started Extendify to really build on top of core Gutenberg and allow people to. Very easily create at their sites and giving them to give eventually giving them all the tools that they needed to achieve their goals as a business, specifically targeting SMBs, kinda thinking about what are all the solutions they need pre-integrated pre already working well together to achieve their goals.

[00:05:47]That's our goal to Extendify. And we actually, as part of Extendify had just to get started we did make a few acquisitions and brought together a few products and a few teams that really gave us a good foundation to build on top of internet squarely focused, more focused now on the product side of things and building out the platform and releasing it to our user base.

[00:06:06] Cory Miller: Thanks for putting the link in the chat, Jeff, to Extendify, where they can learn more. So here's a couple of things I want to ask you, Chris, about your takeaways from doing M&A and being in that whole world. I want to talk about buying a business thoughts about how you approach that. I want to talk.

[00:06:23] Okay. Selling the business, how entrepreneurs in our crowd can better prepare from your perspective. And third, if we have time, if you would, you have raised money, you've been a part of that world. And many of them. I myself have not been through a formal, raising money rounds. So we talk about build by partner and what's our, did we get all of those Jeff build by partner?

[00:06:50] Jeff Meziere: Yeah, I'd build a partner.

[00:06:54] Cory Miller: Yeah. Okay. So if you're game for that, Chris, I'd love to just work through that framework. And Jeff, you jump in here and ask questions of Chris each two or should have met well before this, because you've got similar strategic and I would say analytical minds too.

[00:07:09] And I love the way both of you approach business. As we're going, if you have questions for Chris, post those in the chat or the Q and a button and Jeff and I will be watching that. But so the first question, it's flipping this a little bit. We haven't talked too much Chris about buying businesses, but you've been in that seat and are in that seat of going and acquiring businesses.

[00:07:30] And it's. Honestly, I think we want to push a little bit more is a perspective of you can grow and build your business by acquiring another business. It's something that I hadn't thought about too much, but I did acquisitions. I just went through an acquisition. And Jeff did too on a different, in a different type of business.

[00:07:49] But when you think about how do you think about. Acquiring a business. What do you look for? And then we'll get to maybe some tips, but thoughts on how you think strategically about acquiring and what that means for your existing business or your other businesses? You've been a part of.

[00:08:08] Chris Lubkert: That's a really good question. A lot of times people do feel like they aren't equipped to pursue acquisitions. Whether they're too small or they don't have the experience to do it, or they don't have the capital to do it, but all of those things can be solved. You can, I was actually. We can talk more about this later, if it makes sense.

[00:08:27]When I mentioned that the company I was with prior to joining automatic was power reviews. I was actually with a much smaller company prior to that. And we raised capital and acquire the PowerReviews business. That was 10 times larger than us, and truly transformative to our own business and the opportunities that we had.

[00:08:43] But. Yeah, it can be a very powerful tool to really achieve, achieve whatever business goals you have. But I think about it. I do think about it as a tool. It's not a strategy in and of itself for most companies. It's a strategy if you're a private equity firm and your whole business is about buying and selling your home.

[00:09:03] This is all a diamond selling businesses. But if you're looking at a strategic acquisition, it's one tool and Jeff, you mentioned the Bible partner, element of it. If you want to get into a particular market, you want to offer a particular service. You want to get access to a particular user base or customer base.

[00:09:20] There are different ways that you can do that. You can make an acquisition, you can do something like that. You could partner with someone or you could build it from scratch yourself. And so oftentimes I think a lot of times people think about. Approach acquisitions as a strategy in and of itself.

[00:09:34] It's like now I want to buy some things. So let me go out and try to find some things to buy, but really you should be thinking about what are the, know, where do you want to take the business over the next few years? And where do you have internal capabilities? And. Yeah. What kind of resources to, to get there and where might that be missing and where am I acquiring something or partnering some somewhere help you achieve that goal even better.

[00:09:57]Jeff Meziere: So for Extendify, share with me, maybe a couple of the reasons why you would have gone through the early acquisition phase. You mentioned a couple of things that you acquired. Just share with us a couple of the reasons, like what's going through that buyer's mind as you're thinking through.

[00:10:11] Chris Lubkert: Yeah, for us, it was, it's two different reasons. Depending on which acquisition we were thinking about, but, one was to get a. Both a product and an in a skillset around that product, it's a team that was really experienced and have been working on something specifically, and we knew and combine it and joining forces with what we were pursuing with Extendify could really turbocharge where we were going.

[00:10:33]And the other was an established user base, I think a lot of times, sometimes customer base. A lot of times going from zero to one 10, like that is a really hard. Phase and can take some time. So I think we were confident that we could have grown that way, but by making some of these acquisitions, we did it, it accelerated us.

[00:10:53]So it bought us time. It got us to where we are now much faster than if we had started starting from scratch. So those were just two of the two things we were thinking about. As we, as you think about, it's important to understand what the rationale is from either side of the table.

[00:11:07]So if you're making an acquisition, you want to really be clear on what it is what problem is it solving for you and how it really helps your business? But if you're selling and you're in those conversations too it's really important to make sure you understand. What is the motivation on the other side of the table?

[00:11:21] What do they really care about? How do they, is it about the product is about the customer base, the team, all of it, some of it, can I, that's a good question.

[00:11:28] Jeff Meziere: As the are on that side was it a proactive acquisition on your side? Or did the approach come to you from seller? Was it natural that it happened over time or was this like very thought out like that you had a strategy of a gap that you wanted to fill either from speed, the acceleration of the time.

[00:11:49]Or what are some of those other technicalities that you speak to? So did you proactively go out and seek those opportunities or did some of those opportunities

[00:11:56] Chris Lubkert: come to you? Yeah. With Extendify everything's been proactive from us, so it's a good distinction, right? I I think a lot of people that you and you can understand.

[00:12:04] Yeah. The value in having gone through the process ahead of time to understand, for your business, what are the, what's the strategic rationale for pursuing an opportunity like this, and then looking out into the world and finding the best possible one to, to end up. Partnering with value.

[00:12:20] We teamed to end up partnering with and business to eventually acquire. know, You're going to get to a better outcome in almost every one of those situations than if you just sit back and wait for someone who happens to reach out and be interested in selling and for a couple different reasons, like one is at the beginning, like you can really.

[00:12:37] Crystallize what your thesis is like the why behind what you're pursuing. And you can take a broad view of looking at all the different solutions out there. So not just what happens to be posted on a acquisition marketplace or someone who happens to reach out, you're taking a broad view to really find the best fit there, but it takes a lot of work, because a lot of these conversations.

[00:12:58] Yeah, don't go anywhere. Really. Yeah, I think it's much faster if there's already an interest from both sides that, Hey, we want to sell our business and we're putting it up here. We're going through a process even potentially. And so you'll know, you'll get to an answer in a matter of weeks.

[00:13:13] It's very different than when you're more proactive and building things like that, building a more strategic approach. A lot of it is building relationships, getting to know people over time. And it ends up making them more successful. Again, it's giving us more confidence that there'll be that it will be successful if we've really taken our time to get to know people and understand, our shared motivations and make sure there's a really strong fit both ways.

[00:13:33] But yeah, that was our approach.

[00:13:36] Cory Miller: And now I would say having known you and Artur for over a year now that I really appreciate your approach because it is relational. You didn't come in and just say. Not saying you have this, but you didn't come in and say, Hey, I got this big bag of cash. I want to lay in it and buy you out.

[00:13:53] You're like, hold on. Everything I've seen, you guys do has been highly relational. And I would say in venture to say, I'm human, but that's such a good point. And I'm curious to, and Amber actually has, this question is from the, like, when you were talking about power reviews, you bought a bigger business.

[00:14:12] If I heard you right. So how about financing? So I'm a buyer let's say company and I want to buy there's different options in flat. In fact, I know you because you followed this Brad Sunata delicious brains just acquired advanced custom fields, a huge plug Jack and pressed at most, every developer uses by the way.

[00:14:33] And when we're talking to him, he actually got he's in candidate and he actually got a loan to purchase the. The plugin, which I was like, whoa that's where I've heard. I haven't heard of that. We actually have friends here in BBA that have done similar things, but when we talk about financing options, power reviews going and, buying way, bigger business.

[00:14:54] How do you go about doing that? What are some common ways that you've seen to finance equity?

[00:14:59] Chris Lubkert: Yeah, it definitely makes it more complex. I think the easiest situation is if you have cash to do it and you can make a simple deal and you can make it forward, move forward quickly with power views. We were trying to coordinate two things at the same time, we were trying to move the deal forward, the acquisition opportunity to acquire the business and secure financing at the same time.

[00:15:21] And you have to make sure that those two things. I'll equally, if one of them falls through one of them, no good without the other, really, all right. It definitely adds a lot of complexity and you're managing multiple parties in that way. You're trying to make sure that deal goes through, but also that, you have enough confidence that, know, your due diligence is satisfied and you want to move forward with it.

[00:15:39]But also that the, whoever your financing partner is in that situation is as well. Anyway, I acknowledge that is more complex, but I think broadly, if you don't, if you don't have kind of capital to pursue an acquisition, there are three main sources for that. One is you can raise equity funding, you can share, sell a part of your business in exchange for the capital of the pursued, the bitch, pursued this out acquisition opportunity.

[00:16:02] You can pursue debt. So you're gonna Brad's that example for Brad getting some, getting a loan to acquire ACF. Yeah. That can be really impactful, especially if you're acquiring a business that has either either your current business or the one you're acquiring has stable and strong cashflow.

[00:16:21] That you can use to confidently service that, that too. And then the third is, know, that there are other options of like other components, like seller financing, which could be, you come up with an, a, you come up with an agreement where you're going to pay some portion of the proceeds over time.

[00:16:36] Potentially that could be based on performance of business or it doesn't always have to be, or potentially the person you're acquiring the business from what they're actually interested in is the equity upside from themselves as well. So kind of part of the consideration could be you share some equity in the combined business and you work together to really build something great and bigger than either one could have been just on their own. So yeah, that's broadly how I think about it.

[00:16:58] Jeff Meziere: That's a lot of the creativity in the deal, is that once the deal makes sense and how you go about doing it, there's a lot of options that could be on the table. Would you agree with that?

[00:17:07] Chris Lubkert: Yeah. And that's where understanding, like motivations are really important. And so if you don't understand the motivations, it's really hard to figure out what is the right. DL. That actually makes sense. So in a vacuum, just saying, Hey, we're going to come up with the perfect structure for this. Yeah, I we always seek to understand what's motivating someone, is it, do they need cash today for some reason?

[00:17:27] Do they actually, are they motivated by working on something bigger than what they are working on individually? And are they interested in the upside going forward? Or what is it that really gets them excited about the opportunities so that you can. Yeah, both. Make sure you're crafting a compelling offer.

[00:17:43] One that meets their goals and is exciting, but you're also not giving in areas that aren't going to be impactful. So if someone doesn't care, one lick about having equity ownership in the combined business, but they'll take it. If you give it to them, you just give them 5% of the business that may not have changed their behavior at all.

[00:18:01] But you try to have given this away now and not w without really yet. Any real benefit or need. So understanding the motivations I think is really important there. Yeah.

[00:18:13] Jeff Meziere: Like I just got a lesson in love languages in business, right? Giving somebody a gift when they don't care about gifts is is not really impactful.

[00:18:20]How quickly do you try to get to that point? And do you have any tips for us about how do I uncover that motivation from a sale? If I'm the one that's being proactive, right. It's so difficult at times to enter those conversations where you're picking up the phone and saying, Hey, will you sell your business to me?

[00:18:37] And they're thinking they've probably got big pie in the sky eyes. Cause you're the one place in the phone call. So they're thinking, oh, I'm on the offensive here. Like I can throw out a big number he's he wants to do this deal so badly. So how do you get down to realistic and tempering those expectations and understanding motivation?

[00:18:56] Chris Lubkert: So this goes back to what Cory was talking about. The kind of building a relationship with folks. There's one approach you can take, which is to be very aggressive. Maybe you could say, or identify, this is an acquisition I want to make, I'm gonna call up and try to pursue it and try to make a deal happen quickly for us.

[00:19:14]Speed. Speed does become important like once, but a bit it's more important. Once you've agreed on, a path forward, once we have a term sheet or an LOI in place, we want to move quickly and close that acquisition and that's. That's it's usually a mutual feeling of both sides is to just get it done now that everything's agreed, but in the early stages, we take our time and for us it's largely about.

[00:19:38] I would say in many cases, we don't always even know for sure that it's a good fit until we've had many conversations to understand, where someone's taking the business, what their current challenges are, what their team is like, what they're passionate about, all these important things to make sure it's a good cultural fit as well.

[00:19:55] So we're usually not placing a phone call and saying, we want to buy your business. Most of the time, it's really just building a relationship. Sometimes in fact, in a very small minority of times that leads to an acquisition in many other times, it may just be a friendship. It might be a partnership. It might just be, keeping in touch and helping each other out wherever we can informally rather, as we're doing things. That's what I've heard.

[00:20:23] Jeff Meziere: I've heard that I've heard the word relationships a lot. Yeah. Let me ask you maybe a pointed question, just out of curiosity, on my side. Was there anybody in your proactive approach that you reached out to that you did not already know? Or did you have a, somewhat of a relationship with those individuals?

[00:20:41] Chris Lubkert: No it was both I would say. So these were certainly new relationships. So we'd been in and around the WordPress space for a few years, but we certainly weren't Artur and myself, like prior to joining automatic, we were new to WordPress, actually. So folks like Cory and many others probably going to focus on this call had been in this ecosystem for much longer than we have.

[00:21:00]But I think our approach generally was. We didn't go into most of these conversations with any kind of preconceived notion of the outcome that we wanted to come out of it. We went into it with just, getting to know people and in a lot of ways, just trying to figure out like how it can be helpful too.

[00:21:15] So in some cases like these were people who were looking for. Yeah, folks throughout the community, thinking about either raising capital themselves or potentially selling their business, it may not be a fit for us. Like I said, like the majority of the conversations don't actually lead anywhere specific for us with Extendify but we still try to be helpful whenever we can, whether it's like making introductions or sharing advice and kind of guidance on how to approach that, since we have your kind of somewhat unique experience that, not completely unique but most people don't go through. Most people don't have lots of different iterations going through processes like this. So we just try to be helpful wherever we can and that's turned out well because people connect us with other people and we, how to grow our network and our relationships that way.

[00:22:03] Cory Miller: That's one thing and I won't say names, but I noticed within the people in WordPress right now connecting or in the M and a activity space is I was a little bit shocked when. One person said, this isn't a fit here and I'm not giving names. One person said, okay, if you're talking to a business owner, this isn't a fit, but I'm going to introduce you over here to another person.

[00:22:30] And that was a pretty awesome, at least in our space that I have seen not naming names, but that was just a reflection of I thought some of this might be super competitive, but the fact that everybody wins. Good stuff to happen deal flow to happen, and things like that might not be a fit for me, but it could be for you, which is really neat.

[00:22:47] I think my, my theory would be, it's just a reflection of the open source, ecosystem and Ethan's I guess. So my question here's another question when we're talking about buying. If an entrepreneur is sitting there and they're going, okay, this is terrible charging my business. One of the things you mentioned earlier, and they start to look at a company, a lot of the things we talk about here is how you minimize risk.

[00:23:11] When you think about due diligence and thoughts and takeaways for an entrepreneur, looking at acquiring another business in that due diligence phase, what are some things that they should look at?

[00:23:25] Chris Lubkert: Yeah. And and it was a really good point because I think a bad acquisition can be more impactful than a good one in many cases, culturally, it can be a huge distraction. It could be a financial disaster. So it is important to make sure are you have a high degree of confidence that, that what year. Ultimately acquiring is going to be good for the business because it can also have the opposite effect that it's intended for sure.

[00:23:46]There are a couple different phases I think, of due diligence. So there's one, which is, I think there's oftentimes in the process it's like LOI or term sheet, where you've agreed on the terms of a deal. So there's due diligence and some before you get to that point, which is largely around vendor understanding.

[00:24:05]What's the value of this business. What's the value of this opportunity to me is the acquire, is there a good cultural fit? Is it, let me understand the basic kind of fundamentals of the business so I can understand how to value it and what it's, what it will be worth to me.

[00:24:20]And then there's a more technical part of due diligence that, I don't mean technical in the sense of looking at code, but I just mean, there's a phase between this term sheet or LOI, and actually the deal closing, we are checking a lot of boxes. You're making sure that everything you thought you knew about the business and we've been told about the business is actually true. And for that, my biggest advice there is, even if it's relatively small, you want to engage some sort of professional help with that, like on the legal side or, potentially you might need some accounting support for that as well.

[00:24:54] But certainly from the legal side, like there are folks out there who have. Done hundreds of deals and know exactly like what you should be asking for what you need to look at. And depending on the size of the deal, it's up, know, you need to figure out like how much risk are you willing to take on.

[00:25:07] So I think when we're, if you're doing a huge acquisition and you need to make sure. Every little thing may be checked off. If it's smaller, you may not go through in such great detail. But anyway, I think about those two, two phases very differently there, the second phase, it's not the type of thing where you just want to type up a word doc and ask a few questions and wing it and hope that it all works out.

[00:25:31]Because it can really come back to bite you. If that's okay.

[00:25:33] Jeff Meziere: Give us some feedback on. Maybe a couple of things that you would tell a seller as you're reaching out as the acquire, what are some of the frustrations you have with sellers besides tempering your expectations? And I'm not going to overpay you for the biscuits, but w what kind of feedback can you give us?

[00:25:52]From that perspective to say, Hey, sellers, if I could get you to get on board and do a couple of things that would make my life easier as a, as an acquirer.

[00:26:01] Chris Lubkert: A lot of the, I won't even call it frustration, but a lot of the time that, that it takes is sometimes getting people to spend time to think about what they really want for their business and our future.

[00:26:13]Especially since we're proactively. Building relationships and having conversations with folks it's not always something that's been top of mind. We'll talk to people about what are their goals over the next few years for the business and what they're trying to do for them personally?

[00:26:27] What are they hoping to accomplish? And that's just something that takes time. But to the extent that I think that is a good practice for folks running a business is to, periodically always be thinking about what do you hope to achieve in the future? And therefore you can be more, you can be better prepared for when opportunities do come out for whether it's an investment, a partnership or an acquisition to understand if that fits with what your goals are.

[00:26:50] Both professionally and personally there. But I definitely would call it a frustration. That's just, a process that people need to work through and the time to do that. And just understand what's the best fit for them.

[00:27:01] Cory Miller: I think I remember when I was right before my deal, Chris one of the people I talked to that was not not ended up being the acquiring company, ask these type of questions too, because it just helps negotiation.

[00:27:12] But he asked me where are you at? Oftentimes I'll talk to founders and they're a little burnout, and that was a little bit of a filler to see where you are. But I think that's great advice that I don't want to just get skewed. And what I take out of that is if you're on the other side, get really clear about what you actually want and be prepared to share that.

[00:27:32]It's a confusing time for the entrepreneur, for sure. Having been through it, Jeff's been through it too. Because it's mixed with emotions. There's not just business, there's family stuff in there, but I think that, what does the future look like for you? What do you want out of it is such a good thing to just wanting to put a blessed plus 10 on.

[00:27:50] Chris Lubkert: Yeah. And I, and it can impact how the rest of the conversations go over time, too. So if you communicate, if you say. I'm reaching a point where I am, I'm ready for a change in my life, my business here. And yeah. I'm looking for a new home for this business to someone who can take it and carry it for the next 10 years of it's it's life that will frame the discussions and the conversations very differently than if you say I am super motivated to keep going with this business.

[00:28:22] I think there's a lot we can do independently, but I'm also looking for opportunities to do that as part of a larger organization or teaming up with someone else and, want to be a real leader for this going forward. Both are perfectly acceptable. Places to be and motivations for potentially selling or having these conversations.

[00:28:38] But. If what you've done is communicated the wrong message there, you can find yourself in this position where, Hey, I was hoping to leave after three months and work hard and go spend some time on the beach or go pursue a new opportunity or whatever it is that I was looking to do.

[00:28:52] But now this deal is structured in a way where both the commitments I'm making, personally, just to people about what we're planning to do, and also tying my own financial outcome, potentially of the deal to staying with this and the success of this joint business.

[00:29:08] Now I'm tied to that. So I think being clear, make sure that you end up in a spot that really, know, you end up with a deal and an opportunity that really matches whatever your own motivations are. But the other Jeff, back to your question about, frustrations or what should people be thinking about?

[00:29:22]If they're thinking about signing their business, in addition to really just understanding where you want to go over the next few years for yourself in the fruit business. I think there's also an element of just knowing your key metrics for the business and being able to speak to those and being able to share those confidently, this isn't something specific to just M and a, or being prepared for an acquisition opportunities.

[00:29:47]Cory and Diana, this is stuff you talk about all the time, just preparing ourselves for sales, actually just good business practice, lot of others, just for running a business and making sure you're focused on the right things. But I think it can, it can, if you don't have a good handle on, the key metrics for your business and what really drives it forward and how you're managing those, you can have two negative effects.

[00:30:10] So one is that it can potentially decrease someone's confidence that you actually know what you're doing. If you're just running the business off the seat of your pants, like it can be harder to get confidence that, okay, there's a real, scalable, sustainable business here, because I know that they're watching these numbers in some ways, but it also can, you can also find yourself in a situation where you may think something's true and you may say we have,

[00:30:39] $800,000 of ARR annual recurring revenue. But if you're not actually sure about that, and it turns out later that it's only 600,000, like that's going to be a problem later, through it through the later phases of the diligence that may mean you end up with a deal that you're not as excited about, or maybe it doesn't happen at all.

[00:30:56] And being able to share things and have confidence in those metrics is certainly going to help everyone involved. I think.

[00:31:04] Jeff Meziere: Doesn't that also help give you some level of confidence as an acquirer, is that, truth and transparency is so critical, right? If there's skeletons in the closet as an acquire, I want to know today, like bad news is best delivered swiftly, right?

[00:31:19]If there's skeletons, I need to know about them quick. And doesn't that just help you get confidence in the. If they're able to speak to, they recognize their business, they've got these key metrics they kinda know and see how they define success. Because depending upon whether this seller is going to be continuously involved in the business or not right as part of the management team, or just a short transition period or lifestyle, who knows.

[00:31:44]Because we haven't, we, there's a myriad of different options. But you're trying to get to know somebody as that seller and understand their motivations. And I would think that would give you a little bit of confidence, right? If they're able to speak to their business and they may value and look at success quite completely differently than what you do.

[00:32:00] And it's a point of a point of disconnect that needs to be addressed pretty well.

[00:32:04] Chris Lubkert: Yeah. Yeah. I think you hit the nail on the head. It is a large part of which is building trust with someone and kind of building that takes time. But it also as transparent and as people can be throughout the process, I think that helps for sure.

[00:32:17] There's this there's like this line, you're trying to walk a little bit of, if you're selling a business, you're it is you do want to figure out how you can. It positioned the business and the best way possible for you to achieve the outcome you're looking for. So there is a bit of sales involved.

[00:32:36] You are selling a business in that way. But I think a lot of that comes down to understanding what value you can bring to whatever this other organization is and making sure you're really communicating that value strongly and clearly to them. So there's kind of sales element there. But in terms of the skeletons in the closet, I that is.

[00:32:54] Yeah, I've talked about these two different phases, and this is going to middle point would have been in that position where there's a LOI or a term sheet when we approach that, whether it's an Extendify, when we're not automatic or even previously in, in early in my career, it's as an acquire, you want to get to the point where you are 95% confident that this deal is going to happen.

[00:33:14] That, on the same terms that you've laid out in this LOI or term sheet but you're basing that off, assuming that everything you've been told is true. And, there are no skeletons that have been hidden away in the closet and. If you're thinking about the, the, the seller of the business, the worst thing for you to happen, maybe not the absolute worst thing, but a pretty bad outcome is you enter into this term sheet or ally, you go down this diligence phase and it turns out there's something you haven't shared, and now you share it.

[00:33:41] And it's, a week before, or even four weeks before you're looking to close, you've put in a ton of effort. You potentially stopped conversations with other parties, you've engaged legal counsel. It's that's a huge distraction for your business in a lot of ways. And the deal either doesn't happen, or it doesn't happen on the terms that you thought it was going to happen because you hadn't shared something ahead of time.

[00:33:59] So it's to your benefit as a salary to share as much as you can prior to entering this final phase of due diligence, to make sure that, all the cards are on the table. This is the business as it is the good, the bad, the ugly, and and even, making sure that you, as the acquire, you understand that.

[00:34:14] And despite all of those things, you're still gonna move forward and that can give everyone confidence that the deal is actually going to get done. And it's worth spending time on.

[00:34:22] Cory Miller: It's a funny, you talk about parts of the due diligence process can be helpful for an entrepreneur. And when we first started putting together what, now we know as BBA, we called it a bootcamp called exit exercise that both Jeff and I haven't gone through it again.

[00:34:38] That due diligence process. There's an opportunity cost for sure. It's time and energy and effort that sometimes goes away from your business. But what we found was we both made discoveries through the due diligence process that were like, if this doesn't happen, we just made our business better.

[00:34:55] And so we put it together as exit exercise because. It's probably something you don't wake up and go today is the day I get to go through due diligence. But there are benefits to going through the exercise too, of examining your business to that level. Like some people in the coal mine today say a chef puts it, you have a shoe box.

[00:35:16] Of your accounting. And that whole thought of just going through Guild deals is make, makes you have hot sweats because everything is a shoe box mess, as far as your accounting goes. And that's a prompt to say, maybe you need to engage the CFO for hire or a CPA to help you get things under wrap.

[00:35:32] Jeff Meziere: Yeah, I don't know about you Cory but I would even piggyback on that for a second add too, and say through the due diligence process in, in, in my. I think that there were questions that came to me that made me think, wow, I guess that's important to a buyer. Wow. If I would just focus a little bit of time on that, I could probably sell it for more.

[00:35:51] If I had three more months before this deal was going to close. I learned things of how I could have increased value and gotten more money. I guess I left money on the table. Cause I hadn't really thought about it in that. Until I got to due diligence checklist and I'm like, oh, you really care about monthly recurring revenue. That's interesting. Like I just thought about cash in the bank.

[00:36:13] Chris Lubkert: Yeah, for sure. I Some of these questions can sound pretty basic, but taking a step back and really think about what, what's been the effectiveness of your marketing spend. What's been driving new customers. What's your churn rate? What are the, how does that turn? Vary by customer segment, are using high churn in one segment, but not others.

[00:36:30] Like these are often asked questions, they'll come up and questions that like potential acquirers will want to know. It depends on the business and what questions make sense for that. But, know, if you've never, it can be eye-opening if you've never looked at the business that way it can really open, open, open up some opportunities for sure.

[00:36:46] As you look into the things.

[00:36:50] Cory Miller: Okay, everybody. We've got about 15 minutes and we're really thankful for your time, Chris, that come in and share your experience and expertise about buying and selling businesses, being part of the whole thing. My big question. So post your questions in the chat or the Q and a button, and we'll filter those up to Chris with the time remaining.

[00:37:08] But I have a big question for you. If you had to say there was just one thing you seen most generally kill bills, what would it be time?

[00:37:21] Chris Lubkert: Yeah, so I, I think, but I love it. Yeah. I alluded to this a little bit earlier, once you get to this stage where you've agreed on the general construct of a deal and you want to move forward, you actually want to be prepared to move forward quickly with that.

[00:37:35]And this is not, I I think there's like a bit of a cliche out there. It's like time kills all deals. It's not just applicable to acquisitions. It can be partnerships or the things, but when you found someone who. Either side, if when you found a good fit and you feel like you've come to terms on it on a deal, really only bad things can happen.

[00:37:57] If things go longer. So there could be, if you're selling a business, a whole host of things could happen, right? If it w with the acquire, maybe the CEO of that business gets fired and new one comes in with new street, new priorities. Maybe if it's a public business, they're stuck. Stock price tanks a month from now.

[00:38:17] And their whole budget has changed, maybe a global pandemic hits and everyone has a ton of uncertainty in their business and they decide not to do any acquisitions for the time being, it could be a whole host of things, but Yeah. So it's once you move and it can feel quite frantic, it can feel quite fast.

[00:38:33] It can feel like you are spending 100% of your time on just getting through this process and neglecting other parts of your business, which is another reason why I actually wanted to move. I want it to go by quickly is just get it done. So anyway, so I think about that, like I think about.

[00:38:50] Whether it's deals we've been a part of, or, more often it's, as we're chatting with folks or helping provide some guidance, as they go through their own process, the longer something takes, the more opportunity there is for something to derail it all.

[00:39:04] Jeff Meziere: And even in a good way, oh, I was just going to say even in a good way, right? Like the seller could actually have a sharp spike in revenue. Which then changes their perspective about the original terms of an LOI, all during that phase.

[00:39:20]Chris Lubkert:  Yeah. It can't, are you just saying like the business that's looking to be acquired could improve and potentially get more value?

[00:39:30]Jeff Meziere:  I'm just saying it can I've seen deals happen where a seller enters into terms on an LOI. And we the deal drags that speak for just a little bit too long in the perspective that the original terms of the deal. Don't necessarily add up to the seller's expert patients because now all of a sudden oh look, it's worth even more. And then the, and then you're back to that, you're back to the drawing board and it's this vicious cycle that never ends.

[00:39:57]That's the reason that time, I think, is so critical when I plus one on top of what you said.

[00:40:01] Chris Lubkert: Yeah. Yeah. I It could be a whole, it could be maybe some new partnership comes in or maybe they just had their best month ever or whatever it is. If you're on the buying side and you want to move, w this is, goes to your point about wanting to move quickly there, or it could be, they get another offer, that, that is compelling to them in some way or whatever it is, there are all sorts of things can change.

[00:40:24] Yeah, once you what I would say is I wouldn't rush the beginning part as much, I think buying or selling, I think if you're selling a business, really taking time to make sure that, it's a good fit for you, if you're going to be staying on and for the team and making sure that you found the right partner there and taking your time to engage multiple different potential acquirers.

[00:40:45] His advice that I often am giving to folks, it makes a lot of sense. So I, I don't think that beginning part needs to be wrong but it's once you reach this LOI or term sheet phase, you want to have everything lined up. You want to have all your, all the diligence ready to go.

[00:40:59] If you can, you want to have already know what lawyer we're going to use to support the deal. And you just want to have that, all that ready to go. And people who understand their, the urgency behind it and motivated like you are.

[00:41:13] Cory Miller: On that note, Chris, I was biased. I got during my deal which was ask early for a due diligence checklist from their corner. And that gave us, I don't know, four weeks, a month of head, start to the guy one, we go, holy crap. What is that? What is that on? Number 80. But also get a headstart on given our CPA CFO for her whomever a little bit ahead. So I want to, I love that it was not what I was thinking you were going to say, but I really love it and I can totally see that.

[00:41:44] Okay. So let's flip it. That's what can kill a deal is time? What if you had to say one thing that makes deals good and successful and fast, or, optimal, what would that one thing be?

[00:41:59] Chris Lubkert: I think this is both about that process prior to closing a deal, but also what we haven't spent much time talking about as how do you make sure the deal is successful once it's closed?

[00:42:11] And it actually achieves what both of both sides expect to have happen because plenty of deals happen. And then the effect of them, isn't what everyone thought for one reason or another. But for me, what can really make something I think successful both through the early stages of the process.

[00:42:26] And also post-deal is. It's not as simple as a one word answer, like time was with the last question, but it's really coming to the shared understanding of where the opportunity is and what everyone's going to go out and whatever it's going to pursue. Yup.

[00:42:38]Said another way, you just want alignment between the two parties of what's going to go forward there. And I think if you can be aligned in terms of. Early on in the diligence process, like what's important. Like where are we in the process, even to your point, Cory asked for the due diligence checklist.

[00:42:54] Sometimes you'll see things on there. It'll make you realize oh, okay. And Jeff, you mentioned this too. This is really important to you. I didn't actually realize that this is something that's really important to you but getting getting alignment there on what's important.

[00:43:07] Critical elements of the deal to make sure it gets done, but also then aligning on, what's everyone going to be doing on day one. You close the deal, you high five, everyone celebrates excited for the future, but now it's starting over, day one again, what are you going to do going forward?

[00:43:20] And if you're not aligned there, you may be thinking I'm going to run this great business and take it this way and get some support from this company over here. And then maybe think. Yeah, to combine these two things and go pursue this new opportunity. And if there's that misalignment to can just make that day one and an onward phase really painful for both sides stuff.

[00:43:44]Cory Miller: I think you found that word, which I love: alignment. So he did successesful alignment from the beginning to the end and then the detriment where deals can fill his time. But the alignment word really speaks back to what you're talking about. Relationships. What do you, what of both sides want getting down to that?

[00:44:01] Which, my deal felt I went into it way more guarded and protected than I should have, but I also and it's much better. But I tried to get. That sense of, we were a partner for over a year before the D the LLI phase started for us and getting to know the key execs and the other side of the table, and understanding some of their story and personal context where they started, I think was absolutely critical for through the deal, because I had relationships lean on when things got tough.

[00:44:32] Now, one of the things that we talked about mine is one of my partners had. We didn't know one, if he was going to live through the week, but I want to say, what was it, five months in of a seven month total deal for us. And w we could lean on those relationships we had got where I could have some conversations.

[00:44:50] I wouldn't say they were back channel, but just laying it out, here's what's happened and another word you've used and we've embedded in the relationship. One is trust and continuing to keep that trust, like when issues came up on our side real quickly and make a phone call, Hey, this came up.

[00:45:08] I wanted to be the first to let you know what's going on. And here's what we're doing to work about. That was, I think absolutely critical to that. And it maintain that alignment. Like we both wanted the same thing. Yeah.

[00:45:21] Chris Lubkert: Yeah. And one of the things that it seems like you're touching on a little bit there Cory is like the idea of the best time to be having some of these conversations and building those relationships. Isn't the day you want to sell your business, right? If the first time you ever talked to someone is, Hey, I'm ready for a change. Are you interested?

[00:45:37] Jeff Meziere: Hey, Cory, send him a check. Send him a check.

[00:45:40] Cory Miller: Got it. Got it. Chris. PayPal is on the way

[00:45:43]Chris Lubkert:  Yeah, but I think it's, yeah, I know it's a lot of what you all are focused on with the business value academy, but I think it's having those conversations early. It's you hear it all the time, right? People describe, Hey, we'd known Cory, or we'd known the themes team for many years.

[00:46:01] We'd partnered and blah, blah, blah. And so that's why this makes it makes, make sense for us right now. It can give both sides, a lot of confidence that there is that alignment there is there a good fit and it gives a lot of that, trust when things do go, not perfectly through that process that it's still, it's, it still allows it to keep going. It makes sense there, but...

[00:46:21] Cory Miller: okay, Chris, thanks so much for all of this because has a hope I pronounce your name, right? Because that's a great question. Number one is what are some of the early signals when buying a business for yay or a no. Is there something and if you need more context to answer this, Chris, let me know, but is there an early sign when you're like it's a, yes.

[00:46:41] We're going to keep going or no, is there something that is an indicator in that.

[00:46:46] Chris Lubkert: Yeah. It's a good question. It's a really tough one to answer because it's so context dependent. So it really depends on what the motivation is. You want me to talk about that earlier, to, to pursue an opportunity, but I think if there's an indication that there isn't that a lot.

[00:47:02]There are a bunch of obvious things, but maybe they're not so obvious, but maybe I'll say that many way. Yeah. If people are. You can feel like the motivations aren't aligned in some way with, if someone's just trying to, if what you're looking for is, a team to really come in and help continue to grow this business, combining with yours and the person.

[00:47:23] Yeah. No is on interested in continuing on there can be things that just don't make sense that just don't fit the strategic rationale for why you'd be pursuing something like that. That goes beyond Yeah. Any sort of sense of like dishonesty or things like that.

[00:47:36]Those are obviously like, it can be quick nays, if you will. Yeah, it's a tough question, given that it is, so it kind kinda just depends on what the motivations are for pursuing an acquisition.

[00:47:48] Cory Miller: Yeah. Yeah. I think embedded in a lot other things you said you can have some takeaways. If there's a lack of trust that there's a lack of, open openness, even it's a motivation thing. Mismatch. I think those are good. Good indicators of now. Jeff, do you have any parting questions with the last couple of years?

[00:48:06] Jeff Meziere: No. I've learned so much today, Chris. I can't believe that we, that Cory's been so rude not to introduce us before today. But I appreciate your time and just the perspective your willingness to share and vulnerability. Helping us guide the folks within the academy today giving some real good value back. And I just appreciate your time so much. We can, we could sit here and talk for an hour. I think. Continue this conversation all day long, so probably have a lot of stories to share back and forth. So thank you for your time.

[00:48:32] Chris Lubkert: Yeah.

[00:48:33] Cory Miller: Jeff I've hogged Chris and Artur to myself, for my own advice. And then we were talking earlier this weekend. I said, Hey, you got some time and thank you, Chris I knew you had to move a meeting to make this happen. And there's so much thank you with my last question. What is something you're looking forward to or excited about with Extendify that's next step? I want to give you like a couple of minutes just to brag about something cool. You're doing at Extendify and the future there.

[00:48:57] Chris Lubkert: Cool. Yeah, I think with Extendify we have as everyone always does is it's like long list of like product roadmap, those long product roadmap, and not a never enough time to get done with it all. But we're super excited about, thinking about kind of building or editing a site. How can we give people all of the tools they need to really be a solution for what they're looking to do.

[00:49:23] So if I want to set up a, like a pricing page for a yoga studio, maybe there's like a booking platform that's already pre-integrated and set up for you there in addition to the page layout and everything else you need. So that's what we are know. I feel like today we're just such, we're still in the early stages in a lot of ways.

[00:49:41]We've definitely taken the approach of you're do you work in a very iterative way and get feedback and get something out there and user's hands. But I feel like we still have a huge opportunity ahead of us to really just transform the WordPress experience for small businesses, freelancers building sites, or anyone out there who's creating sites without the like huge enterprise.

[00:50:02] Budgets the like Facebook or other companies would have who use WordPress as well. So super excited about that. And I appreciate, Yukari and Jeff have me on, it's been a fun conversation. One thing I just offer up is. Folks out there, if you're going through this process of you're thinking about raising capital or buying a business or selling a business, you like Artur, I like, we're always happy to chat with folks and offer whatever kind of guidance or tips would be helpful in whatever way we can.

[00:50:29]Folks can definitely feel free to reach out if you're ever looking for some help or advice and some of this stuff.

[00:50:35] Cory Miller: That's very generous. And Chris and Artur are both in Post Status slack. So you can ping them there for the WordPress peeps and then go over to the extendify.com and sign up. I know you're in early phases, but you're going to be launching some cool stuff very soon. And you can be the first to find out about that.

[00:50:53] Chris. Thanks my friend. I appreciate you so much, Jeff. Always good to see you and thanks everybody for being here today.

[00:51:03]Chris Lubkert: Thanks everyone.

 

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