May 9, 2025 • 37 mins
How does the changing market condition affect M&A in freight? Find out with our returning guest, Spencer Tenney from Tenney Group!
Here’s What to Learn From This Episode:
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M&A Market Trends: Current market volatility affecting M&A in freight; mixed industry responses—some waiting, others pursuing acquisitions. Tariffs and uncertainty driving cautious capital allocation decisions.
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Buy vs. Build Decisions: Companies often prefer M&A to build capabilities like AI due to tight margins and market challenges. Increased diligence in capital allocation noted as firms manage risk, with a cultural inclination towards acquisition over development.
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Cash Flow & Consolidation: Small transport businesses financially fragile, most operate month-to-month. Rising bankruptcies from cash flow issues. Industry consolidation growing as small operators exit or merge for increased profitability, driven by sustainability and risk factors.
About Spencer Tenney
Spencer Tenney is President and CEO of the Tenney Group, a merger acquisition advisory firm dedicated to the transportation industry since 1973. The Tenney family has been serving the transportation industry for three generations. Spencer is a graduate of the University of Texas in Austin, He is also the only Certified Merger & Acquisition Advisor (CM&AA) in North America that is dedicated exclusively to the transportation industry. Spencer and his team have closed hundreds of transportation business sales across the United States. Tenney Group clients are companies in the trucking, logistics, passenger transportation industries with annual revenues of 20M - 300M. Spencer's articles have been featured in Fleet Owner, Transport Topics, School Bus Fleet and many other industry publications.
He is a sought-after speaker at national and state industry trade shows and currently serves as Chair of the American Trucking Association's M&A Task Force. Spencer and his wife Lauren reside outside of Nashville in Franklin, Tennessee. He enjoys songwriting and is actively involved in the Hope Clinic, a faith-based organization that equips women, men, and families to make healthy choices regarding unplanned pregnancies, depression, & addictions. He is also the founder of "Tuesdays with Tenney Group, a networking group designed to enrich relationships and business opportunities for Historic Downtown Franklin, TN professionals.
Connect with Spencer
- Website: https://www.thetenneygroup.com/
- LinkedIn: https://www.linkedin.com/in/spencertenney/
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:03):
Came back with a bank window down yelling now money anything hey oh Got the foot on the gas pedal to the metal when I'm get to the back hey Got the foot on the gas pedal to the metal when the blame moving fast hey Let them all cross if they hate then let them hate them make a bigger balls.
Speaker 2 (00:24):
Hey what is up, ladies and gentlemen? We are back. We are live. It is the Freight Coach Podcast, the top podcast in transportation, coming to you guys every single weekday, 8:30am Pacific, 10:30 Central, to break down some industry headlines. But most importantly, you guys provide some actual insight into what you can do with all of this information. If this is your first time tuning in, welcome. This is the real side of freight, ladies and gentlemen. And I say that before every single show.
(00:49):
And what I mean by that is I only speak with transportation professionals because at the end of the day, you guys, I want to talk to the right individuals who have done what you're looking to do or who are currently doing what you're trying to achieve, so you can take that information, apply it, utilize it, and see a meaningful difference in your business and your life. Happy Friday, everybody. We're going to jump right in. I got a very special guest for you guys. And you know we're going to be talking about M and A today, right? What's going on in the freight market from that perspective, how can companies position themselves through. There's already been a flurry of activity happening so far, and we're going to get caught up on that.
(01:24):
And I have nobody, and there's nobody who's more qualified to talk about this than my friend Spencer Tenney. So, Spencer, thank you so much for taking the time to join me today.
Speaker 3 (01:32):
Chris, good to be with you, my man.
Speaker 2 (01:34):
Yes, it's been a while. I mean, the last time we saw each other in person was out at Freight Fest in Houston. It's been like a year and a half now at this point, and I think we've missed each other on the road since then.
Speaker 3 (01:46):
Well, it's not because we. Because we haven't been on the road. I think it's just been. We just been. Been busy. But I certainly love keeping up with what you're doing and appreciate all that you do for our industry.
Speaker 2 (01:57):
No, I appreciate that, man. And, you know, for me, I just. Like in today's day and age, Spencer, everybody's got an opinion on everything, right? And it's kind of like it breeds a ton of confusion out there because, you know, you can go out and make predictions now and you know, if you have the right camera angle and lighting and mic set up, you sound. And I'm like ripping on myself here, you sound really educated on some stuff. And you know, from my perspective, I always like to bring people in from multiple facets of the industry to come in and talk about their expertise. And you know, when it comes to M and A, like, this is literally all you do, right? Like, this is your bread and butter, this is your jam.
(02:36):
And this is why I want to have you come on and kind of break these things down. So, you know, how have things been looking, you know, from your perspective? Is there a lot of wait and see kind of right now out there? Any hesitation from that standpoint?
Speaker 3 (02:52):
It really just depends on what your end markets are in this space. I think there's a lot of folks that are taking that posture right now, and understandably so, because there is a quite a bit of disruption going on with tariffs and the uncertainty about what that's going to mean moving forward. But still, as you mentioned, you know, you don't have to be an M and A person to read headlines. And there's still quite a few announcements that are happening on what seems like a weekly basis. And from our vantage point, we're seeing a lot of folks that are going through, you know, just kind of a checklist. And part of that is just to understand, okay, do we have exposure because of these tariffs and how might that affect interest in our business?
(03:43):
And for some, it does make sense to kind of continue to wait and see what's going on here. And for others that don't have that exposure, you know, they're not hesitating to get into this space and try to advance their position through some type of strategic transaction. So it's a little bit of a mixed bag, but I think we've been highly encouraged just based on the volume, but also the size of the deals that are actually getting done. Even with the most recent deal with EPS and Anlauer Healthcare Group, that's a great testament about some of the deals that are getting done both in size, both in terms of their strategic significance. So for us, it's just, it's not a one size fits all. It's just, do your homework, how does this affect you and if it makes sense, get in the game.
Speaker 2 (04:32):
Do you think with the amount of like. Like, I'm more of like, if anybody's looking to build out their service offerings, do you think, Spencer, there's a lot more, hey, let's just buy something as Opposed to building it, or do you think people are going to be more inclined to build it internally now with the rapid changing landscape of AI tools that are out there at their disposal, do you think it'd be easier for, you know, do you think that's a lot of an internal discussion? Or are these guys like, hey, with this, let's just buy an existing AI company and then roll it up inside of us?
Speaker 3 (05:10):
Well, I think they're, I think business owners in our space right now are kind of inundated with options to, to advance their current position. Whether that's be acquisitions, whether that's through organic growth, whether that's through using, you know, or developing proprietary tech, Endless set of options. And so I think where what I'm seeing folks do is just what is the surest path for execution?
(05:36):
Because I think there's a lot of things that you could do, you know, and you mentioned AI, so what I see, a lot of people are like, if that's kind of how they're wired and they have a, a bent towards that type of technology, then I see a lot of folks leaning in pretty hard to say, hey, this is, we can shine and we can outpace the competition based on this is kind of like what we're wired to do. And other folks that don't live in that world don't want to live in that world. They're much more inclined to go out and buy that technology or buy a competitor who already has it to supplement basically the same effect. And so to me, you can kind of get there a number of different ways.
(06:16):
I think that because we're in such a challenging marketplace and have been for a long time, compressed margins, it's like in, you know, every day of the week adds a new challenge to consider. And for that reason, folks are being very diligent about not committing themselves or their capital to things that they don't feel like they can execute at a high level. And so that's where we start seeing like, you know, if, you know, if in doubt, buy it. That's what's happening.
Speaker 2 (06:43):
Do you, are there any sectors of the industry that you feel like, are at a higher likelihood for like a fire sale to come in? Is there any, you know, like, maybe it's, you know, it's, maybe it's tech. Maybe it's like you see a lot more exits from the trucking side of things, like the asset side of things. Because, I mean, we're, you know, we're in a unique position where we're out. Like, it has to fit our vertical if were to like, entertain any form of strategic partnership, acquisition or anything like that. But I'm starting to see a lot more trucking companies come up for sale here than I have over the last 12 months. And it's like, I would say a massive spike here in the last couple of weeks of opportunity that's out there.
Speaker 3 (07:26):
You know, and some of that is unfortunately a little too late or too little too late. And I think this is what happens with a lot of folks. They get into a very, you know, compromised situation. And, you know, some of that is of no fault of their own. It's just they had the wrong exposure.
Speaker 2 (07:43):
At the wrong time.
Speaker 3 (07:44):
And so. So I think some of that. But also there's a large portion of focus on industry that was. I don't mean to be critical, but the industry as a whole was artificially propped up by a lot of different things during COVID And so. So folks that should have left the industry a long time ago have kind of lingered here. So I think some of this is. We can be reactionary to this, and I don't really see it that way. I think some of this is just pushing out operations that probably would have, you know, self elected out a long time ago due to cash flow crunches. It's just now this is just, you know, tipping point for some folks. So that's kind of how I see it. I don't really see any particular sectors. These.
(08:33):
The tariff things has so many complex effects that you can't even really. I mean, I don't think anybody even. I mean, they might have thought they understood how it might affect them on the front end. But the way that some of this is playing out, you know, there's just a lot of, you know, both intended and unintended consequences through this. And people are trying to figure that out on the fly. And I don't think there's any specific verticals that you can just say, like this one is the most. Obviously there's certain things, like in the auto space that gets a lot of attention.
Speaker 2 (09:05):
Yeah.
Speaker 3 (09:05):
You know, and then, you know, kind of your consumer products and some things like that have exposure in that area. But all in all, it's just a tough time. And so I think that to the. If you've kind of got to the place and you have exhausted your operating reserves, you don't have any volume and you're not, you know, proactively going to try to offset Some of the rising costs in this industry. It's understandable why some folks are, you know, why we're seeing these bankruptcy announcements in mass basically.
Speaker 2 (09:35):
Do you think like, so you know, obviously cash flow is king and I, you know, I try and talk about this on the show. I, I don't know if enough people realize how financially fragile most businesses are. Right. And they can even be established when it comes out there because it's like your cash flow, managing your cash flow is of the utmost importance. But I mean if we're going to talk small business, which is, you know, like if we're talking from a scale perspective that is like 90 some percent of the transportation industry, whether you're a trucking company or a freight broker alike. And you know, I don't know if enough people realize how most small businesses are literally 30 days from going out of business every single month essentially while they're trying to build up their cash flow.
(10:16):
So like have you ever worked like how can people work on improving that from that perspective outside of the just go sell more.
Speaker 3 (10:25):
Right. Well, I mean the reality is we've kind of gotten to a place where this industry, I mean it's not your grandpappy's trucking industry anymore and unfortunately.
Speaker 2 (10:42):
You.
Speaker 3 (10:42):
Need a certain amount of scale in order to squeeze out a meaningful amount of profitability from this industry. And so I think that, yeah, I mean, and I'm not trying to sound self serving, I just think that this is what's true. You're going to see a massive shrinking in the overall number of operators both on brokerage and on the truckload side because the economics aren't going to make sense for people anymore. Most will elect out because just too hard for too little. They'll go do something else. And so, so those that will be successful will either merge or they'll acquire. They'll do certain things to change the formula from which they can create consistent cash flow moving forward and have much more sustainability for the amount of risk that you actually have to, you know, expose yourself to in this space, which is astronomical.
(11:33):
So for me, like I just think some people at some point they just say this is not worth the risk and the hassle and I'm not going to do this anymore. And those that don't make that decision are typically doubling down in the form of a merger in an acquisition because there's only so many pennies that you can squeeze out of $. At some point you have to change the Formula, create synergies, purchasing power, economies of scale. I think that's what we're seeing a lot of folks move into.
Speaker 2 (11:58):
Yeah, it's, you know, margins are obviously extremely thin on a lot of sides of the industry. At the end of the day. Right. Like, it's, you know, I know that there's always this talk on who's. Who's screwing who essentially out there. And I just don't know if enough people are actually putting themselves in the seat of the other individual. Right. Because some people are gonna be, oh, shippers are making all this money off this. I mean, maybe they're making a little bit of money off of it. But like, that. That's why we're in business though, right? Like, I don't know of anybody who starts a business. It's goes, God, I really hope to literally lose everything over the course of these next six years. You know, people want to go in there, they want to build a sustainable company and go out with that.
(12:41):
But I think that, you know, we're. We're at a unique time because we, you know, you're like there was such a false sense of security for a. For essentially 2021 through the beginning stages of 2023. There was a, you know, astronomical amount of money that was being made out there from across the board. And a lot of people, you know, it. I get it now, but I didn't always understand this. That what, you know, and when times are good, you think it's always going to remain. Right. Like you think I'm always going to make a million dollars a year no matter what, I don't have to change anything. You drink your own Kool Aid, you start, you. And then, and I think, like, then you might expand too quick.
(13:20):
Did you see that at all out there, Spencer, where you saw businesses maybe go way too fast into the expansion because they had elevated revenues and, you know, it was an unhistor. It was a historical time, so people probably spent a little bit more recklessly than they should have. And I know as a business owner, as somebody who's bootstrapped, that is a mistake I made. I thought that my revenues were going to remain at what they were for a lot longer than they did. And I increased my expenditures in certain areas. And I have since learned from that. And I have, you know, course corrected and reduced my overhead by probably 30% over the last 15 months because of that.
Speaker 3 (14:00):
Yeah. And I mean, I think this is why I love serving business owners, because the reality is nobody bats a thousand on these types of decisions. And so there's a reason why America is the greatest land in the world is because people are going out there. And yes, there's a path to freedom of all kinds, for prosperity, but the exchanges, you have to be willing to take enormous risk in certain situations that have very little visibility on whether or not that's going to provide sufficient return. And so. And so I. I think that's what makes America great. That's what makes entrepreneurs special, because not everybody can operate like that. Yeah, so.
(14:45):
So what I would say is that, you know, a lot of business owners beat themselves up, maybe yourself included, about like, hey, like, I can't believe I did that, or whatever the deal is, but given the information, the time.
Speaker 2 (14:56):
Oh, yeah.
Speaker 3 (14:56):
I think of a lot of people that were like, well, hey, I'm either going to lose money or I got to buy as much equipment as I possibly can right now, when there was total uncertainty about whether or not, you know, when they would be able to get more equipment if they didn't buy at that particular time. And many are, you know, taking it in the teeth as a result of those decisions now. But at the time, like, who could have possibly known that was, you know, so all that being said, I'm saying I have great admirations for owners that actually are in the arena doing the work and rather than the person, the sideline reporter, you know, you know, you calling out their mistakes along the way. But. But I do think that the reality is this.
(15:39):
We're at a time in our industry right now where it is fragile more so than ever. And so I do think that there are tremendous opportunities, but it's just very difficult to experience the opportunities with this space, in this space without scale. And so that's where you're seeing a lot of people just trying to find out, I mean, problems that, like shippers and everybody else, they're trying to solve. They're. They're evolving every day. So I think the question is, are you still solving a problem that people are willing to pay for? Right. That has not been commoditized. And so I think that's probably part of the issue is just you can't stay stagnant in terms of your. In terms of your commitment to go solve problems that are, you know, that. That are worth somebody paying for. I think that's the issue.
(16:23):
Once what you're doing becomes commoditized, and if you're not adapting to the situation, that's where you get trouble.
Speaker 2 (16:28):
I think, you know, to me, what's never talked about in data, you know, out of everything that I see and this is why it's like I like the sideline reporter made me think of this because I couldn't agree with you more on that. Spencer. Everybody's a Monday morning quarterback, but nobody puts themselves in the emotional roller coaster of being an entrepreneur and what comes along with it and the decisions you make in the moment. There's never an emphasis on human emotions and human decision making. Right. Because like you can sit there and look at everything in front of you and it could paint a very clear picture on what probably is going to happen. But you could have a founder who's maybe never been through that before and they're going to go with their gut and their gut might be wrong in that.
(17:13):
And then there's also the inevitable decision making weight that comes of if I'm wrong, I lose everything. And then that breeds hesitancy in those moments. Right. Because the emotion that most people never understand is when you have everything on the line. When you're building a business and you don't have a 401k, you don't have a retirement, you have no salary that is guaranteed coming in as a business owner and how that affects your ability to operate in the beginning stages of it, right? So it's like that's a weight on most people's shoulders that they will never comprehend and they're always quick to judge of like oh, I would have never done that. It's like, oh really?
(17:53):
Give up your salary, throw everything on the line and build up your dreams for a couple of years and then tell me that exact same thing, that you wouldn't make that decision because you're wrong and you're lying to yourself in that moment. So I just want to point that out and that's like, you know, I, I, I was a lot harder on myself in the moment than I am now because I am looking back and I'm like, dude, you're going to mess up, right? Like you're going to make mistakes. That's part of it. And I also look at it as, fortunately I learned really quick and I course correct sooner and I didn't let it drag out a lot longer than I should like very well could have in those situations. Yeah.
Speaker 3 (18:27):
And I think that's, I mean one of the key characteristics of highly successful business owners, business and value creators, is that they move on from failure very quickly and they learn and they apply and they don't make the same mistakes twice. That's it. Yeah. And so I, I think that, you know, you show me an entrepreneur who has not failed and I'll show you someone who hasn't made any money at all. So like, and so I think that to me it's a badge of honor, but also with it comes responsibility. Like I said, like, if you're going to be an entrepreneur who likes to repeat the same mistakes, you're going to be very broke and very unhappy. And so I think that's what I love about our industry.
(19:12):
And this comes across at M and A all the time, which is, it's an amazing industry, but it's also highly unforgiving. And you have to be agile. You have to be able and be open to reinvention at any given time. And so you know that. And that's when we talk about when you're in a market like this. My son listens to this Christian rapper, Andy Mineo, okay? He has this line, he says, you know, make moves or make excuses and that. And, and I love that line.
(19:44):
And that's kind of how I think about people that are like, you know, kind of in a state right now, which you can either make a move and attempt to advance your position either to partnership through merger, through acquisition, through, you know, maybe some type of management services agreement, whatever, to try to change the economics, the cash flow of your company right now, or you can make excuses, you can absorb all those losses and just take it. To me, that is not an option. That's never a winning formula at any arena of life of any kind. And so, yeah, so to me, like, right now, I think where I see folks doing great things is they're educating themselves, they're surrounding themselves either informal or informal best practice groups. They're moving quickly, they're making decisions.
(20:36):
And, and I think that like, it's just one of those things where like, you can make a. I mean, you can deliberate for months and ultimately arrive at a great decision that was three months too late at some points. Like, you gotta move and you gotta be decisive and you gotta make some decisions. And so not everyone gonna be right. But delayed, you know, a delayed good decision is the same as a wrong decision in most cases in this type of environment. So I think folks that are protecting and building business value right now, they're being decisive with the information that they have available and they're making moves.
Speaker 2 (21:14):
What could a business owner do? You know, say they're, you know, I don't want to Call it at their wit's end, or maybe their plan was, you know, within five years they were gonna sell. What, what could a business owner do today to start making their company maybe look a little bit more appealing out there?
Speaker 3 (21:31):
Well, I always start with kind of the basics. And so like a lot of folks, and they'll come to us and they're like, hey, I want to sell my business and, and I'll ask for some information. And they don't know this yet, but I'm immediately, and my team's immediately assessing whether or not that they have some basic functionality to perform at a high level in a actual sale environment. So to the degree that they can return the right information and return it in the desired timeframe, which is almost immediately on demand, we're assessing whether or not this is someone that, number one, is someone going to be interested in this business? Number two, are they going to present in such a way that will allow them to not leave money on the table? And so that's what I want to know.
(22:12):
So like, we want to make sure that there are some basic financial reporting disciplines in place that you can satisfy the most basic things that an educated buyer is going to request at multiple stages within the process. And so for me, that's kind of like step one. In step two, we want to start looking at leadership because ultimately when people are buying a business, they don't want to buy a job, they want to buy a business. So there needs to be structure that leadership, job descriptions, a meaningful amount of independence away from ownership. And so it's really important to think about who is that next level of leadership that's going to be driving the business moving forward.
(22:52):
I remember a reference, you know, quite often is depending on the size of the business and depending on, I don't know exactly, you know, the size of your, you know, the operators in your audience here. But you know, let's just say that if it is going to be a private equity buyer, I mean the things that they want to know, and I share this all the time because I think it's tremendous advice. This was Pierre Matthew out of Blue Jay Capital and they bought a large nine figure deal from us Priority Courier experts out of Minneapolis. And he was on my podcast afterwards and obviously said, like, how do you think about it? Like, what are you trying to assess within the first couple of things that you're looking at as you're evaluating a company to purchase?
(23:37):
And number one, he was talking about the leadership team and he's like, I'm not interested in evaluating their ability to operate the business today. I want to know what is their desire to. And what is their capability to operate the same business. If it's three to four times the size today, do they have the capacity to perform at that level? Because that becomes much more interesting. Because the alternative is a buyer has to come in and then substitute folks that are good employees but don't have the capacity to grow at that level. And that just creates more risk, which may not be attractive enough for a buyer to actually go through and complete a transaction.
(24:21):
So, like, if you can de risk the transaction on the front end by having a, an exciting level of leadership that can take the business forward without dependence on current ownership, that becomes very compelling and very easy to invest in. So I think that you talk about financial reporting, we talk about reducing dependence. Those are major things. And the other part about it is, you know, things you can control. I talk about this all the time, and this is high sensitivity around this right now based on what's happening in the market. I had in my podcast yesterday, Jonathan Todd from Finnish law firm, and were talking about what's changed in diligence over the last, you know, since. What does Trump call it? Liberation Day with the tariffs.
Speaker 2 (25:07):
Yeah.
Speaker 3 (25:08):
So the biggest change in diligence, the way that buyers are evaluating sellers on the path to close, is on the customers. And they want to know their, you know, they want to know concentration levels, but they also know their exposure to tariffs. But I think, like, customer concentration is something that owners and companies have control over. If you have a disproportionate amount of revenue in any one or a couple of different accounts, that is something that is high perceived risk, because obviously if that goes away, it's not even the same business anymore. And so it doesn't mean that it's a, that it's dead on arrival, but people need to understand the relationship between customer concentration and overall valuation. And so, and it may not even affect the valuation of the company, but it will most certainly affect the structure of the deal.
(25:58):
Nobody's going to write a, you know, highest offer, you know, in the market, all cash, when there's 90 concentration in one account or whatever else. So, so the solution is start to educate yourself about what is acceptable and to try to think about your growth. It's like, well, if I'm going to grow, I can't continue to expand this particular account. I need to grow in other accounts. If I'm going to grow because otherwise I'm going to be disadvantaged or discounted. Because all that growth is coming from one thing, and it's also limiting the future pool. Some people will just, I mean, they won't look at it if it's over a certain threshold, may call it like 70% or even 50%. You know, they won't look at it.
(26:41):
So I think that part of what I see owners doing that they can control, take care of your financials, start reducing dependence on ownership, and then if you have customer concentration, start making very specific moves to grow the business away from that current exposure. And in doing so, you expand the pool of potential buyers who would be interested and you will enhance the quality of the offers that actually come in. And we will most certainly enhance competition which will increase the value of the company.
Speaker 2 (27:15):
No, I mean, that's phenomenal advice. Right. And I feel like, and this is something that I, I see out there, even on, like, from like a business development standpoint, Spencer, is you get a couple of key accounts and then that The Pareto Principle 101 rolls in, right. It's 80% of your entire revenue is with 20% of, you know, is provided by 20% of your. Yeah. Or excuse me, when it was it. I forget how it goes, but essentially it's that concentration that you're talking about, right? Like the 80% of your revenues are coming from just like two people. Right. Like there's no diversification that comes along from your book of business and your risk factor is so high for failure at that point because one, you know, again, talk about human emotion.
(27:57):
You say the wrong thing to the wrong person, all of that gets shut off instantly and there is no chance of that coming back. And your overall, you know, your overall value of your company and your book of business drops overnight, essentially. And you know, for me, it's like as an operator, as somebody who's trying to build up their business. I'm trying, I am very much paying attention to that number right there from our revenue standpoint on a customer by customer basis. And obviously it's lopsided as you're building, right. There's always going to be that. And that's why I say you never stop selling. You have to continue to lower that overall exposure number down to where it's like, hey, you know, 25, 25. That would be phenomenal for you.
Speaker 3 (28:39):
Yeah. And what I would add is the same principle is true with the source of your revenue. So if a lot Especially a lot of freight brokerages you get you have like one to two rainmakers and they're bringing in all the revenue, right? So it's like, so that's another kind of thing that, an element of risk that you have influence over. So you want to make sure that, I mean it's a great thing. If you have a, just a guy that's just crushing it, that's bringing all time revenue, I think that's great. But you need to understand that when it comes time to buy that, like what are they going to be looking at? All right, well what if that guy dies? Like what is that? Like what is his non compete situation? Can he just walk with that book of business tomorrow?
(29:22):
Or like what does that look like? And so, you know, so I think it's just really important as people prepare to understand what do buyers care about? And so like they want to know about that customer concentration, but they want to know the source of the revenue and just as importantly one, they want to know what are the opportunities to expand these existing accounts. So for instance, you know, owners that are doing a really good job, they understand what the needs are of their existing customers and you know, where their current limitations are.
(29:56):
Like and so what ends up happening is if we're in a, we're trying to build a sales strategy for a client and we have an understanding on that or our client has an understanding of that, it just helps us understand what buyers to target who would be able to bring those capabilities, who might be able to contemplate different scenarios based on the synergies that would be created post transaction. And that's just, you know, I think that's just being very savvy about it. So you know, I mentioned Pierre Matthew and one of the other things in the podcast is he talked about like owners need to understand the core truths about their business, both what's good, but you know, the good, bad and ugly. They need to understand all of it and they need to have data to support it.
(30:41):
And that is more important than dressing something up and trying to make it look great. Owners that say, hey here they understand their core competencies, they understand the limitations and they can talk about it and convey those truths with data. I guarantee you like, especially like educated private equity investors, when they come across owners that are in that level of command of their own business, the imperfections actually become attractive because now those can be converted into opportunities based on, you know, data supported facts about what the problems are. But more importantly, what are the financial opportunities associated with solving those problems. And to the degree that the buyer can affect that's where the valuation scenarios become exciting.
Speaker 2 (31:30):
Spencer, I. I mean, I could talk to you for hours, man. But, like, this is because, you know, for me as a business owner, like, I. I'm not like, actively looking to sell, right? Like, I'm. I'm out here to, you know, this is. This is what I'm building for my career. But I know there's a lot of people out there who, you know, their back might be against the wall, they might not know what to do next, and they are going to inevitably say, you know what, maybe we should just sell. Let's try and get what we can. Or maybe they've just hit that inevitable wall, Spencer, where they're like, I'm done, right? Like, I'm done. I. I can't do this anymore. I got to go try something new.
(32:02):
Or, you know, maybe they've built a really quality thing and they want to move on to their next quality project that they want to build out. Because there's a. There's a big thing of. That's what I love the most about founder Spencer is there's some of them who are like, man, I just like building stuff, and when it gets to a certain point, I want to go build the next thing, you know.
Speaker 3 (32:19):
No, I think that there are a lot of people that fit that description. And so I've seen a lot of folks. I mean, we're prideful people as entrepreneurs. I mean, I think that's part of what makes it work, but it can also be pretty dangerous. And so, you know, to quote the. The movie Rounders, I always tell business owners, like, don't put in the pot, but you can't afford to lose.
Speaker 2 (32:40):
Yeah.
Speaker 3 (32:41):
And because. Because you know, just because you were dealt a bad hand right now doesn't mean that you don't have the capacity to be an exceptional entrepreneur and immensely successful, just in a different context. So don't put yourself in such a hole that you can't go do that. Right? And so, like, so I think that's number one. I think every business owner that is in a hole needs multiple sets of eyes to help them see clearly what is happening. I was talking to a business owner the other day and I was like, he's like, well, you know, I have X amount of time. I can do this. And I was like, well, you're bankrupt. I mean, like, I don't know why you're not saying it out loud.
(33:24):
I don't mean to be disrespectful, but like, I don't think you have any appreciation for how severe your situation is. I'm talking about tens of millions of dollars of debt, but in like no time. And whether it's denial, delusion, whatever else it is, I think we as owners have major blind spots on what's true in the moment. And so I would just encourage like a trusted friend, you know, your circle, your CPAs, your attorneys, I would invite them into the conversation to speak honestly about where you're at so that you can steward the situation as best as you possibly can and again, make sure that you live to fight another day, whether it's in trucking logistics or in totally different arena. But you gotta have people speaking truthfully and directly in your life when you're in this, when you're in a moment of duress.
(34:18):
And I think a lot of folks go months without that accountability and lose a lot more than they have to.
Speaker 2 (34:25):
Yeah, well said, Spencer. Spencer, thank you so much for taking the time to join me today. How does anybody reach out to you guys to find out more about what you have going on?
Speaker 3 (34:34):
Yeah, the best way, obviously you can go to our website at the tinder, thetine group dot com. But honestly, if you follow me on LinkedIn. We're pumping out things multiple times a week of 10 minute content. Just very consumable videos that will help you elevate your deal iq both as a seller and as a buyer. So I think those are the best ways to get in contact and we'd love to be a resource for you.
Speaker 2 (34:58):
Perfect. Spencer, thank you so much for taking the time to join me today. That's going to be it for today, ladies and gentlemen. As always, if you got value in what you heard, subscribe to the show. You guys, if you're feeling really ambitious after this one, which you should be, Spencer just literally laid out a masterclass for you guys to follow. Rank the show on itunes and Spotify because if you saw value, that's how your network's going to get value as well. I appreciate you guys. I love you guys and we'll be talking to you soon. Now we're just ending the stream.
Speaker 1 (35:24):
I'm.
Came back with a bank window down yelling now money anything hey oh Got the foot on the gas pedal to the metal when I'm get to the back hey Got the foot on the gas pedal to the metal when the blame moving fast hey Let them all cross if they hate then let them hate them make a bigger balls.
Speaker 2 (00:24):
Hey what is up, ladies and gentlemen? We are back. We are live. It is the Freight Coach Podcast, the top podcast in transportation, coming to you guys every single weekday, 8:30am Pacific, 10:30 Central, to break down some industry headlines. But most importantly, you guys provide some actual insight into what you can do with all of this information. If this is your first time tuning in, welcome. This is the real side of freight, ladies and gentlemen. And I say that before every single show.
(00:49):
And what I mean by that is I only speak with transportation professionals because at the end of the day, you guys, I want to talk to the right individuals who have done what you're looking to do or who are currently doing what you're trying to achieve, so you can take that information, apply it, utilize it, and see a meaningful difference in your business and your life. Happy Friday, everybody. We're going to jump right in. I got a very special guest for you guys. And you know we're going to be talking about M and A today, right? What's going on in the freight market from that perspective, how can companies position themselves through. There's already been a flurry of activity happening so far, and we're going to get caught up on that.
(01:24):
And I have nobody, and there's nobody who's more qualified to talk about this than my friend Spencer Tenney. So, Spencer, thank you so much for taking the time to join me today.
Speaker 3 (01:32):
Chris, good to be with you, my man.
Speaker 2 (01:34):
Yes, it's been a while. I mean, the last time we saw each other in person was out at Freight Fest in Houston. It's been like a year and a half now at this point, and I think we've missed each other on the road since then.
Speaker 3 (01:46):
Well, it's not because we. Because we haven't been on the road. I think it's just been. We just been. Been busy. But I certainly love keeping up with what you're doing and appreciate all that you do for our industry.
Speaker 2 (01:57):
No, I appreciate that, man. And, you know, for me, I just. Like in today's day and age, Spencer, everybody's got an opinion on everything, right? And it's kind of like it breeds a ton of confusion out there because, you know, you can go out and make predictions now and you know, if you have the right camera angle and lighting and mic set up, you sound. And I'm like ripping on myself here, you sound really educated on some stuff. And you know, from my perspective, I always like to bring people in from multiple facets of the industry to come in and talk about their expertise. And you know, when it comes to M and A, like, this is literally all you do, right? Like, this is your bread and butter, this is your jam.
(02:36):
And this is why I want to have you come on and kind of break these things down. So, you know, how have things been looking, you know, from your perspective? Is there a lot of wait and see kind of right now out there? Any hesitation from that standpoint?
Speaker 3 (02:52):
It really just depends on what your end markets are in this space. I think there's a lot of folks that are taking that posture right now, and understandably so, because there is a quite a bit of disruption going on with tariffs and the uncertainty about what that's going to mean moving forward. But still, as you mentioned, you know, you don't have to be an M and A person to read headlines. And there's still quite a few announcements that are happening on what seems like a weekly basis. And from our vantage point, we're seeing a lot of folks that are going through, you know, just kind of a checklist. And part of that is just to understand, okay, do we have exposure because of these tariffs and how might that affect interest in our business?
(03:43):
And for some, it does make sense to kind of continue to wait and see what's going on here. And for others that don't have that exposure, you know, they're not hesitating to get into this space and try to advance their position through some type of strategic transaction. So it's a little bit of a mixed bag, but I think we've been highly encouraged just based on the volume, but also the size of the deals that are actually getting done. Even with the most recent deal with EPS and Anlauer Healthcare Group, that's a great testament about some of the deals that are getting done both in size, both in terms of their strategic significance. So for us, it's just, it's not a one size fits all. It's just, do your homework, how does this affect you and if it makes sense, get in the game.
Speaker 2 (04:32):
Do you think with the amount of like. Like, I'm more of like, if anybody's looking to build out their service offerings, do you think, Spencer, there's a lot more, hey, let's just buy something as Opposed to building it, or do you think people are going to be more inclined to build it internally now with the rapid changing landscape of AI tools that are out there at their disposal, do you think it'd be easier for, you know, do you think that's a lot of an internal discussion? Or are these guys like, hey, with this, let's just buy an existing AI company and then roll it up inside of us?
Speaker 3 (05:10):
Well, I think they're, I think business owners in our space right now are kind of inundated with options to, to advance their current position. Whether that's be acquisitions, whether that's through organic growth, whether that's through using, you know, or developing proprietary tech, Endless set of options. And so I think where what I'm seeing folks do is just what is the surest path for execution?
(05:36):
Because I think there's a lot of things that you could do, you know, and you mentioned AI, so what I see, a lot of people are like, if that's kind of how they're wired and they have a, a bent towards that type of technology, then I see a lot of folks leaning in pretty hard to say, hey, this is, we can shine and we can outpace the competition based on this is kind of like what we're wired to do. And other folks that don't live in that world don't want to live in that world. They're much more inclined to go out and buy that technology or buy a competitor who already has it to supplement basically the same effect. And so to me, you can kind of get there a number of different ways.
(06:16):
I think that because we're in such a challenging marketplace and have been for a long time, compressed margins, it's like in, you know, every day of the week adds a new challenge to consider. And for that reason, folks are being very diligent about not committing themselves or their capital to things that they don't feel like they can execute at a high level. And so that's where we start seeing like, you know, if, you know, if in doubt, buy it. That's what's happening.
Speaker 2 (06:43):
Do you, are there any sectors of the industry that you feel like, are at a higher likelihood for like a fire sale to come in? Is there any, you know, like, maybe it's, you know, it's, maybe it's tech. Maybe it's like you see a lot more exits from the trucking side of things, like the asset side of things. Because, I mean, we're, you know, we're in a unique position where we're out. Like, it has to fit our vertical if were to like, entertain any form of strategic partnership, acquisition or anything like that. But I'm starting to see a lot more trucking companies come up for sale here than I have over the last 12 months. And it's like, I would say a massive spike here in the last couple of weeks of opportunity that's out there.
Speaker 3 (07:26):
You know, and some of that is unfortunately a little too late or too little too late. And I think this is what happens with a lot of folks. They get into a very, you know, compromised situation. And, you know, some of that is of no fault of their own. It's just they had the wrong exposure.
Speaker 2 (07:43):
At the wrong time.
Speaker 3 (07:44):
And so. So I think some of that. But also there's a large portion of focus on industry that was. I don't mean to be critical, but the industry as a whole was artificially propped up by a lot of different things during COVID And so. So folks that should have left the industry a long time ago have kind of lingered here. So I think some of this is. We can be reactionary to this, and I don't really see it that way. I think some of this is just pushing out operations that probably would have, you know, self elected out a long time ago due to cash flow crunches. It's just now this is just, you know, tipping point for some folks. So that's kind of how I see it. I don't really see any particular sectors. These.
(08:33):
The tariff things has so many complex effects that you can't even really. I mean, I don't think anybody even. I mean, they might have thought they understood how it might affect them on the front end. But the way that some of this is playing out, you know, there's just a lot of, you know, both intended and unintended consequences through this. And people are trying to figure that out on the fly. And I don't think there's any specific verticals that you can just say, like this one is the most. Obviously there's certain things, like in the auto space that gets a lot of attention.
Speaker 2 (09:05):
Yeah.
Speaker 3 (09:05):
You know, and then, you know, kind of your consumer products and some things like that have exposure in that area. But all in all, it's just a tough time. And so I think that to the. If you've kind of got to the place and you have exhausted your operating reserves, you don't have any volume and you're not, you know, proactively going to try to offset Some of the rising costs in this industry. It's understandable why some folks are, you know, why we're seeing these bankruptcy announcements in mass basically.
Speaker 2 (09:35):
Do you think like, so you know, obviously cash flow is king and I, you know, I try and talk about this on the show. I, I don't know if enough people realize how financially fragile most businesses are. Right. And they can even be established when it comes out there because it's like your cash flow, managing your cash flow is of the utmost importance. But I mean if we're going to talk small business, which is, you know, like if we're talking from a scale perspective that is like 90 some percent of the transportation industry, whether you're a trucking company or a freight broker alike. And you know, I don't know if enough people realize how most small businesses are literally 30 days from going out of business every single month essentially while they're trying to build up their cash flow.
(10:16):
So like have you ever worked like how can people work on improving that from that perspective outside of the just go sell more.
Speaker 3 (10:25):
Right. Well, I mean the reality is we've kind of gotten to a place where this industry, I mean it's not your grandpappy's trucking industry anymore and unfortunately.
Speaker 2 (10:42):
You.
Speaker 3 (10:42):
Need a certain amount of scale in order to squeeze out a meaningful amount of profitability from this industry. And so I think that, yeah, I mean, and I'm not trying to sound self serving, I just think that this is what's true. You're going to see a massive shrinking in the overall number of operators both on brokerage and on the truckload side because the economics aren't going to make sense for people anymore. Most will elect out because just too hard for too little. They'll go do something else. And so, so those that will be successful will either merge or they'll acquire. They'll do certain things to change the formula from which they can create consistent cash flow moving forward and have much more sustainability for the amount of risk that you actually have to, you know, expose yourself to in this space, which is astronomical.
(11:33):
So for me, like I just think some people at some point they just say this is not worth the risk and the hassle and I'm not going to do this anymore. And those that don't make that decision are typically doubling down in the form of a merger in an acquisition because there's only so many pennies that you can squeeze out of $. At some point you have to change the Formula, create synergies, purchasing power, economies of scale. I think that's what we're seeing a lot of folks move into.
Speaker 2 (11:58):
Yeah, it's, you know, margins are obviously extremely thin on a lot of sides of the industry. At the end of the day. Right. Like, it's, you know, I know that there's always this talk on who's. Who's screwing who essentially out there. And I just don't know if enough people are actually putting themselves in the seat of the other individual. Right. Because some people are gonna be, oh, shippers are making all this money off this. I mean, maybe they're making a little bit of money off of it. But like, that. That's why we're in business though, right? Like, I don't know of anybody who starts a business. It's goes, God, I really hope to literally lose everything over the course of these next six years. You know, people want to go in there, they want to build a sustainable company and go out with that.
(12:41):
But I think that, you know, we're. We're at a unique time because we, you know, you're like there was such a false sense of security for a. For essentially 2021 through the beginning stages of 2023. There was a, you know, astronomical amount of money that was being made out there from across the board. And a lot of people, you know, it. I get it now, but I didn't always understand this. That what, you know, and when times are good, you think it's always going to remain. Right. Like you think I'm always going to make a million dollars a year no matter what, I don't have to change anything. You drink your own Kool Aid, you start, you. And then, and I think, like, then you might expand too quick.
(13:20):
Did you see that at all out there, Spencer, where you saw businesses maybe go way too fast into the expansion because they had elevated revenues and, you know, it was an unhistor. It was a historical time, so people probably spent a little bit more recklessly than they should have. And I know as a business owner, as somebody who's bootstrapped, that is a mistake I made. I thought that my revenues were going to remain at what they were for a lot longer than they did. And I increased my expenditures in certain areas. And I have since learned from that. And I have, you know, course corrected and reduced my overhead by probably 30% over the last 15 months because of that.
Speaker 3 (14:00):
Yeah. And I mean, I think this is why I love serving business owners, because the reality is nobody bats a thousand on these types of decisions. And so there's a reason why America is the greatest land in the world is because people are going out there. And yes, there's a path to freedom of all kinds, for prosperity, but the exchanges, you have to be willing to take enormous risk in certain situations that have very little visibility on whether or not that's going to provide sufficient return. And so. And so I. I think that's what makes America great. That's what makes entrepreneurs special, because not everybody can operate like that. Yeah, so.
(14:45):
So what I would say is that, you know, a lot of business owners beat themselves up, maybe yourself included, about like, hey, like, I can't believe I did that, or whatever the deal is, but given the information, the time.
Speaker 2 (14:56):
Oh, yeah.
Speaker 3 (14:56):
I think of a lot of people that were like, well, hey, I'm either going to lose money or I got to buy as much equipment as I possibly can right now, when there was total uncertainty about whether or not, you know, when they would be able to get more equipment if they didn't buy at that particular time. And many are, you know, taking it in the teeth as a result of those decisions now. But at the time, like, who could have possibly known that was, you know, so all that being said, I'm saying I have great admirations for owners that actually are in the arena doing the work and rather than the person, the sideline reporter, you know, you know, you calling out their mistakes along the way. But. But I do think that the reality is this.
(15:39):
We're at a time in our industry right now where it is fragile more so than ever. And so I do think that there are tremendous opportunities, but it's just very difficult to experience the opportunities with this space, in this space without scale. And so that's where you're seeing a lot of people just trying to find out, I mean, problems that, like shippers and everybody else, they're trying to solve. They're. They're evolving every day. So I think the question is, are you still solving a problem that people are willing to pay for? Right. That has not been commoditized. And so I think that's probably part of the issue is just you can't stay stagnant in terms of your. In terms of your commitment to go solve problems that are, you know, that. That are worth somebody paying for. I think that's the issue.
(16:23):
Once what you're doing becomes commoditized, and if you're not adapting to the situation, that's where you get trouble.
Speaker 2 (16:28):
I think, you know, to me, what's never talked about in data, you know, out of everything that I see and this is why it's like I like the sideline reporter made me think of this because I couldn't agree with you more on that. Spencer. Everybody's a Monday morning quarterback, but nobody puts themselves in the emotional roller coaster of being an entrepreneur and what comes along with it and the decisions you make in the moment. There's never an emphasis on human emotions and human decision making. Right. Because like you can sit there and look at everything in front of you and it could paint a very clear picture on what probably is going to happen. But you could have a founder who's maybe never been through that before and they're going to go with their gut and their gut might be wrong in that.
(17:13):
And then there's also the inevitable decision making weight that comes of if I'm wrong, I lose everything. And then that breeds hesitancy in those moments. Right. Because the emotion that most people never understand is when you have everything on the line. When you're building a business and you don't have a 401k, you don't have a retirement, you have no salary that is guaranteed coming in as a business owner and how that affects your ability to operate in the beginning stages of it, right? So it's like that's a weight on most people's shoulders that they will never comprehend and they're always quick to judge of like oh, I would have never done that. It's like, oh really?
(17:53):
Give up your salary, throw everything on the line and build up your dreams for a couple of years and then tell me that exact same thing, that you wouldn't make that decision because you're wrong and you're lying to yourself in that moment. So I just want to point that out and that's like, you know, I, I, I was a lot harder on myself in the moment than I am now because I am looking back and I'm like, dude, you're going to mess up, right? Like you're going to make mistakes. That's part of it. And I also look at it as, fortunately I learned really quick and I course correct sooner and I didn't let it drag out a lot longer than I should like very well could have in those situations. Yeah.
Speaker 3 (18:27):
And I think that's, I mean one of the key characteristics of highly successful business owners, business and value creators, is that they move on from failure very quickly and they learn and they apply and they don't make the same mistakes twice. That's it. Yeah. And so I, I think that, you know, you show me an entrepreneur who has not failed and I'll show you someone who hasn't made any money at all. So like, and so I think that to me it's a badge of honor, but also with it comes responsibility. Like I said, like, if you're going to be an entrepreneur who likes to repeat the same mistakes, you're going to be very broke and very unhappy. And so I think that's what I love about our industry.
(19:12):
And this comes across at M and A all the time, which is, it's an amazing industry, but it's also highly unforgiving. And you have to be agile. You have to be able and be open to reinvention at any given time. And so you know that. And that's when we talk about when you're in a market like this. My son listens to this Christian rapper, Andy Mineo, okay? He has this line, he says, you know, make moves or make excuses and that. And, and I love that line.
(19:44):
And that's kind of how I think about people that are like, you know, kind of in a state right now, which you can either make a move and attempt to advance your position either to partnership through merger, through acquisition, through, you know, maybe some type of management services agreement, whatever, to try to change the economics, the cash flow of your company right now, or you can make excuses, you can absorb all those losses and just take it. To me, that is not an option. That's never a winning formula at any arena of life of any kind. And so, yeah, so to me, like, right now, I think where I see folks doing great things is they're educating themselves, they're surrounding themselves either informal or informal best practice groups. They're moving quickly, they're making decisions.
(20:36):
And, and I think that like, it's just one of those things where like, you can make a. I mean, you can deliberate for months and ultimately arrive at a great decision that was three months too late at some points. Like, you gotta move and you gotta be decisive and you gotta make some decisions. And so not everyone gonna be right. But delayed, you know, a delayed good decision is the same as a wrong decision in most cases in this type of environment. So I think folks that are protecting and building business value right now, they're being decisive with the information that they have available and they're making moves.
Speaker 2 (21:14):
What could a business owner do? You know, say they're, you know, I don't want to Call it at their wit's end, or maybe their plan was, you know, within five years they were gonna sell. What, what could a business owner do today to start making their company maybe look a little bit more appealing out there?
Speaker 3 (21:31):
Well, I always start with kind of the basics. And so like a lot of folks, and they'll come to us and they're like, hey, I want to sell my business and, and I'll ask for some information. And they don't know this yet, but I'm immediately, and my team's immediately assessing whether or not that they have some basic functionality to perform at a high level in a actual sale environment. So to the degree that they can return the right information and return it in the desired timeframe, which is almost immediately on demand, we're assessing whether or not this is someone that, number one, is someone going to be interested in this business? Number two, are they going to present in such a way that will allow them to not leave money on the table? And so that's what I want to know.
(22:12):
So like, we want to make sure that there are some basic financial reporting disciplines in place that you can satisfy the most basic things that an educated buyer is going to request at multiple stages within the process. And so for me, that's kind of like step one. In step two, we want to start looking at leadership because ultimately when people are buying a business, they don't want to buy a job, they want to buy a business. So there needs to be structure that leadership, job descriptions, a meaningful amount of independence away from ownership. And so it's really important to think about who is that next level of leadership that's going to be driving the business moving forward.
(22:52):
I remember a reference, you know, quite often is depending on the size of the business and depending on, I don't know exactly, you know, the size of your, you know, the operators in your audience here. But you know, let's just say that if it is going to be a private equity buyer, I mean the things that they want to know, and I share this all the time because I think it's tremendous advice. This was Pierre Matthew out of Blue Jay Capital and they bought a large nine figure deal from us Priority Courier experts out of Minneapolis. And he was on my podcast afterwards and obviously said, like, how do you think about it? Like, what are you trying to assess within the first couple of things that you're looking at as you're evaluating a company to purchase?
(23:37):
And number one, he was talking about the leadership team and he's like, I'm not interested in evaluating their ability to operate the business today. I want to know what is their desire to. And what is their capability to operate the same business. If it's three to four times the size today, do they have the capacity to perform at that level? Because that becomes much more interesting. Because the alternative is a buyer has to come in and then substitute folks that are good employees but don't have the capacity to grow at that level. And that just creates more risk, which may not be attractive enough for a buyer to actually go through and complete a transaction.
(24:21):
So, like, if you can de risk the transaction on the front end by having a, an exciting level of leadership that can take the business forward without dependence on current ownership, that becomes very compelling and very easy to invest in. So I think that you talk about financial reporting, we talk about reducing dependence. Those are major things. And the other part about it is, you know, things you can control. I talk about this all the time, and this is high sensitivity around this right now based on what's happening in the market. I had in my podcast yesterday, Jonathan Todd from Finnish law firm, and were talking about what's changed in diligence over the last, you know, since. What does Trump call it? Liberation Day with the tariffs.
Speaker 2 (25:07):
Yeah.
Speaker 3 (25:08):
So the biggest change in diligence, the way that buyers are evaluating sellers on the path to close, is on the customers. And they want to know their, you know, they want to know concentration levels, but they also know their exposure to tariffs. But I think, like, customer concentration is something that owners and companies have control over. If you have a disproportionate amount of revenue in any one or a couple of different accounts, that is something that is high perceived risk, because obviously if that goes away, it's not even the same business anymore. And so it doesn't mean that it's a, that it's dead on arrival, but people need to understand the relationship between customer concentration and overall valuation. And so, and it may not even affect the valuation of the company, but it will most certainly affect the structure of the deal.
(25:58):
Nobody's going to write a, you know, highest offer, you know, in the market, all cash, when there's 90 concentration in one account or whatever else. So, so the solution is start to educate yourself about what is acceptable and to try to think about your growth. It's like, well, if I'm going to grow, I can't continue to expand this particular account. I need to grow in other accounts. If I'm going to grow because otherwise I'm going to be disadvantaged or discounted. Because all that growth is coming from one thing, and it's also limiting the future pool. Some people will just, I mean, they won't look at it if it's over a certain threshold, may call it like 70% or even 50%. You know, they won't look at it.
(26:41):
So I think that part of what I see owners doing that they can control, take care of your financials, start reducing dependence on ownership, and then if you have customer concentration, start making very specific moves to grow the business away from that current exposure. And in doing so, you expand the pool of potential buyers who would be interested and you will enhance the quality of the offers that actually come in. And we will most certainly enhance competition which will increase the value of the company.
Speaker 2 (27:15):
No, I mean, that's phenomenal advice. Right. And I feel like, and this is something that I, I see out there, even on, like, from like a business development standpoint, Spencer, is you get a couple of key accounts and then that The Pareto Principle 101 rolls in, right. It's 80% of your entire revenue is with 20% of, you know, is provided by 20% of your. Yeah. Or excuse me, when it was it. I forget how it goes, but essentially it's that concentration that you're talking about, right? Like the 80% of your revenues are coming from just like two people. Right. Like there's no diversification that comes along from your book of business and your risk factor is so high for failure at that point because one, you know, again, talk about human emotion.
(27:57):
You say the wrong thing to the wrong person, all of that gets shut off instantly and there is no chance of that coming back. And your overall, you know, your overall value of your company and your book of business drops overnight, essentially. And you know, for me, it's like as an operator, as somebody who's trying to build up their business. I'm trying, I am very much paying attention to that number right there from our revenue standpoint on a customer by customer basis. And obviously it's lopsided as you're building, right. There's always going to be that. And that's why I say you never stop selling. You have to continue to lower that overall exposure number down to where it's like, hey, you know, 25, 25. That would be phenomenal for you.
Speaker 3 (28:39):
Yeah. And what I would add is the same principle is true with the source of your revenue. So if a lot Especially a lot of freight brokerages you get you have like one to two rainmakers and they're bringing in all the revenue, right? So it's like, so that's another kind of thing that, an element of risk that you have influence over. So you want to make sure that, I mean it's a great thing. If you have a, just a guy that's just crushing it, that's bringing all time revenue, I think that's great. But you need to understand that when it comes time to buy that, like what are they going to be looking at? All right, well what if that guy dies? Like what is that? Like what is his non compete situation? Can he just walk with that book of business tomorrow?
(29:22):
Or like what does that look like? And so, you know, so I think it's just really important as people prepare to understand what do buyers care about? And so like they want to know about that customer concentration, but they want to know the source of the revenue and just as importantly one, they want to know what are the opportunities to expand these existing accounts. So for instance, you know, owners that are doing a really good job, they understand what the needs are of their existing customers and you know, where their current limitations are.
(29:56):
Like and so what ends up happening is if we're in a, we're trying to build a sales strategy for a client and we have an understanding on that or our client has an understanding of that, it just helps us understand what buyers to target who would be able to bring those capabilities, who might be able to contemplate different scenarios based on the synergies that would be created post transaction. And that's just, you know, I think that's just being very savvy about it. So you know, I mentioned Pierre Matthew and one of the other things in the podcast is he talked about like owners need to understand the core truths about their business, both what's good, but you know, the good, bad and ugly. They need to understand all of it and they need to have data to support it.
(30:41):
And that is more important than dressing something up and trying to make it look great. Owners that say, hey here they understand their core competencies, they understand the limitations and they can talk about it and convey those truths with data. I guarantee you like, especially like educated private equity investors, when they come across owners that are in that level of command of their own business, the imperfections actually become attractive because now those can be converted into opportunities based on, you know, data supported facts about what the problems are. But more importantly, what are the financial opportunities associated with solving those problems. And to the degree that the buyer can affect that's where the valuation scenarios become exciting.
Speaker 2 (31:30):
Spencer, I. I mean, I could talk to you for hours, man. But, like, this is because, you know, for me as a business owner, like, I. I'm not like, actively looking to sell, right? Like, I'm. I'm out here to, you know, this is. This is what I'm building for my career. But I know there's a lot of people out there who, you know, their back might be against the wall, they might not know what to do next, and they are going to inevitably say, you know what, maybe we should just sell. Let's try and get what we can. Or maybe they've just hit that inevitable wall, Spencer, where they're like, I'm done, right? Like, I'm done. I. I can't do this anymore. I got to go try something new.
(32:02):
Or, you know, maybe they've built a really quality thing and they want to move on to their next quality project that they want to build out. Because there's a. There's a big thing of. That's what I love the most about founder Spencer is there's some of them who are like, man, I just like building stuff, and when it gets to a certain point, I want to go build the next thing, you know.
Speaker 3 (32:19):
No, I think that there are a lot of people that fit that description. And so I've seen a lot of folks. I mean, we're prideful people as entrepreneurs. I mean, I think that's part of what makes it work, but it can also be pretty dangerous. And so, you know, to quote the. The movie Rounders, I always tell business owners, like, don't put in the pot, but you can't afford to lose.
Speaker 2 (32:40):
Yeah.
Speaker 3 (32:41):
And because. Because you know, just because you were dealt a bad hand right now doesn't mean that you don't have the capacity to be an exceptional entrepreneur and immensely successful, just in a different context. So don't put yourself in such a hole that you can't go do that. Right? And so, like, so I think that's number one. I think every business owner that is in a hole needs multiple sets of eyes to help them see clearly what is happening. I was talking to a business owner the other day and I was like, he's like, well, you know, I have X amount of time. I can do this. And I was like, well, you're bankrupt. I mean, like, I don't know why you're not saying it out loud.
(33:24):
I don't mean to be disrespectful, but like, I don't think you have any appreciation for how severe your situation is. I'm talking about tens of millions of dollars of debt, but in like no time. And whether it's denial, delusion, whatever else it is, I think we as owners have major blind spots on what's true in the moment. And so I would just encourage like a trusted friend, you know, your circle, your CPAs, your attorneys, I would invite them into the conversation to speak honestly about where you're at so that you can steward the situation as best as you possibly can and again, make sure that you live to fight another day, whether it's in trucking logistics or in totally different arena. But you gotta have people speaking truthfully and directly in your life when you're in this, when you're in a moment of duress.
(34:18):
And I think a lot of folks go months without that accountability and lose a lot more than they have to.
Speaker 2 (34:25):
Yeah, well said, Spencer. Spencer, thank you so much for taking the time to join me today. How does anybody reach out to you guys to find out more about what you have going on?
Speaker 3 (34:34):
Yeah, the best way, obviously you can go to our website at the tinder, thetine group dot com. But honestly, if you follow me on LinkedIn. We're pumping out things multiple times a week of 10 minute content. Just very consumable videos that will help you elevate your deal iq both as a seller and as a buyer. So I think those are the best ways to get in contact and we'd love to be a resource for you.
Speaker 2 (34:58):
Perfect. Spencer, thank you so much for taking the time to join me today. That's going to be it for today, ladies and gentlemen. As always, if you got value in what you heard, subscribe to the show. You guys, if you're feeling really ambitious after this one, which you should be, Spencer just literally laid out a masterclass for you guys to follow. Rank the show on itunes and Spotify because if you saw value, that's how your network's going to get value as well. I appreciate you guys. I love you guys and we'll be talking to you soon. Now we're just ending the stream.
Speaker 1 (35:24):
I'm.
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