May 16, 2023 • 22 mins
EPISODE SUMMARY
Getting a dream exit is the ultimate end game for many software founders. There are multiple reasons behind each exit, but the goal for all is the same. How do you ensure that you get your money's worth when you finally put your SaaS, which you worked so hard for, up for sale?
In this episode of Scale Your SaaS, The Magnolia Firm Founder Christine McDannell talks about the right mindset and courses of action to take when exiting your business with host and B2B SaaS Sales Coach Matt Wolach. She also shares a lot of juicy insight about exiting the industry and how to extract the most value out of the sale. Get ready to ride off into the sunset with a winning exit!
PODCAST-AT-A-GLANCE
Podcast: Scale Your SaaS with Matt Wolach
Episode: Episode No. 264, "How to Achieve Your Dream Exit - with Christine McDannell"
Host: Matt Wolach, a B2B SaaS sales coach, Entrepreneur, and Investor
Guest: Christine McDannell, Founder, Business Intermediary & Broker at The Magnolia Firm
TOP TIPS FROM THIS EPISODE
- Focus on Building an Amazing Product
- Document Your Process and Keep it Simple
- Plan Your Exit Early
- Work Yourself Out of the Company
- Sell at the Start of the Burnout
EPISODE HIGHLIGHTS
- The Exit Industry is Currently Thriving
- Most Buyers are New to Entrepreneurship
- Young Founders Tend to Exit After Five Years
TOP QUOTES
Christine McDannell
[06:30] "What your company is worth is what somebody's willing to pay for it."
[07:54] "I never ever want to bully or pressure a seller into taking a lower price, or taking them to market and then pushing them down on price."
[11:08] "I'm passionate– even more passionate about helping somebody that's getting into entrepreneurship for the first time."
Matt Wolach
[09:43] "You need to have the right process, right formulas in place, the right playbook, so you can bring somebody in. They can take over, they can walk through that exact same thing– and sell just as well as you."
[14:10] "They're willing to pay more… you're gonna have more buyers, if you have it set up. And it looks so good. It looks great. You've got the process lined out and looks like someone could just take over and make it happen."
LEARN MORE
To learn more about The Magnolia Firm, visit:
https://themagnoliafirm.co/
You can also find Christine McDannell on LinkedIn at: https://www.linkedin.com/in/christinemcdannell/
For more about how host Matt Wolach helps software companies achieve maximum growth, visit https://mattwolach.com/
Get even more tips by following Matt elsewhere:
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Matt Wolach (00:10):
I talk with a lot of software founders every week.
And of course, the goal for mostis to have an incredible exit,
right? So you can have thatamazing dream reach, you can get
to that fun, like rich statethat everybody thinks of, I'm
making millions of dollars andI've got an island or whatever
it is, that is your dream. Buthow do you get there? How do you
set up your business to achievethat exit? And who can help you
(00:34):
along the way to until you getto that exit? And at that point,
when you're selling? Who's goingto be the person who's going to
actually facilitate how do theyactually make it all happen?
Fortunately, I talked toChristine McDannell, she is
awesome. She's with The MagnoliaFirm, and she helped sellers of
companies understand how to setup their company be ready for
the exit how to go through theprocess, and to make sure
they're maximizing thatvaluation so you get the most to
(00:57):
achieve your dream. Definitelylisten to this one if you're an
owner of a software company,because she gives some great
advice on what you can do to beready to exit.
Intro/ Outro (01:06):
Welcome to Scale Your SaaS, the podcast that
gives you proven techniques andformulas for boosting your
revenue and achieving your dreamexit brought to you by a guy
who's done just that multipletimes. Here's your host, Matt
Wallach.
Matt Wolach (01:22):
Hello, welcome it Scale Your SaaS. I'm super
excited to have you here. Thankyou for being here. If you're
watching on YouTube, thank youfor that. If you're listening on
the podcast network, thank youfor that as well. My name is
Matt, and we are here to helpyou scale your SaaS so you can
understand the rightmethodologies for building an
incredible process. You canclose a lot of deals, make a
great awesome company and thenexit to your dreams. And that is
(01:46):
what we will be talking abouttoday that exit and how to set
yourself up for the exit. Andthat's why I'm really delighted
to be joined by ChristineMcDaniel. Christine, how're you
doing?
Christine McDannell (01:55):
I'm good, Matt, I love the energy that you
bring to the show. That'sawesome.
Matt Wolach (02:00):
Thank you. And I know that you have that same
energy. So I'm really lookingforward to today. Let me make
sure that everybody knows whoyou are, Christine. So
Christine, guys, you're gonnawant to definitely follow her
and get to know her. She is thefounder, business intermediary
and broker at the Magnolia firm.
She's a lifetime entrepreneurthat has put in the work she
started acquired and sold 20plus of her own businesses and
(02:20):
now helps others do the same.
The Magnolia firm is a highlyspecialized boutique business
brokerage firm supportingentrepreneurs through the finish
line of the most important stepsthey will ever take selling
their company. And having beenthrough that process myself, I
can tell you, it is veryimportant that you have somebody
who knows what they're doinghelping you out. Christine,
(02:42):
thanks so much for coming on theshow.
Christine McDannell (02:44):
Of course.
Thanks for having me.
Matt Wolach (02:46):
Absolutely. So tell me what's going on with you
lately? And what's coming up?
Christine McDannell (02:51):
Yes, so believe it or not, even with the
scary R word, which is recessionor the bank fallout that was
very recent. If people are stillbuying companies and more so
than ever, it's a still hot hotseller's market, you know,
people wind I'm not just sayingthat, because I'm in the
industry, people want to have,you know, more stability, right?
(03:12):
And these are cash flowingbusinesses. So let me be
specific. So people areacquiring cash flowing, stable,
you know, companies that stillshowing growth through these
times. Those are the ones thatpeople are picking up very
quickly.
Matt Wolach (03:26):
Yeah, and I totally agree. That's something that I
had to go through learning. Butit's also something that you
know, as a coach who helpspeople put in the right process
of scaling and, and growing,people come to me because they
realize, hey, we're coming toexit, I want to make sure we
increase our cash flow, weincrease our sales and, of
course, our revenues andprofits. So absolutely. I'm glad
that you mentioned that becauseit is really important for
(03:48):
buyers to have that right.
Christine McDannell (03:50):
Without a doubt. And yeah, what you do,
it's like I love if people go tosomebody like you before they
come to us. What ends uphappening is they come to me and
they say, Hey, I wanted to sellmy business yesterday. So we're
scrambling to try to position itthe best that we can maybe their
systems and I know we'll talkabout like what they need to do
now to position for great exitso they don't leave money on the
(04:12):
table. But yeah, somebody likeyou to get in there first and
systematize and really, youknow, make it like a well oiled
machine will add that much morevalue to that that exit number
at the end of the day.
Matt Wolach (04:25):
Yeah, I love it. I totally agree. I want to go back
what gave you the idea to startthe Magnolia firm?
Christine McDannell (04:31):
Well, I myself have built and sold a lot
of companies. So I'm over thelast 19 years. Multiple
startups, multiple exits,acquisitions, roll ups. That's
That's my game. That's what I'vebeen doing. And I did have a
business broker businessintermediary, my very first
exit. And then after that, I'mlike, Look, I started the
company from scratch. I'm amarketer, I'm a salesperson, why
(04:53):
can't I sell my own company? Andso they're on after I was doing
all my own transactions evenalong with the law. larger ones.
And then my friends startedcoming to me and having me help
them with their exits about ayear and a half ago. And yeah,
just like okay, I guess this iswhat I'm doing next. So launch
the Magnolia firm.
Matt Wolach (05:12):
Very cool. And you told me before we started
recording, you were a SAS owneras well, right?
Christine McDannell (05:17):
That was the last venture that was the
hardest. I know. I said, I couldspeak to the SAS community.
Yeah, three years didn't hitrevenue, was still able to exit
it. But it was like pennies onthe dollar, we'd raised a lot of
capital. I mean, I was lucky inthe sense for two things that I
was it was the heydays of, youknow, 2018 to 2020 2019. The
(05:40):
valuations were off the charts,you know, for my SAS company to
be 1010 months old, pre revenueto be worth $10 million is like,
unheard. Like, it made no senseto me. But I just went with it.
And we raised on a 10 millioncap. And so it was a wild ride,
it was 90 hour weeks is nosleep. It was it was the most
(06:02):
stress I've had in my life forthree years. But the second
thing that came out of it wasnow I can help SAS companies
exit, right. I know the game, Iknow, the raising capital. And
to that point to, you know, Iknow you have very savvy
listeners and followers. Butsome people now are coming to us
and saying, you know, becausethey raised on a 10 million cap
(06:22):
or whatever it was on a certainvaluation. Okay, well, I raised
I just raise capital two yearsgone. 15, you know, my company
was worth 15 million, I want tosell it right now for 15
million. And I'm like, Yeah,that's not what you can get for
your company as a purchaseprice. So So sometimes, you
know, I do have to educatepeople in the sense that, that,
(06:43):
yeah, that doesn't necessarilymean your company, somebody's
gonna pay that much for acompany.
Matt Wolach (06:48):
Yeah, I'm sure it's important for somebody to have
that person to kind of reallykind of level set with them and
get their expectations in theright place, right? Because so
many of us founders, were alwayslike, Oh, my company's worth
this and this, and it's reallymore about the market the data,
right? What what do you look atwhen you're looking at the
valuation of a company?
Christine McDannell (07:08):
Yeah, I mean, out the gate, it's going
to be that baseline of profitEBIT a seller, SD, whatever you
want to call it, you know,sellers, discretionary income,
earnings, I mean, at the bottomof the bottom line of, you know,
all the money you bring in, andthen you take out and we're
adding back your ad back. Soobviously, you guys are running
stuff for your business,everybody knows it. So we add
(07:30):
that back into that bottom,because then the multiples based
off of that, that's number one,that's kind of my base or
baseline. I'm not a fan ofpeople just strictly saying it's
a multiple of your profit it is,first off that that what your
company is worth is whatsomebody's willing to pay for
it. I've said that forever. Andit is so true no matter what,
okay, that's what your companyis truly worth what someone's
(07:53):
willing to pay. But okay, we'regoing to take that that net
profit as a baseline, but thenI'm going to check, I'm going to
start adding on to that, right,like, what's your reputation,
like how many years in business,the longevity of your team, your
systems in place, all thatstuff, it comes into play. And
that's what we start puttinginto a package and, and
(08:14):
marketing the company for sale.
Just like if you're raisingcapital, you need to put a lot
of work into how you're going toposition it for sell. And I
don't even see like decks donewhen a company is going to
market for sale. They don't evendo a pitch deck. And I'm like,
Yeah, but you'll do one to raiseall this capital, this slick
deck and this presentation. Soyeah, it's been, that's the part
we do for people.
Matt Wolach (08:37):
Awesome. So what exactly would an advisor like
you like if somebody's like,Okay, I'm starting to get there.
How do you guys help? Or anybodywho's helping like an advisor on
a buying or selling transaction?
Christine McDannell (08:50):
Yeah, so we're mostly on this sell side.
We do actually double sidedtransactions a lot because a
buyer comes to us unrepresented.
So I'm usually helping bothsides, which I actually love to
do. So yeah, we're just kind ofa hand holding our seller, you
know, we want to come with a anasking, we're not going to
pressure them. It's theircompany, like I never ever want
to bully or pressure a sellerinto taking a lower price, or
(09:11):
taking them to market and thenpushing them down on price. I've
seen that done in this industry,which is really sad to watch. So
yeah, we collectively agree on ago to market price, right? It's
got to be a reasonable price.
And they could stay true to thatnumber for as long as they want,
you know, and based on marketconditions, and if they're
(09:32):
patient, I don't you know,that's fine. We don't have to
lower the price. Even ifeverybody's telling us hey, it's
too high. It's too high. Youknow, we we relay that to our
seller, like hey, here's theobjections we're getting, or,
Hey, you're too You're involvedtoo and for your listeners.
Another thing you want to workout, you know while you're doing
this planning is workingyourself out of the company. So
(09:55):
we see the company I'm sure yousee that I'm sure that's what
you come in help them fix isthat you're so like the
company's wrapped around you, ifyou were not there, that company
would fall apart. So are youjust the only one doing the
bizdev? Like you're the onelanding all the big clients, you
know, if that's the case, yougot to put somebody in for
bizdev position, take yourselfout of it. Because again, when
(10:17):
somebody goes by your company,they're gonna say, well, shoot,
it's wrapped around you and youcan't leave, or you're gonna
have a long urn out like a fouryear earnout, which I'm telling
you do not we will not let oursellers do that we won't let
them do really any error now,but you want to avoid that.
Matt Wolach (10:32):
I totally agree.
That's something I do help with.
And just to add somepiggybacking on that,
absolutely. In the early days, Ihighly recommend that founders
are the ones who do the sales,it's really important for you to
get to know your market and yourbuyer and what they want what
they need. It helps youunderstand marketing messaging
helps you understand your salesprocess helps you build out the
product even better to fit them.
But once you get that, you needto make sure you shift it to
(10:56):
somebody else, you need to havethe right process right formulas
in place, the right playbooks,so you can bring somebody in,
they can take over, they canwalk through that exact same
thing, sell just as well as youwhich a lot of founders have
trouble with getting that nextperson to sell as well as them
with the right process. You cando it, but you need them selling
as well as you and then that isa very sellable business,
because you're not involved insomething that somebody else can
(11:18):
take over. I totally agree withyou. Great point. Christine.
Christine McDannell (11:22):
Cool, thanks. Yeah.
Matt Wolach (11:25):
So you mentioned that sometimes you're working
with buyer and seller, I thinkthat's great. How do you balance
the needs and interests? Whenyou are working with both of
them? How do you make sure thateverything kind of aligns?
Christine McDannell (11:35):
Yeah, I'm a really big fan of winwin. I
know, some people, you know,don't don't think that's even
possible. But I disagree withthat point that people make.
It's it's definitely what youknow, it takes some
negotiations, it takes them alittle bit of give maybe on each
side to get to that point. Butit can be a win win, right for
both parties, you know, and fbeing having high integrity and
(11:58):
ethics, and I have to be able tosleep at night, like I have to
be so there's there, I have toknow I'm doing best for both
parties, a lot majority of ourbuyers Believe it or not, are
first time business owners, youknow, they're leaving corporate,
they got you know, COVID gavethem that taste of freedom. And
then they go back to the office.
And now they're like, Look, Ijust I'm ready to kind of strike
(12:18):
out on my own. So that'sexciting. So a lot of times, and
I'm passionate, even morepassionate about helping
somebody that's getting intoentrepreneurship for the first
time.
Matt Wolach (12:29):
I love it, definitely, it's super cool to
see somebody take that ventureand kind of that feels like a
leap to them. But something thatyou and I both know, is going to
be a fantastic journey and a lotof learning along the way. But I
want to ask you, of course, as asoftware founder, if you're
aiming for an exit, we want tomaximize that exit. So what are
some of the things that softwareleader can do early on, to kind
(12:49):
of make sure they're set up fora great exit down the road?
Christine McDannell (12:53):
So again, there's different stages. So
obviously, you guys are, youknow, you're trying to scale up,
right, you're putting everypenny into marketing and growth
and systems and all that funstuff. So I don't expect to see
a lot to the bottom, ifanything, right. It's not, you
know, especially not the firstor second year. So you know,
you're you're kind of maybeputting people on the platform
(13:15):
for free and getting, you know,you know, doing a lot of SAFS.
That's how they start, right,they put you on for free, and
then they start charging alittle down the road. So so that
makes sense. But then at yearthree, and pass that, you know,
we need to start seeing theprofit, especially for
positioning for an exit withinfi a lot of people are trying to
do five years, which we've seen,you know, you know, millennials,
(13:37):
Gen Z, you know, they don'texpect to own a company for 20
years, like that's never gonnahappen. A lot of our recent
clients, they're in there, theyoungest is like 24, our average
right now is like 33 to 35 yearolds that are exiting their
first company, they've had itfor six years, it's profitable,
they had a great run at it, theyjust don't have the skill set to
(13:59):
take it to the next level. Andbe there like the startup
person, they're the ideavisionary person, so they're
ready to get to the next, youknow, start the new thing from
scratch. So yeah, I mean, Iwould say definitely net profit,
once you can get to that pointis super important. And then the
team, so keeping your team happyis huge longevity, and then
(14:21):
reputation. So of course thepotential buyer is going to
Google your company, they'regoing to look at the reviews,
they're going to look at thesocial media comments, you know,
do they like their product? Whatare the complaints and address
those quickly? So I think thatthat those are the main and
systems would be the last onelike solid systems. I always
love to say even in mycompanies, like right my
(14:44):
playbook or the standard, youknow, the procedures, the
operating manual, whatever youwant to call it, in my company,
right at like a 10 year old cancome in and run the company like
run it like write it that detailthen that's simplified. So if a
10 year old came in, they canliterally run the company so So
in that takes time, and it's aliving document, and but just
make sure you do that from thestart.
Matt Wolach (15:05):
I love that. And I totally agree. That's something
that I tried to help peoplewith. And I've had some of my
clients tell me that, hey, wehad an exit, it was awesome. And
because we had that process inplace, and the playbook there,
the buyers absolutely loved it.
And I think that's part of it.
You're right, like you saidearlier, you know, your
company's worth, whateversomebody's gonna pay, well,
they're willing to pay more andyou're willing to have, you're
(15:27):
gonna have more buyers. If youhave it set up. And it looks so
good, it looks great. You've gotthe process lined out and looks
like someone could just takeover and make it happen. I have
been both a buyer and a sellerof companies like you,
Christine. And I can totallyagree with that. It's absolutely
cool when you've got thatprocess nailed,
Christine McDannell (15:46):
right?
Yeah. And you will get out ofthat company even quicker, we
just had a 3.5 million closedjust two weeks ago, even with
the banking drama, like themedia tries to scare everybody,
you know, our deal still closedtwo weeks later, and it was SBA
loan, but the banks didn't getspooked, it was totally fine.
And that owner gets to leave in60 days, you know, he gets to
train for 60 days, and he getsto write off to the sunset,
(16:08):
because the company was sodialed, and he was only working
about 10 hours a week, he waspretty, you know, all the way
out of the company already, youknow that, again, with those
systems in place and thoseprocesses, then you're out,
you're out of there, if they're,if those aren't in place, you're
gonna, they're gonna want you tostick around for a year or two,
the training is going to takelonger, it's gonna be harder,
(16:30):
you know, you're everything inyour head. You know, and I'm one
of those founders do, right?
It's like, oh, it's in my head,like, that doesn't work. When
somebody buys your company,you're gonna have to get it out
of your head somehow.
Matt Wolach (16:43):
Yeah, it's very true. We think about it all the
time. Right? So eventually,you're gonna have to stop
thinking about easier said thandone. I would agree. What would
you say to some of the foundersand leaders who are asking when
is a good time to sell theirbusiness? You know, I'm sure
that a lot of people arethinking, Hmm, should we sell
now? Should we wait a year?
Should we wait a few years?
Like, when should we do it? Whatdo you say if they ask you that
(17:04):
question?
Christine McDannell (17:05):
I know what I wish, I tell everybody, I wish
I had a crystal ball, right?
Because we speak to some thataren't quite ready. They're just
like, look, we're scaling, we'redoing great. Like, you know, how
about that, you know, we want tohit this exit number. So some
people have a number in mindthat they're working backwards
from totally get it, you know,and a lot of times, it's that
nine figure number, they justwant to hit this, you know,
(17:26):
eight or nine figure number, andthen you know, they'll go
towards that. But then I tellthem, because right now, again,
super hot seller's market, butwhat happens if now you're you
work another year to grow iteven more, and you put all that
work in? And what if the marketcomes down, and but you grew it,
so you're ending up with thesame purchase price anyways. So
(17:47):
again, I don't have a crystalball. So there's no way for me
to say if that's gonna happen ornot, I have no clue. So what I
tell people, it's when you startgetting burned out, like, you're
gonna have to kind of run themarathon, finish the marathon,
you know, on the exit, you wantto have high energy excitement,
you know, you still enjoy thecompany, you don't hate it,
(18:09):
you're not burned out, becauseit's going to be that much
harder to sell it. Because youneed that enthusiasm, to
convince somebody else to buyit. You got due diligence to
work through again, we try tomake it as painless as possible,
sometimes not the case. You gotlawyers involved, you got
sometimes banks involved. And soyou got to tough that out for a
couple of months. So yeah, it'sjust if you're burned out, it's
(18:33):
not fair to your team, yourclients. You know, if you if
you're getting burned out,that's probably the time I would
tell people to try to sell onthe upward, obviously upwards to
me. Yeah, before you're in,that's the hardest time because
you're like, what we're doing sogood, you know, this person was
doing $100,000, you know, in hisbiggest month as it was under
(18:53):
contract, and he's like, Oh, mygosh, this is so hard to sell it
right now. It's making so muchmoney. And I'm like, No, but
this is the best time to sellit.
Matt Wolach (19:04):
Your point? That's something I wouldn't think about
either, but that's awesome. Sowhat advice would you have for
software leaders who arethinking about this? It's a
future thing for them? Whatwould you share with them?
Christine McDannell (19:15):
Yeah, I mean, I don't know if much after
kind of the points I've alreadymade that, you know, you just
want to concentrate on thatstuff. You want to, you know,
start start laying out a plan.
So if you've been talking topeople that they're two years
in, and they they're going to xin five years, and again,
they've just reverse engineeredit, and they're on track,
they'll just if needed, some ofthem are ahead of schedule,
(19:36):
which is kind of cool to see. Ithink doing that is really cool.
Just build I mean my biggest tipto be honest, and I was really
good about this with thesoftware company for some reason
I wasn't I think it was just allthe hype is not just thinking
about that exit number all thetime. Okay, and I have a lot of
friends making the mistake rightnow I'm gonna exit for five
whatever 5 billion and all thesecrazy The numbers and and they
(19:59):
just started. And I'm like,Look, if all you concentrate on
is building an amazing product,amazing product, happy
customers, if that's all you dothat exit will, will come
automatically. But if you'reonly only building it for the
exit thinking about the exits,very distracting, you're in it
for different reasons,obviously, you know, probably
(20:22):
the money because you keepthinking about the money. I
think that that's a harderroute. To be honest,
Matt Wolach (20:29):
I would totally agree having that number in your
head. And I've had founders thatI work with that kind of have
that and it takes you away fromwhat really matters. And what
really matters is if you deliveran outstanding product with
great service, people are goingto love you, and people are
gonna come to you. And if enoughpeople love you and come to you,
which if you set up the rightprocess, they will, then you're
(20:50):
gonna have that great exit. Sofocus on what's really
important, and what's gonna getyou there instead of that, that
final end result. I totallyagree. So, Christine, this has
been awesome. Thank you so muchfor everything and for sharing
all of your wisdom. How can ouraudience learn more about you
and then Magnolia firm?
Christine McDannell (21:10):
You could definitely check out the
Magnolia firm.ca Oh, online.
That's our website. It's got alot of fun stuff on there. But
me personally, I'm great atLinkedIn. So feel free to
connect with me there message methere happy to help. If you have
any questions, any scenarios youwant to run by me. I'm super
passionate aboutentrepreneurship, as you can
tell, you know, 19 years in thegame and still still as excited
as day one. It's a fun journey.
Matt Wolach (21:35):
I love it. And we'll put all those links into
the discussion. So everybody whois on the podcast or on YouTube,
you'll see it down in thecomments there. But Christine,
this has been awesome. Thanks somuch for coming in and sharing
all this with us. No, of
Christine McDannell (21:47):
course Matt, thanks for having me out.
It was a blast.
Matt Wolach (21:49):
Absolutely, likewise, and everybody else out
there. Thank you for being here.
Really appreciate it. Make sureyou're subscribed to the show.
You don't want to miss on anyother awesome leaders like
Christine coming in sharingtheir advice. So hit that
subscribe, you'll be good to go.
And then we will see you nexttime. Take care
Intro/ Outro (22:10):
thanks for listening to Scale Your SaaS for
more help on finding great leadsand closing more deals. Go to
Mattwolach.com
I talk with a lot of software founders every week.
And of course, the goal for mostis to have an incredible exit,
right? So you can have thatamazing dream reach, you can get
to that fun, like rich statethat everybody thinks of, I'm
making millions of dollars andI've got an island or whatever
it is, that is your dream. Buthow do you get there? How do you
set up your business to achievethat exit? And who can help you
(00:34):
along the way to until you getto that exit? And at that point,
when you're selling? Who's goingto be the person who's going to
actually facilitate how do theyactually make it all happen?
Fortunately, I talked toChristine McDannell, she is
awesome. She's with The MagnoliaFirm, and she helped sellers of
companies understand how to setup their company be ready for
the exit how to go through theprocess, and to make sure
they're maximizing thatvaluation so you get the most to
(00:57):
achieve your dream. Definitelylisten to this one if you're an
owner of a software company,because she gives some great
advice on what you can do to beready to exit.
Intro/ Outro (01:06):
Welcome to Scale Your SaaS, the podcast that
gives you proven techniques andformulas for boosting your
revenue and achieving your dreamexit brought to you by a guy
who's done just that multipletimes. Here's your host, Matt
Wallach.
Matt Wolach (01:22):
Hello, welcome it Scale Your SaaS. I'm super
excited to have you here. Thankyou for being here. If you're
watching on YouTube, thank youfor that. If you're listening on
the podcast network, thank youfor that as well. My name is
Matt, and we are here to helpyou scale your SaaS so you can
understand the rightmethodologies for building an
incredible process. You canclose a lot of deals, make a
great awesome company and thenexit to your dreams. And that is
(01:46):
what we will be talking abouttoday that exit and how to set
yourself up for the exit. Andthat's why I'm really delighted
to be joined by ChristineMcDaniel. Christine, how're you
doing?
Christine McDannell (01:55):
I'm good, Matt, I love the energy that you
bring to the show. That'sawesome.
Matt Wolach (02:00):
Thank you. And I know that you have that same
energy. So I'm really lookingforward to today. Let me make
sure that everybody knows whoyou are, Christine. So
Christine, guys, you're gonnawant to definitely follow her
and get to know her. She is thefounder, business intermediary
and broker at the Magnolia firm.
She's a lifetime entrepreneurthat has put in the work she
started acquired and sold 20plus of her own businesses and
(02:20):
now helps others do the same.
The Magnolia firm is a highlyspecialized boutique business
brokerage firm supportingentrepreneurs through the finish
line of the most important stepsthey will ever take selling
their company. And having beenthrough that process myself, I
can tell you, it is veryimportant that you have somebody
who knows what they're doinghelping you out. Christine,
(02:42):
thanks so much for coming on theshow.
Christine McDannell (02:44):
Of course.
Thanks for having me.
Matt Wolach (02:46):
Absolutely. So tell me what's going on with you
lately? And what's coming up?
Christine McDannell (02:51):
Yes, so believe it or not, even with the
scary R word, which is recessionor the bank fallout that was
very recent. If people are stillbuying companies and more so
than ever, it's a still hot hotseller's market, you know,
people wind I'm not just sayingthat, because I'm in the
industry, people want to have,you know, more stability, right?
(03:12):
And these are cash flowingbusinesses. So let me be
specific. So people areacquiring cash flowing, stable,
you know, companies that stillshowing growth through these
times. Those are the ones thatpeople are picking up very
quickly.
Matt Wolach (03:26):
Yeah, and I totally agree. That's something that I
had to go through learning. Butit's also something that you
know, as a coach who helpspeople put in the right process
of scaling and, and growing,people come to me because they
realize, hey, we're coming toexit, I want to make sure we
increase our cash flow, weincrease our sales and, of
course, our revenues andprofits. So absolutely. I'm glad
that you mentioned that becauseit is really important for
(03:48):
buyers to have that right.
Christine McDannell (03:50):
Without a doubt. And yeah, what you do,
it's like I love if people go tosomebody like you before they
come to us. What ends uphappening is they come to me and
they say, Hey, I wanted to sellmy business yesterday. So we're
scrambling to try to position itthe best that we can maybe their
systems and I know we'll talkabout like what they need to do
now to position for great exitso they don't leave money on the
(04:12):
table. But yeah, somebody likeyou to get in there first and
systematize and really, youknow, make it like a well oiled
machine will add that much morevalue to that that exit number
at the end of the day.
Matt Wolach (04:25):
Yeah, I love it. I totally agree. I want to go back
what gave you the idea to startthe Magnolia firm?
Christine McDannell (04:31):
Well, I myself have built and sold a lot
of companies. So I'm over thelast 19 years. Multiple
startups, multiple exits,acquisitions, roll ups. That's
That's my game. That's what I'vebeen doing. And I did have a
business broker businessintermediary, my very first
exit. And then after that, I'mlike, Look, I started the
company from scratch. I'm amarketer, I'm a salesperson, why
(04:53):
can't I sell my own company? Andso they're on after I was doing
all my own transactions evenalong with the law. larger ones.
And then my friends startedcoming to me and having me help
them with their exits about ayear and a half ago. And yeah,
just like okay, I guess this iswhat I'm doing next. So launch
the Magnolia firm.
Matt Wolach (05:12):
Very cool. And you told me before we started
recording, you were a SAS owneras well, right?
Christine McDannell (05:17):
That was the last venture that was the
hardest. I know. I said, I couldspeak to the SAS community.
Yeah, three years didn't hitrevenue, was still able to exit
it. But it was like pennies onthe dollar, we'd raised a lot of
capital. I mean, I was lucky inthe sense for two things that I
was it was the heydays of, youknow, 2018 to 2020 2019. The
(05:40):
valuations were off the charts,you know, for my SAS company to
be 1010 months old, pre revenueto be worth $10 million is like,
unheard. Like, it made no senseto me. But I just went with it.
And we raised on a 10 millioncap. And so it was a wild ride,
it was 90 hour weeks is nosleep. It was it was the most
(06:02):
stress I've had in my life forthree years. But the second
thing that came out of it wasnow I can help SAS companies
exit, right. I know the game, Iknow, the raising capital. And
to that point to, you know, Iknow you have very savvy
listeners and followers. Butsome people now are coming to us
and saying, you know, becausethey raised on a 10 million cap
(06:22):
or whatever it was on a certainvaluation. Okay, well, I raised
I just raise capital two yearsgone. 15, you know, my company
was worth 15 million, I want tosell it right now for 15
million. And I'm like, Yeah,that's not what you can get for
your company as a purchaseprice. So So sometimes, you
know, I do have to educatepeople in the sense that, that,
(06:43):
yeah, that doesn't necessarilymean your company, somebody's
gonna pay that much for acompany.
Matt Wolach (06:48):
Yeah, I'm sure it's important for somebody to have
that person to kind of reallykind of level set with them and
get their expectations in theright place, right? Because so
many of us founders, were alwayslike, Oh, my company's worth
this and this, and it's reallymore about the market the data,
right? What what do you look atwhen you're looking at the
valuation of a company?
Christine McDannell (07:08):
Yeah, I mean, out the gate, it's going
to be that baseline of profitEBIT a seller, SD, whatever you
want to call it, you know,sellers, discretionary income,
earnings, I mean, at the bottomof the bottom line of, you know,
all the money you bring in, andthen you take out and we're
adding back your ad back. Soobviously, you guys are running
stuff for your business,everybody knows it. So we add
(07:30):
that back into that bottom,because then the multiples based
off of that, that's number one,that's kind of my base or
baseline. I'm not a fan ofpeople just strictly saying it's
a multiple of your profit it is,first off that that what your
company is worth is whatsomebody's willing to pay for
it. I've said that forever. Andit is so true no matter what,
okay, that's what your companyis truly worth what someone's
(07:53):
willing to pay. But okay, we'regoing to take that that net
profit as a baseline, but thenI'm going to check, I'm going to
start adding on to that, right,like, what's your reputation,
like how many years in business,the longevity of your team, your
systems in place, all thatstuff, it comes into play. And
that's what we start puttinginto a package and, and
(08:14):
marketing the company for sale.
Just like if you're raisingcapital, you need to put a lot
of work into how you're going toposition it for sell. And I
don't even see like decks donewhen a company is going to
market for sale. They don't evendo a pitch deck. And I'm like,
Yeah, but you'll do one to raiseall this capital, this slick
deck and this presentation. Soyeah, it's been, that's the part
we do for people.
Matt Wolach (08:37):
Awesome. So what exactly would an advisor like
you like if somebody's like,Okay, I'm starting to get there.
How do you guys help? Or anybodywho's helping like an advisor on
a buying or selling transaction?
Christine McDannell (08:50):
Yeah, so we're mostly on this sell side.
We do actually double sidedtransactions a lot because a
buyer comes to us unrepresented.
So I'm usually helping bothsides, which I actually love to
do. So yeah, we're just kind ofa hand holding our seller, you
know, we want to come with a anasking, we're not going to
pressure them. It's theircompany, like I never ever want
to bully or pressure a sellerinto taking a lower price, or
(09:11):
taking them to market and thenpushing them down on price. I've
seen that done in this industry,which is really sad to watch. So
yeah, we collectively agree on ago to market price, right? It's
got to be a reasonable price.
And they could stay true to thatnumber for as long as they want,
you know, and based on marketconditions, and if they're
(09:32):
patient, I don't you know,that's fine. We don't have to
lower the price. Even ifeverybody's telling us hey, it's
too high. It's too high. Youknow, we we relay that to our
seller, like hey, here's theobjections we're getting, or,
Hey, you're too You're involvedtoo and for your listeners.
Another thing you want to workout, you know while you're doing
this planning is workingyourself out of the company. So
(09:55):
we see the company I'm sure yousee that I'm sure that's what
you come in help them fix isthat you're so like the
company's wrapped around you, ifyou were not there, that company
would fall apart. So are youjust the only one doing the
bizdev? Like you're the onelanding all the big clients, you
know, if that's the case, yougot to put somebody in for
bizdev position, take yourselfout of it. Because again, when
(10:17):
somebody goes by your company,they're gonna say, well, shoot,
it's wrapped around you and youcan't leave, or you're gonna
have a long urn out like a fouryear earnout, which I'm telling
you do not we will not let oursellers do that we won't let
them do really any error now,but you want to avoid that.
Matt Wolach (10:32):
I totally agree.
That's something I do help with.
And just to add somepiggybacking on that,
absolutely. In the early days, Ihighly recommend that founders
are the ones who do the sales,it's really important for you to
get to know your market and yourbuyer and what they want what
they need. It helps youunderstand marketing messaging
helps you understand your salesprocess helps you build out the
product even better to fit them.
But once you get that, you needto make sure you shift it to
(10:56):
somebody else, you need to havethe right process right formulas
in place, the right playbooks,so you can bring somebody in,
they can take over, they canwalk through that exact same
thing, sell just as well as youwhich a lot of founders have
trouble with getting that nextperson to sell as well as them
with the right process. You cando it, but you need them selling
as well as you and then that isa very sellable business,
because you're not involved insomething that somebody else can
(11:18):
take over. I totally agree withyou. Great point. Christine.
Christine McDannell (11:22):
Cool, thanks. Yeah.
Matt Wolach (11:25):
So you mentioned that sometimes you're working
with buyer and seller, I thinkthat's great. How do you balance
the needs and interests? Whenyou are working with both of
them? How do you make sure thateverything kind of aligns?
Christine McDannell (11:35):
Yeah, I'm a really big fan of winwin. I
know, some people, you know,don't don't think that's even
possible. But I disagree withthat point that people make.
It's it's definitely what youknow, it takes some
negotiations, it takes them alittle bit of give maybe on each
side to get to that point. Butit can be a win win, right for
both parties, you know, and fbeing having high integrity and
(11:58):
ethics, and I have to be able tosleep at night, like I have to
be so there's there, I have toknow I'm doing best for both
parties, a lot majority of ourbuyers Believe it or not, are
first time business owners, youknow, they're leaving corporate,
they got you know, COVID gavethem that taste of freedom. And
then they go back to the office.
And now they're like, Look, Ijust I'm ready to kind of strike
(12:18):
out on my own. So that'sexciting. So a lot of times, and
I'm passionate, even morepassionate about helping
somebody that's getting intoentrepreneurship for the first
time.
Matt Wolach (12:29):
I love it, definitely, it's super cool to
see somebody take that ventureand kind of that feels like a
leap to them. But something thatyou and I both know, is going to
be a fantastic journey and a lotof learning along the way. But I
want to ask you, of course, as asoftware founder, if you're
aiming for an exit, we want tomaximize that exit. So what are
some of the things that softwareleader can do early on, to kind
(12:49):
of make sure they're set up fora great exit down the road?
Christine McDannell (12:53):
So again, there's different stages. So
obviously, you guys are, youknow, you're trying to scale up,
right, you're putting everypenny into marketing and growth
and systems and all that funstuff. So I don't expect to see
a lot to the bottom, ifanything, right. It's not, you
know, especially not the firstor second year. So you know,
you're you're kind of maybeputting people on the platform
(13:15):
for free and getting, you know,you know, doing a lot of SAFS.
That's how they start, right,they put you on for free, and
then they start charging alittle down the road. So so that
makes sense. But then at yearthree, and pass that, you know,
we need to start seeing theprofit, especially for
positioning for an exit withinfi a lot of people are trying to
do five years, which we've seen,you know, you know, millennials,
(13:37):
Gen Z, you know, they don'texpect to own a company for 20
years, like that's never gonnahappen. A lot of our recent
clients, they're in there, theyoungest is like 24, our average
right now is like 33 to 35 yearolds that are exiting their
first company, they've had itfor six years, it's profitable,
they had a great run at it, theyjust don't have the skill set to
(13:59):
take it to the next level. Andbe there like the startup
person, they're the ideavisionary person, so they're
ready to get to the next, youknow, start the new thing from
scratch. So yeah, I mean, Iwould say definitely net profit,
once you can get to that pointis super important. And then the
team, so keeping your team happyis huge longevity, and then
(14:21):
reputation. So of course thepotential buyer is going to
Google your company, they'regoing to look at the reviews,
they're going to look at thesocial media comments, you know,
do they like their product? Whatare the complaints and address
those quickly? So I think thatthat those are the main and
systems would be the last onelike solid systems. I always
love to say even in mycompanies, like right my
(14:44):
playbook or the standard, youknow, the procedures, the
operating manual, whatever youwant to call it, in my company,
right at like a 10 year old cancome in and run the company like
run it like write it that detailthen that's simplified. So if a
10 year old came in, they canliterally run the company so So
in that takes time, and it's aliving document, and but just
make sure you do that from thestart.
Matt Wolach (15:05):
I love that. And I totally agree. That's something
that I tried to help peoplewith. And I've had some of my
clients tell me that, hey, wehad an exit, it was awesome. And
because we had that process inplace, and the playbook there,
the buyers absolutely loved it.
And I think that's part of it.
You're right, like you saidearlier, you know, your
company's worth, whateversomebody's gonna pay, well,
they're willing to pay more andyou're willing to have, you're
(15:27):
gonna have more buyers. If youhave it set up. And it looks so
good, it looks great. You've gotthe process lined out and looks
like someone could just takeover and make it happen. I have
been both a buyer and a sellerof companies like you,
Christine. And I can totallyagree with that. It's absolutely
cool when you've got thatprocess nailed,
Christine McDannell (15:46):
right?
Yeah. And you will get out ofthat company even quicker, we
just had a 3.5 million closedjust two weeks ago, even with
the banking drama, like themedia tries to scare everybody,
you know, our deal still closedtwo weeks later, and it was SBA
loan, but the banks didn't getspooked, it was totally fine.
And that owner gets to leave in60 days, you know, he gets to
train for 60 days, and he getsto write off to the sunset,
(16:08):
because the company was sodialed, and he was only working
about 10 hours a week, he waspretty, you know, all the way
out of the company already, youknow that, again, with those
systems in place and thoseprocesses, then you're out,
you're out of there, if they're,if those aren't in place, you're
gonna, they're gonna want you tostick around for a year or two,
the training is going to takelonger, it's gonna be harder,
(16:30):
you know, you're everything inyour head. You know, and I'm one
of those founders do, right?
It's like, oh, it's in my head,like, that doesn't work. When
somebody buys your company,you're gonna have to get it out
of your head somehow.
Matt Wolach (16:43):
Yeah, it's very true. We think about it all the
time. Right? So eventually,you're gonna have to stop
thinking about easier said thandone. I would agree. What would
you say to some of the foundersand leaders who are asking when
is a good time to sell theirbusiness? You know, I'm sure
that a lot of people arethinking, Hmm, should we sell
now? Should we wait a year?
Should we wait a few years?
Like, when should we do it? Whatdo you say if they ask you that
(17:04):
question?
Christine McDannell (17:05):
I know what I wish, I tell everybody, I wish
I had a crystal ball, right?
Because we speak to some thataren't quite ready. They're just
like, look, we're scaling, we'redoing great. Like, you know, how
about that, you know, we want tohit this exit number. So some
people have a number in mindthat they're working backwards
from totally get it, you know,and a lot of times, it's that
nine figure number, they justwant to hit this, you know,
(17:26):
eight or nine figure number, andthen you know, they'll go
towards that. But then I tellthem, because right now, again,
super hot seller's market, butwhat happens if now you're you
work another year to grow iteven more, and you put all that
work in? And what if the marketcomes down, and but you grew it,
so you're ending up with thesame purchase price anyways. So
(17:47):
again, I don't have a crystalball. So there's no way for me
to say if that's gonna happen ornot, I have no clue. So what I
tell people, it's when you startgetting burned out, like, you're
gonna have to kind of run themarathon, finish the marathon,
you know, on the exit, you wantto have high energy excitement,
you know, you still enjoy thecompany, you don't hate it,
(18:09):
you're not burned out, becauseit's going to be that much
harder to sell it. Because youneed that enthusiasm, to
convince somebody else to buyit. You got due diligence to
work through again, we try tomake it as painless as possible,
sometimes not the case. You gotlawyers involved, you got
sometimes banks involved. And soyou got to tough that out for a
couple of months. So yeah, it'sjust if you're burned out, it's
(18:33):
not fair to your team, yourclients. You know, if you if
you're getting burned out,that's probably the time I would
tell people to try to sell onthe upward, obviously upwards to
me. Yeah, before you're in,that's the hardest time because
you're like, what we're doing sogood, you know, this person was
doing $100,000, you know, in hisbiggest month as it was under
(18:53):
contract, and he's like, Oh, mygosh, this is so hard to sell it
right now. It's making so muchmoney. And I'm like, No, but
this is the best time to sellit.
Matt Wolach (19:04):
Your point? That's something I wouldn't think about
either, but that's awesome. Sowhat advice would you have for
software leaders who arethinking about this? It's a
future thing for them? Whatwould you share with them?
Christine McDannell (19:15):
Yeah, I mean, I don't know if much after
kind of the points I've alreadymade that, you know, you just
want to concentrate on thatstuff. You want to, you know,
start start laying out a plan.
So if you've been talking topeople that they're two years
in, and they they're going to xin five years, and again,
they've just reverse engineeredit, and they're on track,
they'll just if needed, some ofthem are ahead of schedule,
(19:36):
which is kind of cool to see. Ithink doing that is really cool.
Just build I mean my biggest tipto be honest, and I was really
good about this with thesoftware company for some reason
I wasn't I think it was just allthe hype is not just thinking
about that exit number all thetime. Okay, and I have a lot of
friends making the mistake rightnow I'm gonna exit for five
whatever 5 billion and all thesecrazy The numbers and and they
(19:59):
just started. And I'm like,Look, if all you concentrate on
is building an amazing product,amazing product, happy
customers, if that's all you dothat exit will, will come
automatically. But if you'reonly only building it for the
exit thinking about the exits,very distracting, you're in it
for different reasons,obviously, you know, probably
(20:22):
the money because you keepthinking about the money. I
think that that's a harderroute. To be honest,
Matt Wolach (20:29):
I would totally agree having that number in your
head. And I've had founders thatI work with that kind of have
that and it takes you away fromwhat really matters. And what
really matters is if you deliveran outstanding product with
great service, people are goingto love you, and people are
gonna come to you. And if enoughpeople love you and come to you,
which if you set up the rightprocess, they will, then you're
(20:50):
gonna have that great exit. Sofocus on what's really
important, and what's gonna getyou there instead of that, that
final end result. I totallyagree. So, Christine, this has
been awesome. Thank you so muchfor everything and for sharing
all of your wisdom. How can ouraudience learn more about you
and then Magnolia firm?
Christine McDannell (21:10):
You could definitely check out the
Magnolia firm.ca Oh, online.
That's our website. It's got alot of fun stuff on there. But
me personally, I'm great atLinkedIn. So feel free to
connect with me there message methere happy to help. If you have
any questions, any scenarios youwant to run by me. I'm super
passionate aboutentrepreneurship, as you can
tell, you know, 19 years in thegame and still still as excited
as day one. It's a fun journey.
Matt Wolach (21:35):
I love it. And we'll put all those links into
the discussion. So everybody whois on the podcast or on YouTube,
you'll see it down in thecomments there. But Christine,
this has been awesome. Thanks somuch for coming in and sharing
all this with us. No, of
Christine McDannell (21:47):
course Matt, thanks for having me out.
It was a blast.
Matt Wolach (21:49):
Absolutely, likewise, and everybody else out
there. Thank you for being here.
Really appreciate it. Make sureyou're subscribed to the show.
You don't want to miss on anyother awesome leaders like
Christine coming in sharingtheir advice. So hit that
subscribe, you'll be good to go.
And then we will see you nexttime. Take care
Intro/ Outro (22:10):
thanks for listening to Scale Your SaaS for
more help on finding great leadsand closing more deals. Go to
Mattwolach.com
Popular Podcasts
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
24/7 News: The Latest
The latest news in 4 minutes updated every hour, every day.
Therapy Gecko
An unlicensed lizard psychologist travels the universe talking to strangers about absolutely nothing. TO CALL THE GECKO: follow me on https://www.twitch.tv/lyleforever to get a notification for when I am taking calls. I am usually live Mondays, Wednesdays, and Fridays but lately a lot of other times too. I am a gecko.