[EP 045] The Future of M&A – and how to be a disruptor in the broking industry

Using algorithms to identify and reach out to potential buyers

Craig: We know that algorithms powered by artificial intelligence are changing every industry and so what if there was an algorithm that was written that looked at a business and looked at the ideal customer for that as nurse and crawled across the Internet and looked at web pages and social media profiles and discussion boards and reached out automatically to people that shared the values of the business owner who were passionate about those things were talking about potentially buying a business. What if that algorithm could find those for you and provide you a list every week of potential candidates to buy their business. What if that did all that research for you? Wouldn’t that be incredible?

Well guess what, it’s already happening. This is already happening in your industry. But maybe not in your group or maybe you don’t know that it’s happening but it’s already happening. It’s already happening with recruiters.

One has to ask themselves if this is the inevitable future. This is how deals are going to be done in the future that you’re going to find leads automatically. You’re going to negotiate value automatically, that you’re going to provide advice how businesses can maximize their value automatically. We need to get to that future fast and it doesn’t mean giving up what we do personally.

It doesn’t mean that at all. It means that we’re augmenting or giving power to what we do. One on One, eyeball to eyeball, face to face, belly to belly I say and these deals. That’s still how we do deals but how can we do it without data, without automation, without this power.

I know it’s already happening. I’m talking to deal makers that are already doing this and they’re identifying which startup to invest in and which business to buy all through an algorithm that gives them the leads. Now they make the final decision. But this is this is going to change the industry.

Benchmarking within industries and across industries

Craig: For instance, what if you could benchmark a florist for instance. What if we could benchmark a florist and say this florist is more valuable than every other florist in New South Wales it might be the most valuable florist in the country. How will we know that?

Well, we could find out. If they agreed to install a bit of software on their Xero accounting package for instance, called Fathom and they were willing to share their data anonymised with the other 14000 florists that have already anonymised their data then you could benchmark that business against every other florist and you could have much better information compared to what you had before. This is already happening right now. It’s available right now.

Fathom is a benchmarking tool, a great kiwi startup. I referred them to many of my industry groups that now do benchmarking across their entire membership and boy does this make it really clear which businesses stand out and which ones don’t.

Joanna: Accountants can be looking at benchmarking their clients and providing real value about how their clients can improve the value of their business well prior to a sale by using tools like this Fathom that you’re talking about.

Get educated about the future trends

Craig: If you want to understand where this new economy is going at the heart of the leaders of this shift into the fourth industrial revolution are the startups, Google “The Billion Dollar Startup Club.” Go to the Wall Street Journal. Look at the list and study it because there it has for instance all the deals that are being done, who the founders are, what was their seed investment, what was their first round, what was their second round. Have they succeeded? Have they gone down? Were they acquired? How big was the acquisition? Did they list? This is a real education about the future.

To find startups in your industry, there is a database of all startups at a website called Crunchbase. And let’s say you were looking for a startup to collaborate with a florist, you would just type in florist and there would be tons of startups in the floral industry and you’d look for one that was the equivalent scale as your client whether they’re big, medium or small.

If you’re small, you find a small startup. If you’re medium, find a medium startup and so on and then collaborate do something together that sets you apart from the rest of your industry.

Imagine we know for instance that the UBER of florists are coming, that we had FTD in the old days and next we’re probably going to have UBER flowers and so who’s going to have that first move or advantage? Who’s going to say I don’t need a shop what do I need a shop for? People can go on their phone, they can choose a bouquet and I can just drive my truck straight to them.

We have coffee cafes in a truck that turn up at soccer games early in the morning when everybody’s freezing. They don’t need a café anymore and so maybe we don’t need a florist and maybe we need to have a mobile fleet and maybe I could be the first one doing that. These are the ideas that you could develop because maybe you don’t know how to make it happen. Maybe there’s already an app made for that by a startup.

Help startups do commercial deals

Craig: What startups really need I found is they need some commercial sense. They don’t know how to do commercial deals. This is a huge opportunity for advisors because their whole business model is let’s find investment and I say get a commercial contract first. Team up with an established business. Get some deals. Get some business and then your value of your startup is so much more than when you just have an idea. You’ve got proof that it works.

I think this is a great opportunity for us doing deals. I think it’s a huge opportunity. There’s a hundred thousand startups and there’s hundreds in every industry.

A new demographic of entrepreneurs

Craig: Yes, unfortunately the startup community is not as diverse as it needs to be. But there are new trends happening. It’s not just young dropouts from Stamford that are going to be getting these deals. Of course, from Harvard and Stanford, we can see that a lot of the deals are being done from graduates from those two schools. But we have a new shift in the industry because this is becoming more mainstream. It’s not just products made by white young guys for young white guys. We now have big shifts and really valuable businesses serving really unique audiences. So young women, millennial women. There’s some really incredible businesses starting there. And then people of every race and creed and interest around the world. And of course, now we’re seeing a brand new group called seniorpreneurs.

They’re finding that startups that are being led or have a team member that’s 50 plus years old are more likely to succeed in the long run because they bring life experience. So there’s this whole 50 plus startup a group. It’s happening in America. It’s going to happen in Australia soon.

Somebody who runs a Facebook group called Seniorpreneurs and tens of thousands of people are joining it here in Australia and you can see that it’s just a mindset thing. You don’t have to be 20 something. You can be 50 plus or 60 plus. It’s all in your head. It’s what you understand and that’s why I’m trying to provide research tools. You could spend days analyzing just the startup club or just Crunchbase.

Go on a news free diet

Craig: And if you really want to understand, the last thing that I’ll say as a tip. You want to cut out all the news. News is a waste of time. Just go on a news free diet.

I have a morning magazine that gets put together for me by a little app called Flipboard that you can run on any Mac or PC or Android phone or tablet or IOS device and you can subscribe to a topic – the fourth industrial revolution or the startup club or the future of florists or whatever topic you want. It brings in into a beautiful magazine type style. So I have my coffee in the morning. I’m just flicking through, seeing what’s interesting and I follow every industry that I work in and I go oh that will be interesting to my client. I’ll just flick them a copy of that and I just flick them a copy and just tap on it and it goes out to them send them. Send them a LinkedIn message – here is an article that I found to be useful to you.

I don’t have fake news in there and it’s not done by an algorithm it’s done by live people. It’s curators, editors and so I don’t get any that fake news stuff. We don’t like that.

A sister podcast – Talking Law!

If you’re interested in hearing smart legal tips for business, The Deal Room sister podcast – Talking Law is perfect for you! These two podcasts are now among the top legal podcasts in Australia.

In our Talking Law podcast, I dissect a different topic each week that I have seen impact businesses and then provide actionable tips for you to avoid that risk or to use that legal area to your advantage. We release new episodes every 10 days and you can listen to our episodes through www.talkinglaw.com.au or subscribe to our Talking Law podcast on iTunes to be the first to know when a new episode is out.

Now back to the show!

An advice for middle aged workers – start a business!

Craig: The sad news is in this country and in much of the developing world businesses are increasingly not wanting to hold on to this liability called a middle-aged worker. They are very expensive, and they’d rather get people on demand, part time that are young people rate. That’s the fact of the matter.

We know from the statistics, not many people want to talk about this, but there are some in government that are talking about it. Somebody who is let go from Ford or NAB and if they’re in their mid 40s or older, their chance of being re-employed are very low. This is a shame, but it is a fact and I encourage people who are in this situation to start a business or invest in a business because they’re are much more likely to find something they love. Find a new way of working that is completely different from their desk job and they are bound to be more successful.

I mean it’s hugely more likely, the statistics I don’t have them in front of me, but it’s something like 89 percent of people that get laid off after they’ve been at one employer for more than 10 years and they’re over 45 will never get a fulltime job in that industry again.

Joanna: There’s an opportunity for individuals themselves to rethink how they fit into work as a whole and how they see that all working. But also, if you’re in the sales and acquisitions industry say for example you’re a broker, maybe here is a pool of buyers for you.

But one of the things I would say is that I have seen on many instances someone coming out of a corporate environment buying a business and it is going a bit pear shaped and not ready for it. So I would add if you’re thinking about this as an opportunity I feel like you must, in order to do the right thing by everyone, also have built in to your strategy the way that you help these people transition and find the opportunities in the technology approaches that you’re talking about Craig.

Craig: There are actually state and federal packages that allow seniorpreneurs to do this. They can get some assistance and even advice, free strategic planning in Australia.

There are advisors that get X number of hours to test your idea and help you write a business plan and all sorts of things that you could team up with. It’s not instead of what you’re doing as an advisor. It’s an addition to what you do as an advisor. Help your clients get connected to those and they get some extra resources and training. There’s all sorts of training now for how to digitize your business and the owners of these businesses don’t have time or interest in digitizing their business. They just want to get out. So why doesn’t the you know potential investor that now has a package you know it’ll be quite a sizeable package if you’d worked for NAB for 10 years you’d have quite a sizeable package. And you would know how to get additional finance as well and you’d get a special deal.

Go do a course on running a business, how to digitize the business, go work at it for a while and meanwhile work out a deal on how you transition the owner out.

Getting in touch with Craig

Craig: Many advisors attend my regular mentoring groups, so they run around the country in Melbourne and Sydney and online and to find out more about that if any of you listeners watchers would like to join one of these mentoring groups. Be my guest. Come along as my guest the first time for free. You can find out more information at my web site futuretrendsgroup.com and click on mentor and register. Come along and ask me anything. Ask me about a deal you’re doing or ask me where your industry is going. I’d love to be of service to you.