June 10, 2025 • 32 mins
In this episode of IAMCP Profiles in Partnership, hosts Anthony Carrano and Rudy Rodriguez welcome back Tim Mueller, M&A Managing Partner and Co-Founder of IT ExchangeNet, for a dynamic continuation of their discussion on navigating the M&A landscape within the Microsoft Partner ecosystem.
With decades of experience advising IT services firms, Tim dives deep into how sellers can best position themselves for acquisition—balancing technical strategy, financial discipline, and the human relationships that make deals thrive. From AI’s transformative role to the nuances of Microsoft partner alignment, this conversation is both timely and tactical.
- The Future is Now: AI as the New Catalyst for Business Transformation
Tim and Anthony draw powerful parallels between today’s AI revolution and the early days of the Internet. AI isn’t just a trend—it’s a structural shift that’s already redefining how Microsoft partners operate and scale. Whether it’s automating workflows or informing smarter business decisions, being fluent in AI tools is becoming a baseline for valuation and future readiness. - The Microsoft Balancing Act
Strong Microsoft ties can boost your valuation—but there's a catch. Tim shares a revealing story that shows why too much reliance on referrals can backfire when it matters most. - Cost Discipline Is Strategic Power
From 1800s entrepreneurs to modern SaaS founders, one thing hasn’t changed: cost efficiency is a lasting competitive advantage. Tim outlines how codifying lean operational practices today can lead to stronger margins tomorrow—and better deal terms when it’s time to sell. - The Human Element Behind Every Great Deal
More than numbers, M&A is about trust. Tim explains why the quality of your team, your client relationships, and your reputation with Microsoft matter just as much as revenue and recurring contracts. Buyers are looking for operational maturity and relational credibility.
Whether you’re planning an exit, scouting acquisitions, or optimizing your business for the future, this episode delivers a rare blend of strategic insight and real-world wisdom from one of the industry’s most experienced voices.
Guests:
Tim Mueller, M&A Managing Partner at IT ExchangeNet
Personal LinkedIn: Tim Mueller | LinkedIn
Company LinkedIn: IT ExchangeNet | LinkedIn
Website: IT ExchangeNet | Website
Show hosts:
Anthony Carrano LinkedIn, Managing Partner at Dunamis Marketing
Rudy Rodriguez LinkedIn, Managing Partner at Dunamis Marketing
Profiles in Partnership, brought to you by Dunamis Marketing
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Anthony Carrano (00:05):
Welcome back to part two of this insightful
conversation with Tim Mueller,M&A managing partner and
cofounder of IT ExchangeNet, aleading M&A marketplace
exclusively for mid market ITbusinesses, where we're diving
deep into the world of Microsoftpartners, mergers and
acquisitions, and the future ofAI and business. If you joined
us for part one, you know thatTim brings years of expertise
(00:28):
and a unique perspective to thetable. Today, we're picking up
right where we left off,exploring the human side of the
M&A process, the evolvingrole of AI, and how Microsoft
partners can position themselvesfor long term success. So
whether you're a business ownerplanning your next strategic
move or simply curious about theintricacies of the M&A
process in the tech industry,you're in for a real treat. But
(00:52):
before we get started, here's aquestion for you.
What do successful businessleaders, rock solid
partnerships, and the GratefulDead have in common? Well,
according to Tim, they all playa role in understanding the soul
of the deal. In this episode,we'll uncover why relationships
matter just as much as revenue,how cost effectiveness can be a
game changer, and the singlebiggest factor that could
(01:13):
reshape the tech industry as weknow it. Spoiler alert, it's all
about AI, and Tim's got theinsights to prove it. Let's dive
in.
Well, the thing I really, as asyou were just sharing now and
just even as I was reflecting onour, you know, our previous
episode that we did together,the thing that always just
strikes me is I mean, here,you're dealing with, you know,
(01:36):
very technical, very smart, youknow, people, you know, that
have have grinded it out. You'vegotta have a lot of confidence
in building, you know, yourbusiness as you're going, you
know, forging the fire. But atthe same time, then, you know,
it's equally, you know, whenyou're going through this
process of not only just radicaltransparency, but, you know,
(01:57):
humility, right, that you haveto have, like, you know, in that
to, you know, recognize, youknow, things for what they are
and be willing to to kinda makethose changes. And so that's
just something as I as I justthink about the human element of
the process that, you know,these these sellers are going
through. Have you found, like,in the the decades that you've
(02:20):
been doing this, have you foundthat you've had to, like, advise
them or counsel them, if youwill, on kind of that that
qualitative that human part ofit of, hey, it's you know,
there's you know, it it's gonnait might hurt for a little bit.
Let me coach you through, youknow, you know, just the
humility and being teachable,etcetera. I mean, could could
you share a little bit about,you know, from your experience?
Tim Mueller (02:42):
You know, having gotten to know you now, Anthony,
I'm not surprised by yourquestion because that is what
you're known for in the channelis the human element of it and
how that plays out.
Anthony Carrano (02:53):
Yeah.
Tim Mueller (02:54):
I'm not surprised that you wanna dig in on that
one, and that's that's, I think,why you are so respected in in
this channel. Our role is partpriest, part rabbi, part
therapist, part big brother,part adviser. And depending on
what hat you're wearing is kindof related to what stage of the
(03:16):
M&A process there is. So,clearly, the upfront stage where
you kind of get ready to get inposition to be in position for a
sale is clear adviser work whereyou're dotting the i's crossing
the t's, making sure thateverything during future audits
are gonna be in place.
So we kinda let work with themto get their best suit and tie
(03:39):
metaphorically on before we goto market. But if you jump fast
forward into, let's say, 80%through the process, now the
amount of therapy work you'redoing and part rabbi, part
priest, part devote, increasesprecipitously because because
there's there is that humilityfactor where people are looking
(04:01):
at you going, we like yourbusiness. You did a nice job.
It's a lifestyle business, butwhy didn't you do this? And why
didn't you take care of thesemetrics?
And why didn't and you have tolook at it. And and one of the
things we tell them is that youare not gonna be perfect for the
seller for the buyer, I mean,but that's what they want. They
(04:21):
want something they can tinkerwith, maybe make some wholesale
changes in some areas becausethat makes you valuable to them.
If they take a perfect businessand just integrate it into them
themselves, there's nothing thatcould make that acquisition more
valuable. And so just know thatsome of it's posturing, you
(04:41):
know, we didn't do this right,so we're gonna give you a
discount on our our offer.
Or, it's not how we would do it,but the good buyers understand
the the ego, not the bad ego,but the ego that everybody has.
They're proud of what theybuilt. I mean, these guys and
and and, you know, lady andladies and and men that built
(05:02):
these Microsoft businesses,they've put their kids through
college, they bought new homes,sometimes a second home. They
have done probably more thanthey ever thought they would do
professionally because of howthey ran their business.
Anthony Carrano (05:15):
Mhmm.
Tim Mueller (05:15):
So hats off to them for doing it. They just happen
to be smaller than the buyerthat's going to envelop them in
their practice. So, of course,they're not gonna have as
polished of the systems and andbilling and all that reporting
ability.
Anthony Carrano (05:31):
Mhmm. Mhmm.
Tim Mueller (05:32):
So I I think the better buyers understand it and
they treat them more humanely sothat the humility that comes out
of it is a lot easier. But wehave had deals. We had probably
one of the biggest deals in ourhistory fail at the eleventh
hour because the CEO of thebuyer got into the personal side
(05:57):
of questioning the CEO of theseller. And the CEO of our
client, the seller said, I couldnever work for him and I know my
people could never work for him.So I'm out.
Anthony Carrano (06:08):
Oh, wow.
Tim Mueller (06:09):
And he was so fatigued with the process
because it just takes a lot outof you. He said Uh-huh. I wanna
pause, and he never went back tomarket. He just kept the
business private.
Anthony Carrano (06:18):
Wow.
Tim Mueller (06:19):
So sometimes that happens in the eleventh hour.
And so we ask offline part ofour role is to give the buyers a
little bit of the cycle profileof our seller to say, here are
some hot buttons that we knowafter working with them the last
couple of months that we'd likeyou to be gentle and and
(06:41):
understand that, you know, hey,the the the seller, you know,
lost his wife in the last twentyfour months. Real issue. Right?
And there are differentsensitivities or triggers they
have.
So please be soft on thembecause during that epoch of
time, during that illness andfor months after, he was in a
(07:02):
cloud. He was in a haze. And soknow that that dip was related
directly to a major loss. Soskip over it. Know that it's
more about the future and how herebounded versus getting too
tight on the area that kinda waswas a little bit of a down
downfall.
Anthony Carrano (07:20):
Mhmm. Mhmm. No. That's that's that's
fascinating. That's awesome. NowI know you've shared so much
already about, you know,factors, you know, you know, I'm
gonna kinda bring it back to,you know, on the business and
and the and the number side ofit. In fact, you've already
shared I mean, you sharedseveral between, you know, the
the just the percentage ofcustomer concentration, the
(07:42):
amount of reoccurring revenue,customer churn, employee
retention, you know,proprietary, like, you know, IP,
you know, EBITDA. You know?
So you've shared a lot of of thefactors, you know, driving, you
know, high multiples in theseM&A deals. Would you say are
there any other key factorsmaybe that you haven't touched
(08:03):
on that we should that ourlisteners should be aware of?
Tim Mueller (08:07):
Yep. Microsoft partners really need to have
gross margins of at least 50% orhigher to really paint the
picture of someone that'spricing, you know, get the right
pricing schedule for theircustomers.
Anthony Carrano (08:21):
Mhmm.
Tim Mueller (08:21):
And that's something that is is higher, you
know, by standards of manyothers in the space. You know,
Amazon has got about 17% grossmargins in their work.
The closest that we see toMicrosoft are the Oracle
partners that are between fortyfive and fifty, and then Google
partners that sit around 40%gross margins. But, you know, in
(08:43):
in that food system, you've gotMicrosoft that really is the
highest and should be thehighest of 50% of gross margins
or higher. If you look at thekind of the two year forward
growth rates, Microsoft partnersshould be at least 12 to 15% to
be considered, you know, averageto be, you know, for the buyers
(09:05):
that look at it. So if you'regrowing less than 10%, two year
forward looking, And I know it'sreally hard to say the second
year is a real tough squintbecause one year out is mostly
what most of the partners cansee with confidence.
Anthony Carrano (09:19):
Mhmm.
Tim Mueller (09:19):
But if you go into the second year, it'll be
roughly wrong. Don't knowexactly how roughly wrong it'll
be, too low, too high. But thatkind of 12% annual growth rate
is really what a lot of thebuyers are looking for.
Anthony Carrano (09:34):
And is that, do they care so much about what
type of revenue? And, mean, Ithink I know the answer, but I
don't wanna see, like, whetherit's at, you know, project based
revenue, subscription revenue,you know, or is it, you know,
net new rep like, net new logorevenue, a land and expand
revenue? Do they do they careabout what type of revenue that
(09:55):
is, or they just want to see,you know, just that 12 to 15%
growth?
Tim Mueller (10:00):
Yeah. Great question. And and I think it is
probably the right questionbecause not all revenue is made
equal. And during that qualityof earnings, they're really
looking at the quality ofrevenue that's coming in. So so
clearly, the customers that aresticky, that have one, two,
three year contracts that aregonna move forward mitigates all
(10:21):
the risk for the buyers.
So those contracts or thoseprojects that have a set sunset,
that's really difficult for thebuyers to get around and say,
how do we continue to replacethe projects? And a lot of
Microsoft's partners over thelast twenty years look at us and
go, that's what we've done.That's how we've done our
(10:42):
business over the years. But thebuyers are saying, yeah. But we
wanna see you pivot to the moresure business. We know you're
gonna take a hit on that onetime license revenue that you
normally would get.
Anthony Carrano (10:53):
Mhmm.
Tim Mueller (10:53):
But now it's gonna be recurring, and to you, that's
more valuable revenue for us.Second to that would be new logo
acquisition. So what kind of,you know, new business did you
see in '23 versus '24? And whatare you projecting in '25?
A lot of Microsoft partners cancan base that potential new
(11:15):
revenue on discovery sessionsthat they do. So they could
directly correlate discoverysessions for pay with
prospective customers to newrevenue that's gonna come in. So
don't have a lot of discoverysessions going on in February,
March, June, then you're likelygonna see a little bit of
(11:36):
pipeline, issues that go alongwith that. So number two would
be, net new, logos.
Number three, you may not havecontracts or new net, logos, but
customers that have beenconsistent over three, five, ten
years that you know havecontinually come to you with new
(11:57):
projects. So while that's not asvaluable as the customers that
are under contract, it still hasvalue and something you can
point to.
Anthony Carrano (12:07):
Mhmm.
Tim Mueller (12:07):
And then the last one is just sporadic projects
that don't have any kind ofconsistency, and you've got a
whole load of different logos,but they come in and out just
like the wind. And there aresunsets. There's a three month
project. Here's an eight monthproject. Here's twelve months,
but we don't think there's anyfollow on work on it. So those
are the four types of categoriesthat we see in order of
(12:29):
importance.
Anthony Carrano (12:30):
Mhmm. So kind of a piggyback, how has the with
the focus with AI and cloudservices, has that changed any
of those numbers, and thoseexpectations?
Tim Mueller (12:43):
Not enough information yet on the AI side.
Wish wish we could do it. Nextseven months from now when we
reconvene for a check-in, Ipromise you I will have more
data on that, but we just don'thave access to the data because
it's not there yet. Uh-huh. Whatwas the other side of the
Anthony Carrano (13:00):
Just about with the with the cloud services
because has that evolved causedsome of those numbers to evolve
a little bit over time just fromyour perspective?
Tim Mueller (13:10):
It has, and it's reflective in the multipliers.
So there are two ways to tovalue a business. One would be a
multiplier of your revenue, andthe second would be a multiplier
of your adjusted EBITDA. And formore information on add backs
for the adjustments, we could dosome have some notes that are
attached to this part of thepodcast, Anthony.
Anthony Carrano (13:30):
Mhmm.
Tim Mueller (13:31):
Generally accepted add backs that get you to your
adjusted EBITDA. Most everybodywatching this podcast will be
valued on in a, in a multiple ofyour adjusted EBITDA. And so
knowing that, those companiesthat are more cloud based get a
bump in their multiplier. Soinstead of kinda topping out at
(13:53):
seven and a half, they may startat seven and a half times your
adjusted EBITDA and go up toeight, nine, nine and a half, 10
when they have a practice morethan 45% of their revenue that's
cloud based, and they've gotmore in Outlook in their
pipeline to bring on more logosthat are looking for cloud.
Anthony Carrano (14:12):
That's what I thought. You know, I appreciate
you sharing that, and I'm sureyou've there are plenty of
resources on the IT ExchangeNetwebsite that folks can go to and
and dig into some of that. Solet's kinda maybe shift a little
more about kinda some futurestuff. So what do you I'm a put
(14:33):
you on the spot here a littlebit is how do you foresee the
future of M&A activityevolving for Microsoft partners
in, you know, like, the nextfive to ten years?
Let's bust out your crystal ballfor us.
Tim Mueller (14:46):
Yeah. Well, I mean, the the easy go to is to say, if
you haven't sniffed around orfigure out how to best lever AI,
you're already behind. Buteverybody's heard that at every
conference they go to.Everything, every, every little
hook for a conference that says,you know, building AI into your
value proposition and such. ButI think it's real. And and there
(15:09):
are two components of that.
One would be through certainlyCopilot and any other ancillary
AI tools that you could becomean expert on that you could then
offer to your customers. Butequally, if not more
importantly, how you run yourbusiness. So how will you lever
and be more cost effective toyou know, you may not have to
(15:31):
bring as many employees on tohave your Microsoft practice if
you're levering a lot of thosetools that can automate you
know, if you're doing somecyber, there certainly are more
AI tools that are gonna automatepen testing and certain
observability, for your securitypractice.
There's ways to run your yourbilling and also be able to see
(15:54):
metrics that, you know, we I'llhearken back to fifteen minutes
ago where these all of thesedifferent clients of ours are
saying, god, I wish I knew whatto do with all these metrics or
how to find them in my business.I will guarantee you five years
from now standard fare using AItools to help them run their
business better, to help thembill more quickly, to help them
(16:17):
collect and be pings. You know?We're just scratching the
surface on what Microsoftpartners can do to be more
effective to run their business.And, you know, if they thought
offshoring was a way to gethigher margins for their
business, to have a workforce ofnow 40% of your work face force
will be AI agents that are doingthose types of of manual pieces
(16:43):
that that normally you're you'vebeen paying people to do.
And it's scary to think aboutour workforce that are gonna be
replaced, but it's the standardevolution of technology
Anthony Carrano (16:53):
Mhmm.
Tim Mueller (16:53):
You know, going from the industrial revolution
all the way through today. Butyou gotta figure out how to best
make yourself more valuable bybeing an expert with the AI
tools.
Anthony Carrano (17:03):
Mhmm. Mhmm. When you say crystal ball, I
don't think there's any there'sa singular transformational, and
I would even dare to say,catalytic push for how to force
to push your business, AI, sincethe formation of the Internet. I
(17:24):
think everything in between whenthe Internet was first
introduced circa 9596 withMosaic has all been certainly
building upon that great momentOf graphic user interface with
the Internet until now AI. And Ithink that will be something
that may make the Internetrevolution pale by comparison.
(17:48):
And and I I'm bought in fully.
Tim Mueller (17:50):
There isn't a workout that I do or a walk that
I take unless I'm with my wife.That doesn't have my earbuds in
listening to This Week in AI orAI Copilot podcast. Everything's
surrounded because unless wefully understand it, we can't be
that advisor in the front end ofthis. We also talk to a lot of
(18:10):
Microsoft partners that are two,three years out from wanting to
sell, and they're asking us howdo we architect the business
that will get the greatestvalue. So unless I'm aware in my
team, particularly of where AIis going to affect positively
Microsoft partners, we can'thelp them put their best suit
and tie on twenty four, thirtysix months from now.
Anthony Carrano (18:33):
Mhmm. Well, hearing what what you said just
kinda two thoughts came to mind,especially the one of the the
second part about how you runyour business and being cost
effective. And it's interesting.I'm going through this series of
just, you know, of of foundersand where, you know, just a
consistent theme. And this iscovering, you know, founders of,
(18:53):
you know, of businesses andAmerican entrepreneurs from even
going back to until, like, the1800's up to the modern, the
modern day.
And they're one of theconsistent themes is, you know,
cost effectiveness because, youknow, as the markets, you know,
change, you know, prices will goup, prices will go down, revenue
can get adjusted. But once you,codify certain, you know, cuts
(19:16):
and efficiencies, you know, thatstays fixed when things are
going up or things are goingdown. When they're going up, you
just get, you know, greatermargins. So I I appreciate you
sharing that. The other thing isas I was listening and there was
a point, I forgot what questionit was, but when we were talking
about, like, the relationshipsand about the partners, one of
(19:36):
the things that you found in,you know, that you've observed
in decades of experience, one ofthe key relationships that, you
know, buyers are looking for andsellers is, you know, they're
how, you know, ingratiated arethey with Microsoft and how well
known in Microsoft?
So I think of, like, just apractical advice hack for people
(19:57):
listening is saying, make sureyou're aligned with Microsoft.
You know? Because, you know,they've got, like, resources and
insights to, you know, what thenext, you know, five to ten
years and, you know, just makesure you're aligned and continue
to ingratiate there as it makessense for your business to you
you know, while you're thenrunning your business, you know,
(20:18):
aligning with Microsoft, andthat kind of will help position
you, you know, for that, youknow, for that, you know, exit
in five to ten years. I don'tknow. Is that what do you think?
Is that is that a good like agood hack, bad a bad idea, good
idea?
Tim Mueller (20:31):
Yeah. It's a great pro tip for these guys for sure.
And I do think it's a fine line.One, yes, you do wanna have a
stellar relationship so thatwhen you do decide to sell and
they ask for that contact atMicrosoft, they would say full
throated, I know Anthony reallywell. We work with them on a
(20:51):
weekly basis. We give themreferrals. They respond. And
more so than responding, if theyget the assignment, they get
rave reviews. So that's theideal reference you want from
Microsoft. But there's a fineline between organic revenue
that you generate and referralrevenue that you take from
Microsoft.
(21:12):
So we had a client years agothat bragged and said, we've got
such a great relationship withMicrosoft that 70% of our
revenue comes from Microsoft.And while that takes a lot of
work to Yeah. Nurture and curatethat relationship, If for
whatever reason Microsoftdecides to pull back on
(21:33):
referrals or they decide tokinda do an attaboy on on giving
business to another partner inyour region that they were
normally giving to you, thoseare variables that you are not
controlling any longer.
Anthony Carrano (21:48):
Mhmm.
Tim Mueller (21:48):
And so I don't know if there is a perfect balance.
It certainly isn't 70/30.
Anthony Carrano (21:54):
Yeah. Yeah.
Tim Mueller (21:55):
And on the other side, is it the other way, 30/70
where you're only getting 30% ofthe referrals because there
isn't a partner alive that says,oh, no. I don't want any more
referred business from youbecause it's gonna mess up my
percentage.
Anthony Carrano (22:09):
Uh-huh.
Tim Mueller (22:10):
But I would just say much like you wanna work
really hard to have yourcustomer concentration at 10% or
lower, you also wanna work atalways originating, organic
revenue from your sales team andnever get too reliant on
Microsoft to give you all ofyour revenue. It's just smart
(22:31):
business. And that way, don'thave to ever have to think about
declining the revenue because,you know, the other part too is
if you decline enough of thereferrals from Microsoft,
they're gonna just know you asthe person that declined much
like dating.
Anthony Carrano (22:47):
Mhmm.
Tim Mueller (22:48):
Two or three times to say I don't wanna go out.
You're not gonna ask anymore.
Anthony Carrano (22:51):
Uh-huh.
Tim Mueller (22:51):
So so you wanna be in position where you can take
on all those referrals, but notbe placed in a position of, of
weakness where you're fullydependent on that to make your
numbers.
Anthony Carrano (23:02):
No. And I'm I won't go into the stories, but I
because, obviously, we work witha lot of Microsoft partners on
the marketing, you know, side.And, yeah, we've had some
clients go through those ebbsand flows, and it's it's just
been interesting kinda walkingthat journey with some of them.
I'll just I'll just leave it atthat.
Tim Mueller (23:20):
Fast forward that same kind of, yes, we'll take
the revenue. We appreciate it.We appreciate it. And now we're
in the tail end of due diligencefor an m and a deal, and
Microsoft notifies them is thatyou no longer can get the, you
know, the billings on these thissoftware license that we're
gonna we're gonna go direct tothe customer. And now all of a
(23:43):
sudden, tens of thousands ofdollars of revenue that you
normally were the pass throughto your client is now gonna be
held on by the regional salesrep from Microsoft because they
don't want you to take themargin. And that's done toward
the tail end of due diligence.It's meant to take the deal.
Anthony Carrano (24:01):
Yeah. I bet. I bet. Well, this has been
fantastic. I I can talk to youall day.
Tim, this there's just theamount of insight and wisdom
that you share is just is justfantastic. So really appreciate
it. As we wrap up, I know Iwanted to ask you. So it's
actually gonna be kind of likethere's gonna be two part. It's
(24:21):
because I you mentioned that youdo listen to a lot of podcasts.
So, basically, what's one bookyou would recommend a business
owner read as part of theirpreparation to sell their their
business, and what's one podcastyou would recommend that an
owner listens to as part oftheir preparation to sell their
business?
Tim Mueller (24:40):
Well, hold on. I will that's really funny you
asked that question, but I'vegot 20 of them here in my
because I give away to all of mymy customers.
Anthony Carrano (24:53):
The soul of the deal. Okay.
Tim Mueller (24:54):
The soul of the deal. I've got 20 of these
written by Mark Morgenstern. Thebest book ever written on
M&A. He's a huge Dead fan,and he makes analogies all the
time about the Dead in thisbook. Okay.
Great recommendations on theback of the cover. Mark
Morgenstern, The Soul of theDeal. No better book out there
(25:16):
to prepare yourself thepsychology side of it of selling
your business.
Anthony Carrano (25:21):
Excellent.
Tim Mueller (25:22):
And then secondly, David Gilbert, who was at
Microsoft running their garagefor a number of years,
entrepreneur, he has a podcastcalled Acquired that he's been
running for about, I wanna say,fifteen years now.
Anthony Carrano (25:38):
Oh, wow.
Tim Mueller (25:40):
He's an esteemed graduate of The Ohio State
University, but went off as a 22year old and and end up running
the garage at Microsoft and thengot into other types of
businesses at Microsoft that hewas an executive in before he
went off. And he's doing venturenow. He's probably not more than
(26:00):
35 or so. But these acquiredpodcasts, Anthony, are ninety
minutes, two hours, and they godeep into businesses and how
they're run. And for geeks likeus, and I include you in that
geek
Anthony Carrano (26:19):
Absolutely.
Tim Mueller (26:20):
You can get lost in these these podcasts. And they
also do you know, they were onelast ones, I think, to interview
Charlie Munger before he died ofvirtual activity.
Anthony Carrano (26:31):
Okay.
Tim Mueller (26:32):
And Charlie never did interviews, and he was just
so intrigued by these two youngguys that he sat and talked with
them for two hours. But, yeah,the podcast called Acquired.
Anthony Carrano (26:42):
Okay. Definitely. And I'll put a link
to both of those. The soul thesoul of the deal and Acquired in
in the show notes for sure.Appreciate it.
And I'm I'm gonna go ahead andafter we're done, I'm gonna
subscribe to Acquired and startlistening to it. It's I love
listening to that kind of stuff.Well, last question then is, so
how can partners who wanna, youknow, either sell their business
(27:05):
or acquire one, you know, getstarted?
Tim Mueller (27:08):
So, you know, the pat answer is call us and we and
no matter where in the stagesbut we we do have something
called Ready, Set, Go, and it'sa free readiness assessment for
those who are contemplating thesale of their business. And
we'll give you a scorecard tosay, you know, you're looking
great in this side of it. Youmight wanna focus a little bit
(27:28):
more in this other area. So it'scalled Ready, Set, Go.
We work very closely with theIAMCP. In fact, we're the,
M&A marketplace for theIAMCP, and we know the Microsoft
space like the back of ourhands. It's likely the the most
number of deals we do on anannual basis are Microsoft
partners. So the ready, set, go,free, piece is great. If you are
(27:53):
a buyer, we have somethingcalled buyers direct where you
can, for free, advertise all thecriteria of companies you're
looking for.
And on a monthly basis, we pushthat out to all of our potential
sellers and to see if that pinkymatches the pinky and the thumb
matches the thumb so that wecould match buyer and seller.
Those are a couple of ways.We're always talking with buyers
(28:15):
to understand what their theirinvestment criteria may be so
that we then put it in ourdatabase. We've got rudimentary
AI that helps us match buyer andseller. So the more we know from
the buyers, the better we couldbe and more accurately to bring
our sellers to them.
Anthony Carrano (28:32):
Excellent. Excellent. Well, we'll
definitely have links to both ofthose in the show notes and then
on social media as well. Tim,this has been fantastic. Thank
you again.
Really appreciate you coming onwith us.
Tim Mueller (28:46):
Anthony and and Rudy, love to always see you
guys. Good to communicatebetween these shows too. It's
always good to stay in touch andto, you know, understand from
you the finger or the pulse thatyou have on the Microsoft
network, but also just sittingfor an hour and chatting. Always
love doing it. Anytime youwanna, do a refresh, we're here.
But thanks again for theopportunity to sit with you.
Anthony Carrano (29:08):
Sounds good. Thanks. Have a great rest of the
day.
Tim Mueller (29:10):
You too.
Anthony Carrano (29:13):
As we wrap up this enriching discussion with
Tim Mueller, one thing becomesabundantly clear. Success in
business is not just aboutnumbers, multipliers, or market
position. It's aboutrelationships, foresight, and
adaptability. Tim has sharedinvaluable insights on the human
element of mergers andacquisitions, the pivotal role
of AI in shaping the future, andpractical tips for Microsoft
(29:36):
partners navigating the everevolving tech landscape. I
really enjoyed just the timethat I had with Tim over these
last two episodes, and here arefive key takeaways I took from
our time together.
First, number one, the humanelement. Building and nurturing
relationships whether withMicrosoft, buyers, or clients is
just as critical as financialsuccess. Mutual respect and
(29:59):
trust can make or break deals.Number two: Cost Effectiveness
Codifying cost efficiencies inyour business ensures lasting
margins regardless of marketfluctuations. The third takeaway
is AI's transformational power.
Leveraging AI tools isn't justabout offering cutting edge
(30:19):
solutions to clients, it's aboutusing them internally to run a
lean, effective business model.From automating manual processes
to refining metrics, AI is setto revolutionize operations.
Number four, your partnershipwith Microsoft. Aligning with
Microsoft effectively whileensuring a balance between
organic and referral revenue canposition your business for long
(30:42):
term success and a highervaluation. And number five,
preparation is key.
Tools like the Ready, Set, GoReadiness Assessment and Buyers
Direct Initiatives are practicalresources to streamline the
M&A process for sellers andbuyers alike. Remember, as Tim
eloquently stated, AI may justbe the catalyst push that marks
(31:03):
a new era of transformation, onethat rivals the internet
revolution itself. Staying aheadmeans not only understanding the
tools, but also positioning yourbusiness to thrive in this
dynamic ecosystem. So whetheryou're a seller preparing, you
know, for your next big move ora buyer seeking your ideal
match, Tim's advice serves as aroad map for success in today's
(31:24):
fast changing tech world. Ifthis conversation resonated with
you, don't forget to check outthe resources Tim mentioned,
especially there was the bookcalled The Soul of the Deal by
Mark Morgenstern and theacquired podcast for deeper
dives in the world of businessand acquisitions.
And, of course, you know,explore the Ready, Set, Go,
Readiness Assessment and BuyersDirect to take that first step
(31:45):
in your journey. Until the nexttime, stay curious and keep
innovating. And keep in mind,please check out, you know,
www.iamcp.org. Members arefinding a lot of great
opportunities to, you know,connect with other members to
build out, you know, theirpartnerships, increase revenue
and customer satisfaction, butalso find a lot of great
(32:06):
resources to navigate therelationship with Microsoft. You
can find out more atwww.iamcp.org.
Welcome back to part two of this insightful
conversation with Tim Mueller,M&A managing partner and
cofounder of IT ExchangeNet, aleading M&A marketplace
exclusively for mid market ITbusinesses, where we're diving
deep into the world of Microsoftpartners, mergers and
acquisitions, and the future ofAI and business. If you joined
us for part one, you know thatTim brings years of expertise
(00:28):
and a unique perspective to thetable. Today, we're picking up
right where we left off,exploring the human side of the
M&A process, the evolvingrole of AI, and how Microsoft
partners can position themselvesfor long term success. So
whether you're a business ownerplanning your next strategic
move or simply curious about theintricacies of the M&A
process in the tech industry,you're in for a real treat. But
(00:52):
before we get started, here's aquestion for you.
What do successful businessleaders, rock solid
partnerships, and the GratefulDead have in common? Well,
according to Tim, they all playa role in understanding the soul
of the deal. In this episode,we'll uncover why relationships
matter just as much as revenue,how cost effectiveness can be a
game changer, and the singlebiggest factor that could
(01:13):
reshape the tech industry as weknow it. Spoiler alert, it's all
about AI, and Tim's got theinsights to prove it. Let's dive
in.
Well, the thing I really, as asyou were just sharing now and
just even as I was reflecting onour, you know, our previous
episode that we did together,the thing that always just
strikes me is I mean, here,you're dealing with, you know,
(01:36):
very technical, very smart, youknow, people, you know, that
have have grinded it out. You'vegotta have a lot of confidence
in building, you know, yourbusiness as you're going, you
know, forging the fire. But atthe same time, then, you know,
it's equally, you know, whenyou're going through this
process of not only just radicaltransparency, but, you know,
(01:57):
humility, right, that you haveto have, like, you know, in that
to, you know, recognize, youknow, things for what they are
and be willing to to kinda makethose changes. And so that's
just something as I as I justthink about the human element of
the process that, you know,these these sellers are going
through. Have you found, like,in the the decades that you've
(02:20):
been doing this, have you foundthat you've had to, like, advise
them or counsel them, if youwill, on kind of that that
qualitative that human part ofit of, hey, it's you know,
there's you know, it it's gonnait might hurt for a little bit.
Let me coach you through, youknow, you know, just the
humility and being teachable,etcetera. I mean, could could
you share a little bit about,you know, from your experience?
Tim Mueller (02:42):
You know, having gotten to know you now, Anthony,
I'm not surprised by yourquestion because that is what
you're known for in the channelis the human element of it and
how that plays out.
Anthony Carrano (02:53):
Yeah.
Tim Mueller (02:54):
I'm not surprised that you wanna dig in on that
one, and that's that's, I think,why you are so respected in in
this channel. Our role is partpriest, part rabbi, part
therapist, part big brother,part adviser. And depending on
what hat you're wearing is kindof related to what stage of the
(03:16):
M&A process there is. So,clearly, the upfront stage where
you kind of get ready to get inposition to be in position for a
sale is clear adviser work whereyou're dotting the i's crossing
the t's, making sure thateverything during future audits
are gonna be in place.
So we kinda let work with themto get their best suit and tie
(03:39):
metaphorically on before we goto market. But if you jump fast
forward into, let's say, 80%through the process, now the
amount of therapy work you'redoing and part rabbi, part
priest, part devote, increasesprecipitously because because
there's there is that humilityfactor where people are looking
(04:01):
at you going, we like yourbusiness. You did a nice job.
It's a lifestyle business, butwhy didn't you do this? And why
didn't you take care of thesemetrics?
And why didn't and you have tolook at it. And and one of the
things we tell them is that youare not gonna be perfect for the
seller for the buyer, I mean,but that's what they want. They
(04:21):
want something they can tinkerwith, maybe make some wholesale
changes in some areas becausethat makes you valuable to them.
If they take a perfect businessand just integrate it into them
themselves, there's nothing thatcould make that acquisition more
valuable. And so just know thatsome of it's posturing, you
(04:41):
know, we didn't do this right,so we're gonna give you a
discount on our our offer.
Or, it's not how we would do it,but the good buyers understand
the the ego, not the bad ego,but the ego that everybody has.
They're proud of what theybuilt. I mean, these guys and
and and, you know, lady andladies and and men that built
(05:02):
these Microsoft businesses,they've put their kids through
college, they bought new homes,sometimes a second home. They
have done probably more thanthey ever thought they would do
professionally because of howthey ran their business.
Anthony Carrano (05:15):
Mhmm.
Tim Mueller (05:15):
So hats off to them for doing it. They just happen
to be smaller than the buyerthat's going to envelop them in
their practice. So, of course,they're not gonna have as
polished of the systems and andbilling and all that reporting
ability.
Anthony Carrano (05:31):
Mhmm. Mhmm.
Tim Mueller (05:32):
So I I think the better buyers understand it and
they treat them more humanely sothat the humility that comes out
of it is a lot easier. But wehave had deals. We had probably
one of the biggest deals in ourhistory fail at the eleventh
hour because the CEO of thebuyer got into the personal side
(05:57):
of questioning the CEO of theseller. And the CEO of our
client, the seller said, I couldnever work for him and I know my
people could never work for him.So I'm out.
Anthony Carrano (06:08):
Oh, wow.
Tim Mueller (06:09):
And he was so fatigued with the process
because it just takes a lot outof you. He said Uh-huh. I wanna
pause, and he never went back tomarket. He just kept the
business private.
Anthony Carrano (06:18):
Wow.
Tim Mueller (06:19):
So sometimes that happens in the eleventh hour.
And so we ask offline part ofour role is to give the buyers a
little bit of the cycle profileof our seller to say, here are
some hot buttons that we knowafter working with them the last
couple of months that we'd likeyou to be gentle and and
(06:41):
understand that, you know, hey,the the the seller, you know,
lost his wife in the last twentyfour months. Real issue. Right?
And there are differentsensitivities or triggers they
have.
So please be soft on thembecause during that epoch of
time, during that illness andfor months after, he was in a
(07:02):
cloud. He was in a haze. And soknow that that dip was related
directly to a major loss. Soskip over it. Know that it's
more about the future and how herebounded versus getting too
tight on the area that kinda waswas a little bit of a down
downfall.
Anthony Carrano (07:20):
Mhmm. Mhmm. No. That's that's that's
fascinating. That's awesome. NowI know you've shared so much
already about, you know,factors, you know, you know, I'm
gonna kinda bring it back to,you know, on the business and
and the and the number side ofit. In fact, you've already
shared I mean, you sharedseveral between, you know, the
the just the percentage ofcustomer concentration, the
(07:42):
amount of reoccurring revenue,customer churn, employee
retention, you know,proprietary, like, you know, IP,
you know, EBITDA. You know?
So you've shared a lot of of thefactors, you know, driving, you
know, high multiples in theseM&A deals. Would you say are
there any other key factorsmaybe that you haven't touched
(08:03):
on that we should that ourlisteners should be aware of?
Tim Mueller (08:07):
Yep. Microsoft partners really need to have
gross margins of at least 50% orhigher to really paint the
picture of someone that'spricing, you know, get the right
pricing schedule for theircustomers.
Anthony Carrano (08:21):
Mhmm.
Tim Mueller (08:21):
And that's something that is is higher, you
know, by standards of manyothers in the space. You know,
Amazon has got about 17% grossmargins in their work.
The closest that we see toMicrosoft are the Oracle
partners that are between fortyfive and fifty, and then Google
partners that sit around 40%gross margins. But, you know, in
(08:43):
in that food system, you've gotMicrosoft that really is the
highest and should be thehighest of 50% of gross margins
or higher. If you look at thekind of the two year forward
growth rates, Microsoft partnersshould be at least 12 to 15% to
be considered, you know, averageto be, you know, for the buyers
(09:05):
that look at it. So if you'regrowing less than 10%, two year
forward looking, And I know it'sreally hard to say the second
year is a real tough squintbecause one year out is mostly
what most of the partners cansee with confidence.
Anthony Carrano (09:19):
Mhmm.
Tim Mueller (09:19):
But if you go into the second year, it'll be
roughly wrong. Don't knowexactly how roughly wrong it'll
be, too low, too high. But thatkind of 12% annual growth rate
is really what a lot of thebuyers are looking for.
Anthony Carrano (09:34):
And is that, do they care so much about what
type of revenue? And, mean, Ithink I know the answer, but I
don't wanna see, like, whetherit's at, you know, project based
revenue, subscription revenue,you know, or is it, you know,
net new rep like, net new logorevenue, a land and expand
revenue? Do they do they careabout what type of revenue that
(09:55):
is, or they just want to see,you know, just that 12 to 15%
growth?
Tim Mueller (10:00):
Yeah. Great question. And and I think it is
probably the right questionbecause not all revenue is made
equal. And during that qualityof earnings, they're really
looking at the quality ofrevenue that's coming in. So so
clearly, the customers that aresticky, that have one, two,
three year contracts that aregonna move forward mitigates all
(10:21):
the risk for the buyers.
So those contracts or thoseprojects that have a set sunset,
that's really difficult for thebuyers to get around and say,
how do we continue to replacethe projects? And a lot of
Microsoft's partners over thelast twenty years look at us and
go, that's what we've done.That's how we've done our
(10:42):
business over the years. But thebuyers are saying, yeah. But we
wanna see you pivot to the moresure business. We know you're
gonna take a hit on that onetime license revenue that you
normally would get.
Anthony Carrano (10:53):
Mhmm.
Tim Mueller (10:53):
But now it's gonna be recurring, and to you, that's
more valuable revenue for us.Second to that would be new logo
acquisition. So what kind of,you know, new business did you
see in '23 versus '24? And whatare you projecting in '25?
A lot of Microsoft partners cancan base that potential new
(11:15):
revenue on discovery sessionsthat they do. So they could
directly correlate discoverysessions for pay with
prospective customers to newrevenue that's gonna come in. So
don't have a lot of discoverysessions going on in February,
March, June, then you're likelygonna see a little bit of
(11:36):
pipeline, issues that go alongwith that. So number two would
be, net new, logos.
Number three, you may not havecontracts or new net, logos, but
customers that have beenconsistent over three, five, ten
years that you know havecontinually come to you with new
(11:57):
projects. So while that's not asvaluable as the customers that
are under contract, it still hasvalue and something you can
point to.
Anthony Carrano (12:07):
Mhmm.
Tim Mueller (12:07):
And then the last one is just sporadic projects
that don't have any kind ofconsistency, and you've got a
whole load of different logos,but they come in and out just
like the wind. And there aresunsets. There's a three month
project. Here's an eight monthproject. Here's twelve months,
but we don't think there's anyfollow on work on it. So those
are the four types of categoriesthat we see in order of
(12:29):
importance.
Anthony Carrano (12:30):
Mhmm. So kind of a piggyback, how has the with
the focus with AI and cloudservices, has that changed any
of those numbers, and thoseexpectations?
Tim Mueller (12:43):
Not enough information yet on the AI side.
Wish wish we could do it. Nextseven months from now when we
reconvene for a check-in, Ipromise you I will have more
data on that, but we just don'thave access to the data because
it's not there yet. Uh-huh. Whatwas the other side of the
Anthony Carrano (13:00):
Just about with the with the cloud services
because has that evolved causedsome of those numbers to evolve
a little bit over time just fromyour perspective?
Tim Mueller (13:10):
It has, and it's reflective in the multipliers.
So there are two ways to tovalue a business. One would be a
multiplier of your revenue, andthe second would be a multiplier
of your adjusted EBITDA. And formore information on add backs
for the adjustments, we could dosome have some notes that are
attached to this part of thepodcast, Anthony.
Anthony Carrano (13:30):
Mhmm.
Tim Mueller (13:31):
Generally accepted add backs that get you to your
adjusted EBITDA. Most everybodywatching this podcast will be
valued on in a, in a multiple ofyour adjusted EBITDA. And so
knowing that, those companiesthat are more cloud based get a
bump in their multiplier. Soinstead of kinda topping out at
(13:53):
seven and a half, they may startat seven and a half times your
adjusted EBITDA and go up toeight, nine, nine and a half, 10
when they have a practice morethan 45% of their revenue that's
cloud based, and they've gotmore in Outlook in their
pipeline to bring on more logosthat are looking for cloud.
Anthony Carrano (14:12):
That's what I thought. You know, I appreciate
you sharing that, and I'm sureyou've there are plenty of
resources on the IT ExchangeNetwebsite that folks can go to and
and dig into some of that. Solet's kinda maybe shift a little
more about kinda some futurestuff. So what do you I'm a put
(14:33):
you on the spot here a littlebit is how do you foresee the
future of M&A activityevolving for Microsoft partners
in, you know, like, the nextfive to ten years?
Let's bust out your crystal ballfor us.
Tim Mueller (14:46):
Yeah. Well, I mean, the the easy go to is to say, if
you haven't sniffed around orfigure out how to best lever AI,
you're already behind. Buteverybody's heard that at every
conference they go to.Everything, every, every little
hook for a conference that says,you know, building AI into your
value proposition and such. ButI think it's real. And and there
(15:09):
are two components of that.
One would be through certainlyCopilot and any other ancillary
AI tools that you could becomean expert on that you could then
offer to your customers. Butequally, if not more
importantly, how you run yourbusiness. So how will you lever
and be more cost effective toyou know, you may not have to
(15:31):
bring as many employees on tohave your Microsoft practice if
you're levering a lot of thosetools that can automate you
know, if you're doing somecyber, there certainly are more
AI tools that are gonna automatepen testing and certain
observability, for your securitypractice.
There's ways to run your yourbilling and also be able to see
(15:54):
metrics that, you know, we I'llhearken back to fifteen minutes
ago where these all of thesedifferent clients of ours are
saying, god, I wish I knew whatto do with all these metrics or
how to find them in my business.I will guarantee you five years
from now standard fare using AItools to help them run their
business better, to help thembill more quickly, to help them
(16:17):
collect and be pings. You know?We're just scratching the
surface on what Microsoftpartners can do to be more
effective to run their business.And, you know, if they thought
offshoring was a way to gethigher margins for their
business, to have a workforce ofnow 40% of your work face force
will be AI agents that are doingthose types of of manual pieces
(16:43):
that that normally you're you'vebeen paying people to do.
And it's scary to think aboutour workforce that are gonna be
replaced, but it's the standardevolution of technology
Anthony Carrano (16:53):
Mhmm.
Tim Mueller (16:53):
You know, going from the industrial revolution
all the way through today. Butyou gotta figure out how to best
make yourself more valuable bybeing an expert with the AI
tools.
Anthony Carrano (17:03):
Mhmm. Mhmm. When you say crystal ball, I
don't think there's any there'sa singular transformational, and
I would even dare to say,catalytic push for how to force
to push your business, AI, sincethe formation of the Internet. I
(17:24):
think everything in between whenthe Internet was first
introduced circa 9596 withMosaic has all been certainly
building upon that great momentOf graphic user interface with
the Internet until now AI. And Ithink that will be something
that may make the Internetrevolution pale by comparison.
(17:48):
And and I I'm bought in fully.
Tim Mueller (17:50):
There isn't a workout that I do or a walk that
I take unless I'm with my wife.That doesn't have my earbuds in
listening to This Week in AI orAI Copilot podcast. Everything's
surrounded because unless wefully understand it, we can't be
that advisor in the front end ofthis. We also talk to a lot of
(18:10):
Microsoft partners that are two,three years out from wanting to
sell, and they're asking us howdo we architect the business
that will get the greatestvalue. So unless I'm aware in my
team, particularly of where AIis going to affect positively
Microsoft partners, we can'thelp them put their best suit
and tie on twenty four, thirtysix months from now.
Anthony Carrano (18:33):
Mhmm. Well, hearing what what you said just
kinda two thoughts came to mind,especially the one of the the
second part about how you runyour business and being cost
effective. And it's interesting.I'm going through this series of
just, you know, of of foundersand where, you know, just a
consistent theme. And this iscovering, you know, founders of,
(18:53):
you know, of businesses andAmerican entrepreneurs from even
going back to until, like, the1800's up to the modern, the
modern day.
And they're one of theconsistent themes is, you know,
cost effectiveness because, youknow, as the markets, you know,
change, you know, prices will goup, prices will go down, revenue
can get adjusted. But once you,codify certain, you know, cuts
(19:16):
and efficiencies, you know, thatstays fixed when things are
going up or things are goingdown. When they're going up, you
just get, you know, greatermargins. So I I appreciate you
sharing that. The other thing isas I was listening and there was
a point, I forgot what questionit was, but when we were talking
about, like, the relationshipsand about the partners, one of
(19:36):
the things that you found in,you know, that you've observed
in decades of experience, one ofthe key relationships that, you
know, buyers are looking for andsellers is, you know, they're
how, you know, ingratiated arethey with Microsoft and how well
known in Microsoft?
So I think of, like, just apractical advice hack for people
(19:57):
listening is saying, make sureyou're aligned with Microsoft.
You know? Because, you know,they've got, like, resources and
insights to, you know, what thenext, you know, five to ten
years and, you know, just makesure you're aligned and continue
to ingratiate there as it makessense for your business to you
you know, while you're thenrunning your business, you know,
(20:18):
aligning with Microsoft, andthat kind of will help position
you, you know, for that, youknow, for that, you know, exit
in five to ten years. I don'tknow. Is that what do you think?
Is that is that a good like agood hack, bad a bad idea, good
idea?
Tim Mueller (20:31):
Yeah. It's a great pro tip for these guys for sure.
And I do think it's a fine line.One, yes, you do wanna have a
stellar relationship so thatwhen you do decide to sell and
they ask for that contact atMicrosoft, they would say full
throated, I know Anthony reallywell. We work with them on a
(20:51):
weekly basis. We give themreferrals. They respond. And
more so than responding, if theyget the assignment, they get
rave reviews. So that's theideal reference you want from
Microsoft. But there's a fineline between organic revenue
that you generate and referralrevenue that you take from
Microsoft.
(21:12):
So we had a client years agothat bragged and said, we've got
such a great relationship withMicrosoft that 70% of our
revenue comes from Microsoft.And while that takes a lot of
work to Yeah. Nurture and curatethat relationship, If for
whatever reason Microsoftdecides to pull back on
(21:33):
referrals or they decide tokinda do an attaboy on on giving
business to another partner inyour region that they were
normally giving to you, thoseare variables that you are not
controlling any longer.
Anthony Carrano (21:48):
Mhmm.
Tim Mueller (21:48):
And so I don't know if there is a perfect balance.
It certainly isn't 70/30.
Anthony Carrano (21:54):
Yeah. Yeah.
Tim Mueller (21:55):
And on the other side, is it the other way, 30/70
where you're only getting 30% ofthe referrals because there
isn't a partner alive that says,oh, no. I don't want any more
referred business from youbecause it's gonna mess up my
percentage.
Anthony Carrano (22:09):
Uh-huh.
Tim Mueller (22:10):
But I would just say much like you wanna work
really hard to have yourcustomer concentration at 10% or
lower, you also wanna work atalways originating, organic
revenue from your sales team andnever get too reliant on
Microsoft to give you all ofyour revenue. It's just smart
(22:31):
business. And that way, don'thave to ever have to think about
declining the revenue because,you know, the other part too is
if you decline enough of thereferrals from Microsoft,
they're gonna just know you asthe person that declined much
like dating.
Anthony Carrano (22:47):
Mhmm.
Tim Mueller (22:48):
Two or three times to say I don't wanna go out.
You're not gonna ask anymore.
Anthony Carrano (22:51):
Uh-huh.
Tim Mueller (22:51):
So so you wanna be in position where you can take
on all those referrals, but notbe placed in a position of, of
weakness where you're fullydependent on that to make your
numbers.
Anthony Carrano (23:02):
No. And I'm I won't go into the stories, but I
because, obviously, we work witha lot of Microsoft partners on
the marketing, you know, side.And, yeah, we've had some
clients go through those ebbsand flows, and it's it's just
been interesting kinda walkingthat journey with some of them.
I'll just I'll just leave it atthat.
Tim Mueller (23:20):
Fast forward that same kind of, yes, we'll take
the revenue. We appreciate it.We appreciate it. And now we're
in the tail end of due diligencefor an m and a deal, and
Microsoft notifies them is thatyou no longer can get the, you
know, the billings on these thissoftware license that we're
gonna we're gonna go direct tothe customer. And now all of a
(23:43):
sudden, tens of thousands ofdollars of revenue that you
normally were the pass throughto your client is now gonna be
held on by the regional salesrep from Microsoft because they
don't want you to take themargin. And that's done toward
the tail end of due diligence.It's meant to take the deal.
Anthony Carrano (24:01):
Yeah. I bet. I bet. Well, this has been
fantastic. I I can talk to youall day.
Tim, this there's just theamount of insight and wisdom
that you share is just is justfantastic. So really appreciate
it. As we wrap up, I know Iwanted to ask you. So it's
actually gonna be kind of likethere's gonna be two part. It's
(24:21):
because I you mentioned that youdo listen to a lot of podcasts.
So, basically, what's one bookyou would recommend a business
owner read as part of theirpreparation to sell their their
business, and what's one podcastyou would recommend that an
owner listens to as part oftheir preparation to sell their
business?
Tim Mueller (24:40):
Well, hold on. I will that's really funny you
asked that question, but I'vegot 20 of them here in my
because I give away to all of mymy customers.
Anthony Carrano (24:53):
The soul of the deal. Okay.
Tim Mueller (24:54):
The soul of the deal. I've got 20 of these
written by Mark Morgenstern. Thebest book ever written on
M&A. He's a huge Dead fan,and he makes analogies all the
time about the Dead in thisbook. Okay.
Great recommendations on theback of the cover. Mark
Morgenstern, The Soul of theDeal. No better book out there
(25:16):
to prepare yourself thepsychology side of it of selling
your business.
Anthony Carrano (25:21):
Excellent.
Tim Mueller (25:22):
And then secondly, David Gilbert, who was at
Microsoft running their garagefor a number of years,
entrepreneur, he has a podcastcalled Acquired that he's been
running for about, I wanna say,fifteen years now.
Anthony Carrano (25:38):
Oh, wow.
Tim Mueller (25:40):
He's an esteemed graduate of The Ohio State
University, but went off as a 22year old and and end up running
the garage at Microsoft and thengot into other types of
businesses at Microsoft that hewas an executive in before he
went off. And he's doing venturenow. He's probably not more than
(26:00):
35 or so. But these acquiredpodcasts, Anthony, are ninety
minutes, two hours, and they godeep into businesses and how
they're run. And for geeks likeus, and I include you in that
geek
Anthony Carrano (26:19):
Absolutely.
Tim Mueller (26:20):
You can get lost in these these podcasts. And they
also do you know, they were onelast ones, I think, to interview
Charlie Munger before he died ofvirtual activity.
Anthony Carrano (26:31):
Okay.
Tim Mueller (26:32):
And Charlie never did interviews, and he was just
so intrigued by these two youngguys that he sat and talked with
them for two hours. But, yeah,the podcast called Acquired.
Anthony Carrano (26:42):
Okay. Definitely. And I'll put a link
to both of those. The soul thesoul of the deal and Acquired in
in the show notes for sure.Appreciate it.
And I'm I'm gonna go ahead andafter we're done, I'm gonna
subscribe to Acquired and startlistening to it. It's I love
listening to that kind of stuff.Well, last question then is, so
how can partners who wanna, youknow, either sell their business
(27:05):
or acquire one, you know, getstarted?
Tim Mueller (27:08):
So, you know, the pat answer is call us and we and
no matter where in the stagesbut we we do have something
called Ready, Set, Go, and it'sa free readiness assessment for
those who are contemplating thesale of their business. And
we'll give you a scorecard tosay, you know, you're looking
great in this side of it. Youmight wanna focus a little bit
(27:28):
more in this other area. So it'scalled Ready, Set, Go.
We work very closely with theIAMCP. In fact, we're the,
M&A marketplace for theIAMCP, and we know the Microsoft
space like the back of ourhands. It's likely the the most
number of deals we do on anannual basis are Microsoft
partners. So the ready, set, go,free, piece is great. If you are
(27:53):
a buyer, we have somethingcalled buyers direct where you
can, for free, advertise all thecriteria of companies you're
looking for.
And on a monthly basis, we pushthat out to all of our potential
sellers and to see if that pinkymatches the pinky and the thumb
matches the thumb so that wecould match buyer and seller.
Those are a couple of ways.We're always talking with buyers
(28:15):
to understand what their theirinvestment criteria may be so
that we then put it in ourdatabase. We've got rudimentary
AI that helps us match buyer andseller. So the more we know from
the buyers, the better we couldbe and more accurately to bring
our sellers to them.
Anthony Carrano (28:32):
Excellent. Excellent. Well, we'll
definitely have links to both ofthose in the show notes and then
on social media as well. Tim,this has been fantastic. Thank
you again.
Really appreciate you coming onwith us.
Tim Mueller (28:46):
Anthony and and Rudy, love to always see you
guys. Good to communicatebetween these shows too. It's
always good to stay in touch andto, you know, understand from
you the finger or the pulse thatyou have on the Microsoft
network, but also just sittingfor an hour and chatting. Always
love doing it. Anytime youwanna, do a refresh, we're here.
But thanks again for theopportunity to sit with you.
Anthony Carrano (29:08):
Sounds good. Thanks. Have a great rest of the
day.
Tim Mueller (29:10):
You too.
Anthony Carrano (29:13):
As we wrap up this enriching discussion with
Tim Mueller, one thing becomesabundantly clear. Success in
business is not just aboutnumbers, multipliers, or market
position. It's aboutrelationships, foresight, and
adaptability. Tim has sharedinvaluable insights on the human
element of mergers andacquisitions, the pivotal role
of AI in shaping the future, andpractical tips for Microsoft
(29:36):
partners navigating the everevolving tech landscape. I
really enjoyed just the timethat I had with Tim over these
last two episodes, and here arefive key takeaways I took from
our time together.
First, number one, the humanelement. Building and nurturing
relationships whether withMicrosoft, buyers, or clients is
just as critical as financialsuccess. Mutual respect and
(29:59):
trust can make or break deals.Number two: Cost Effectiveness
Codifying cost efficiencies inyour business ensures lasting
margins regardless of marketfluctuations. The third takeaway
is AI's transformational power.
Leveraging AI tools isn't justabout offering cutting edge
(30:19):
solutions to clients, it's aboutusing them internally to run a
lean, effective business model.From automating manual processes
to refining metrics, AI is setto revolutionize operations.
Number four, your partnershipwith Microsoft. Aligning with
Microsoft effectively whileensuring a balance between
organic and referral revenue canposition your business for long
(30:42):
term success and a highervaluation. And number five,
preparation is key.
Tools like the Ready, Set, GoReadiness Assessment and Buyers
Direct Initiatives are practicalresources to streamline the
M&A process for sellers andbuyers alike. Remember, as Tim
eloquently stated, AI may justbe the catalyst push that marks
(31:03):
a new era of transformation, onethat rivals the internet
revolution itself. Staying aheadmeans not only understanding the
tools, but also positioning yourbusiness to thrive in this
dynamic ecosystem. So whetheryou're a seller preparing, you
know, for your next big move ora buyer seeking your ideal
match, Tim's advice serves as aroad map for success in today's
(31:24):
fast changing tech world. Ifthis conversation resonated with
you, don't forget to check outthe resources Tim mentioned,
especially there was the bookcalled The Soul of the Deal by
Mark Morgenstern and theacquired podcast for deeper
dives in the world of businessand acquisitions.
And, of course, you know,explore the Ready, Set, Go,
Readiness Assessment and BuyersDirect to take that first step
(31:45):
in your journey. Until the nexttime, stay curious and keep
innovating. And keep in mind,please check out, you know,
www.iamcp.org. Members arefinding a lot of great
opportunities to, you know,connect with other members to
build out, you know, theirpartnerships, increase revenue
and customer satisfaction, butalso find a lot of great
(32:06):
resources to navigate therelationship with Microsoft. You
can find out more atwww.iamcp.org.
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