Acquisitions Anonymous - #1 for business buying, selling and operating - $3.9mm digital agency in Canada. Did we like it? - Acquisitions Anonymous 269

Episode Date: February 6, 2024

In this episode of Acquisitions Anonymous,  Michael , Mills, and Bill discuss a Canadian digital agency, highlighting its business model, profitability, and the $3.9 million CAD asking price. The conversation also touches on generational differences in technology and social interactions, adding depth to the discussion. This episode offers a blend of insightful analysis and light-hearted banter, perfect for those interested in the nuances of business acquisitions and generational dynamics in the digital age.Check out the listing here: https://app.acquire.com/startup/AKseySChYOgsrv7WdGFiO2jSKy43/GMCEUFRW7cSCNHIwY7Fv?hideBackBtn=trueThanks to our sponsors!Acquisition Lab and their team have been longtime supporters of the pod.Created by Walker Diebel author of Buy Then Build: How to Outsmart the Startup Game, is an accelerator with a highly vetted cohort-based educational and support community for people serious about buying a business.Acquisition Lab exists to help people buy a business and navigate all the complexities of the process, as well as provide a trusted framework, tools, and resources to support you from search to close.If you are serious about buying a business, check out acquisitionlab.com or email the Lab's director Chelsea Wood, [e-mail].-------------CloudBookkeeping offers adaptable solutions to businesses that want to focus on growth with a “client service first” approach. They offer a full suite of accounting services, including sophisticated reporting, QuickBooks software solutions, and full-service payroll options.Subscribe to weekly our Newsletter and get curated deals in your inboxAdvertise with us by clicking here Do you love Acquanon and want to see our smiling faces? Subscribe to our Youtube channel. Do you enjoy our content? Rate our show! Follow us on Twitter @acquanon Learnings about small business acquisitions and operations. For inquiries or suggestions, email us at [e-mail]

Hey, Michael here, Acquisitions Anonymous, Internet's number one podcast about business investing, buying, and selling, and talking poop about them. Today, we actually had a pretty fun deal. It was through our friends over at Acquire.com, Andrew and his team, and it is a digital agency that is highly profitable and very reasonably priced up in Canada. So Bill, Mills, and myself, Michael, talked through this deal, and where it went was a lot of fun. So stick to it and see if you like it as much as we did. Thanks. Hey, Michael here, want to talk to you about today's sponsor for the episode, which is cloudbookkeeping.com. So cloud bookkeeping is actually run by my neighbor, Charlie. So I've met him in person and can attest that he's a real human being and a good

person. And what cloud bookkeeping does is offer a full suite of bookkeeping services all in the cloud for you around QuickBooks and other technologies that you're using as a small business owner. So if you're interested in getting the bookkeeping part of running a business off of your plate and focusing on running your business, Charlie and his team are one to call. They can put together a bunch of other stuff in terms of helping you manage and grow your business besides just bookkeeping, sophisticated reporting, definitely helping you get your quickbooks online set up in the right way, and a number of things around payroll as well. So definitely know them and recommend them. If you want to find out more about cloud bookkeeping, you can go to their website at cloud

bookkeeping.com, reach out to Charlie. I know many of you have and see if he can help you make running your business easier and more fun by letting them help with a lot of the bookkeeping solutions. And when you call, mention this podcast, it would help us and help Charlie know that we're supporting him as well. So thanks a bunch. And cloudbookkeeping.com as the sponsor for today's episode. Mills, before you start cursing, you need to you need to know we've already clicked record. I just saw the red dots staring me in the face,

so I'm really glad. I'm glad you told me. Mills, you made it on three of the 5,4, 3-21 countdown. You joined on three. Good. We are glad you're here. I'm glad you're here, Bill. Michael, I knew you were going to be here,

but Bill, I thought for sure you were going to be a dad of three this morning. Me too. The due date is actually not until tomorrow, so I'm on borrowed time. So this is probably my last acquisition is anonymous for a couple weeks, but I will be back. You shall be missed.

All right, I brought a deal today. It's from our friends at Acquire.com and has some stuff going on for it. It's in Canada. It's an agency. And according to Acquire.com, things are getting serious. What's the thing where people change their dating,

their Facebook status from in a relationship to it's complicated? It looks like this is one where it's complicated. I don't know. You guys dated recently. How does that work? I've been married 14 years. I've been married for like five, six years. So, no.

We've dated for a lot. I've not dated recently. So this is interesting and an incredible piece of marketing from Acquire.com. So Michael, you're logged in here. I'm logged out, so I can't see this little block. But for logged in platinumacquire.com buyers, you can actually see how many buyers are PMing the seller. That's what this is that you got on the screen, right?

Yeah. First it was tender, then it's Bumble, and now it's Acquire.com with fear stuff. By the way, I was, there's, one of my acquaintances is on Twitter, I guess is in the dating market, and he was posting screenshots of like what it's like to text with something.

somebody before you even meet with them now on dating apps. And it is insane. Like, people are so aggressively mean to each other. Do you make sure you guys just don't want to meet at a bar or something? It's so crazy. And maybe it's all going to come full circle and you just, everybody deletes the apps and you start meeting people at bars. I don't know.

It's, uh, I read this book called Generations because you guys, you know, I'm sure you're familiar with that I'm kind of a nerd about generational differences in studies. And one of the things that is a problem with like Gen Z and folks like that trying to meet mates is just walking up and starting to talk to somebody and starting a conversation. Like because that's a creepy thing to happen on the internet and people's like defenses are up, doing that in real world makes you seem like a creeper. So like the idea of like meeting somebody in the elevator in an office building where you both work and then you go for coffee and then you date, like that is just like,

like super weird to Gen Z. Like they don't want to do that. Like that just seems like you're a total creeper if you do that. You just have to be real shadowy and like like their Instagram post for a little while. You know, and then they're like, oh, you know, what is this? Birth rate for Gen Z, not looking good. Not looking good. It's already a tiny generation.

And the other thing that it talks about, this book talks about, it's called Generations. It was written by this PhD lady. and just like most other things, she is incredibly good about writing about her generation. She's a Gen X like I am, and she sucks about her writing about the rest of the generations. I read the whole book. I was like, only the Gen X chapter here was any good.

But one of the things that she talks about is because of technology and the urbanization of stuff, so many of these Gen Zs are just delaying adulthood, and we're seeing that over and over again. Whereas, like, Gen X, like, we're kind of flummox that our kids are not actually out doing bad things like premarital sex, drinking drugs, all that kind of stuff. And instead, Gen Zs are just like, no, no, I don't need a driver's license.

That's cool. I'll just stay at home. Like, what is wrong with you? Like, go have some fun. Yeah. Yeah, that's a, this is a whole podcast. Michael's favorite topic differences between generations, always. Oh, yeah.

It is. It's interesting, Michael, because you tweet about this, and I thought it was just like pop psychology, you know, of like Gen X, Gen Z, baby boomer dynamics, you know, in the kind of broader business. I just thought you were like making this stuff up. You thought it was just some crap I just made up? Yeah, I thought you were making the stuff up as you went. I didn't realize you actually like researched it.

Michael, I didn't know you could read. All right. So let's talk about this deal before you guys called me stupid anymore. All right. So here's the deal. It's from our friends at Acquire.com. And your 53 buyers are in active conversations.

pre-approved for financing, and they also are guided by experts. And one of the things, like, unlike other platforms where you can find the deal, I like that they have like this captive brokerage arm, so like pretty cool stuff, especially if you're going to do something bigger. So this is an agency startup, and it's an innovative agency transforming businesses through tailored web mobile and infrastructure solutions located in Canada. They're asking $3.9 million for it, which is 3.6 times profit or 1.9 to, times revenue. It is a solid recurring revenue company with a roster of regular clients,

along with an impeccable track record, 350,000 automated recurring revenue alone. Typically, and it says, well, typically that would sell it 10 times revenue. So metrics and asking price are presented in Canadian dollars. So what's the Canadian to US exchange right now? Like $4,000.1 Canadian dollar is 0.75 US dollars as of today. Okay. So, yes. Like everything in here by 0.75. So they're asking 3.9 million Canadians, so really 3 million U.S. dollars. Correct. Got it.

Okay. So by the numbers, they've done $2 million in last 12 months revenue, 1.1 million in last 12 months profits. So 1.1 million in profit on $2 million in revenue, $182,000 in last month revenue and $110,000 last month profit. So as you guys read this, is this just, is this a standard custom soft? software development startup agency business? Yes and no.

So it says if you go down, it says as a custom software development agency, we have built to distinguish track record over our 15-year tenure. I don't know how this is a startup then, if 15 years old. Our success is underlined by extensive recurring revenue, robust systems for new customer acquisition

and minimal overhead. Our profit records speak for themselves with TTM profit of about $1.1 million. Our business model has always insured profitability. We're very well positioned. And it keeps talking about this recurring revenue. And so, like, I wonder, is that retainer, or are they trying to sell some sort of, like, maintenance, ongoing maintenance after they build something probably?

It could be. It's got to be. Yeah. It could be hosting. Makes you wonder, the churn on it. It could be maintenance. It could be some combination of those. So sometimes you'll pay, when somebody builds you a custom piece of software, you'll pay

them to host it for you. And then they'll manage that. It could be that or that plus maintenance, which is, like, You pay a fixed fee every month for them to make sure it keeps running and update and fix bugs and all that kind of stuff. So could be one of the two. Okay. So they build you a mobile app or they build you a web app. I wonder if the 15-year tenure is just like their experience. Like the founder has been doing this for 15 years, but this company is a startup.

I don't know. I think it's probably a blurry line. Like the guy starts doing it, you know, on his own and then he gradually hires some help and he gradually hires a help and at what point did it become a company? Or like, you know, he had a falling out with his partner and then rebranded and it's like, I have a 15-year track record. This LLC's been around for five years. Right, right. They claim that was founded here May of 2008, a team size of 21 through 100 people. And the way often businesses like this are organized is there's a U.S.-based customer

service executive team and sales team. And then there is a team somewhere in Pakistan, Afghanistan, not necessarily Afghanistan, Argentina, Eastern Europe, where there's just an office full of, or India, where there's an office full of people doing the actual development. Sales is in the U.S., executive in the U.S., and then development, all that kind of stuff happens overseas somewhere. Wouldn't surprise me if that's what's going on here, except, well, instead of U.S., it's Canada, which is most likely. The classic mullet business, domestic in the front, international in the back. Get ready for it. I mean, it's every company I know.

know is hiring overseas, and if your job can be done across the internet, it is susceptible to being pushed somewhere overseas, whether it's coding or admin or sales. If you can do it across the internet, there's now a world of people competing for your job to work for American companies. So is this a good business? So this is an agency. You come to them, you say, build me a web app, build me an iPhone app or whatever, and then you pay them ongoing to, you know, make sure it doesn't break, add features, and host it for you. On one hand, it's, seems phenomenally profitable. This guy's making $1.1 million a year doing it. He's been doing it for a long time, and there is some fraction of recurrence to it. On the other hand, there are

11 billion of these, you know, all over right, Upwork and the internet. Like, there are so many, they are less than a dime a dozen. There are a penny a dozen. I mean, there's so many, and they appear to be totally undifferentiated. Is this a good business? I mean, it seems like a great business to own, but is this a viable business? I think one of the issues with this is that if you're good, you just get a lot bigger because you can work for bigger and bigger clients and you can take on larger fees per engagement and, you know, bigger projects. So if you, if you're, if you get bigger, if you're good and you get bigger, why is this small? I think part of it is the dynamic of these type of agency businesses and I think is Bill talks.

about the development itself is commoditized. You know, it's to some extent, a red ocean. And your differentiators become one of two things. One is the relationships that the owner or the principal ends up having, like those become an unfair advantage for you. Or you end up specializing in a particular domain, right? And so it's the same as like any sort of agency business, advertising agency, custom software development,

SEO, all that kind of stuff, you either win because of the relationships and brand that your founder has and you manage those relationships yourself, or you specialize in a particular niche. And so, Bill, I think my specific answer to your question is both of those are good businesses. It's to some extent dependent upon what your definition of good business is, right? Is this a business, like a digital agency like this, is a business that you can step away from without buying yourself a job? It depends, right? If you own a niche, potentially yes. but if you're just based on the relationship of the founder, kind of that type one that I talked about,

it's maybe not. But either way, like you can make a lot of money with a business like this. I think that's, I don't want to diminish that at all. Yeah, I mean, this is,

it's basically a labor arbitrage business, right? Like you're hiring programmers overseas, and then you're packaging up those hours and selling them either in a fixed price markup or a variable price markup to people who want apps. And then you're also packaging up, you know,

AWS credits, basically. and selling those that mark up to people who want hosting. So it's mostly a labor arbitrage business. You can tell it's international because the margins are so good. I mean, he's doing north of 50% net margins. I was a partner in a business that did exactly this business model, but did kind of that type one, which was just like, you know, generic.

We'll take whatever customers we can get and we'll do it solely based on the reputation of the founder and the selling of the founder. and like we were barely profitable because we were always competing with the offshore mullet types where it's like you know they're they're buying our they're buying labor in india for three dollars an hour sure they have to hire three times as many people but like it's still a ridiculous advantage compared to if you had all u.s staff and we had all u.s staff and you're like well i mean surely people want to buy american uh they'd say they want to buy american until they have to look at the totally see the price thing.

It's the same thing. You got a Walmart and it's like, oh, hey, look where this American flag was made. It's like, yeah, there you go. They're always from China. First, it's, you know, we don't want to buy American code. We want to buy international code because it's cheaper. The next step is we want to buy AI code instead of human code because it's that much cheaper still.

And potentially you can trust it a little bit more. Yeah. Because you don't, if you're shipping code overseas, you know, the way to make code work is you've got to have, you got to have private, you know, data to run it on. Like, you know, a lot of people once they realize, oh, I'm shipping stuff to Pakistan or, you know, Southern Europe or all this kind of weird, word places, you're like, oh, maybe I don't want all my financial stuff to go there. But the other just anecdote for you, like, most people also don't internalize that almost all of the, you know, the big accounting firms and the out-of-station firms,

they all have these massive like offshoring entities like BDO RSM like you know Pricewaterhouse like all of these guys are shipping massive amounts of private American data to the Philippines or Indonesia all these places every night to have them worked on by massive accounting teams there who all know U.S. Gap and all this kind of stuff the accounting stuff and then it gets shipped back the next morning and some partner here is reviewing it and signing off on it like people don't don't understand that. So anyway, I always found, I found it super interesting when I learned that fact. So can you buy this business? I mean, we don't have Heather here to tell us, you know, how underwritable this is. But can you buy this with debt to me? This is terrifying because your labor

arbitraging, if your clients go away or if AI comes in, right, and takes the, takes your pricing power away entirely. If people are, you can build apps with AI, I just worry that this business model could go away overnight. Is that valid? I mean, I'm less worried about buying this business about AI eating this for lunch. I think it's, if you look at the pattern of new technology, you know, it happens very slowly and then a mass adoption happens very quickly. And we're like going through that with EVs now, right? Like everybody, if you talk to people in 2015, by now, they would think that we'd all be driving EVs. Well, it turns out there's some limitations to us all driving EVs and self-driving cars are also very difficult. And look, I was in that bucket, too.

In 2015, I was like, man, there's no way I'd want to own a gas station. But it turns out, like, they last a lot longer than you think. So personally, I'm less worried about AI for this stuff because I still realize we have a ton of the way to go there. I think the bigger challenge for you to buy this, if you're an American or a Canadian is it's a Canadian business. And the downside with all of that is, you know, as far as I know, you can't SBA loan this thing, there's not a lot of assets to attach to it. So it really limits the pool of buyers, especially considering Canada doesn't have

kind of the same SBA programs we do. It's going to make it pretty tough for this to trade, you know, in general. Hey, everyone, this is Bill. I'm just taking a quick break from this week's episode to tell you about a longtime sponsor, major fan of the podcast, Acquisition Lab. So a lot of our listeners that you guys tune in

every week for our deal reviews, You want to get in on buying a business, but you're not really sure where to start. The cool thing about Acquisition Lab is they were created to solve that problem. So they exist to help people buy a business and also to navigate all the complexities of the process. They provide a trusted framework, tools, resources. They kind of support you all the way from search while you're looking to buy a business, all the way to close. So if you're serious about buying a business, you want to learn more about the process and you want someone to shirpah you through buying a business, check out AcquisitionLab.com. or you can email the labs director Chelsea Wood directly.

It's just Chelsea at buy then build.com. Michael, how do you think the niche thing works on this? Like, if you specialize in like, hey, we, you know, we make websites for, you know, local coffee shops. They all kind of start to look the same, don't they? If you're just doing the same thing, rinse and repeat for coffee shops or retail or whatever,

or like you can only kind of, if you're going to be niche, it all starts to look the same, doesn't it? For sure. Well, and that's a huge benefit, right? Like, if there's, if I was to look into this business and it was a type two business where they've gone into a specific niche. And the niche can be the type of market you're selling into, industry-wise, stuff like that. It can also be the type of like problem space that you live in.

So you see lots of these agencies who go and specialize and say, I want to just do luxury brands that are very large and are international, right? And I'm going to be the custom development arm for them. And what happens is you get this real kind of two-sided advantage, number one being you develop a brand in that market to where all of the, you walk in and you have a slide that's like, okay, everybody from Hermes to LVMH, all this stuff I don't buy, by the way. I don't buy this stuff. I'm too cheap.

Sounds like it. Well, you know, I read some stuff on Twitter once. I know what a Birken bag is. But anyway, so, but you can walk in and you have this slide that's like, look, we are the safe and trusted provider for all of these folks. And that ends up being number one, a huge advantage for you where they know they can trust you. And they all talk amongst themselves.

All their teams know each other. They help, they do that. And then number two, you build up this like base of like code stuff and things that you've built in modules that you can plug and play for them. And sometimes it's as simple as you build an app. for company A and just go to company B, you put a new skin on it, change the logo, and resell it at full price.

Like those become a huge advantage for you would you niche down in a business like this? And you see that kind of thing happening through like outsourcing providers, right? Like so if you're like somebody that competes with our business near, there are a company that competes with our business near, which is the offshoring company. But what they do is they'll go in and say,

we're just going to do offshoring, but we're going to do it just for this. And one time I went through in Columbia, there is an office that basically is a company that's an offshoring provider. And they're in Medellin. So Pablo Escobar, all that kind of stuff, good offshoring location. And we go through the building. And it's an entire floor of people who are the offshore back office for the guys that are small regional fuel haulers in the United States. So they do marketing, admin, billing, sales, all that kind of stuff.

And it's just row after row of Colombian who are working. remotely for these companies and they've offshored all of their stuff. But they only do these small regional fuel haulers who cover two or three cities in a state like Texas or Florida or North Carolina. And I looked up and they had the entire United States. They had one over every single one of these fuel haulers across America because they had an unfair advantage. Like they knew how to do that for those businesses.

They knew how to run it. Like it was kind of an amazing eye-opening thing as a business door to go in there and be like, oh, like, this can really work if you do this nicheing down and specialization strategy. So the way you describe it, Michael, it seems like you're saying the moat here is reputational, right? It's what are the clients do you serve and do people talk? So that is really what you're buying, right? Otherwise, can't basically anybody just hire a bunch of overseas folks set up a website and start cold DMing me five times a day to ask, you know, I need a web app built for me? Yeah, to push back on that a little bit, I think,

brand is a moat. I think you have potentially, so I agree with you there, I think you have a moat that finding a good and reputational, like somebody that deserves their reputation, finding a good offshore development agency or offshore development group is very difficult. There are tons of scammers out there. And then there are people that aren't scammers but are just incompetent. Upwork is filled with them. So I think the fact that this person since 2008 has figured out a group or potentially hired their own team somewhere offshore. There's some value in that. One of my buddies runs exactly the same business here in San Antonio,

and he's very successful with it. And his whole team is like in Serbia or something. And he goes over there, like twice a year. He knows their names. Like he knows they're not going to screw them. He knows where they're strong and where they're weak and all that kind of stuff. So I think you get that as well. I think the third thing worth noting here is potentially you're buying client relationships.

It's not just reputation, but you have contracts. with these people and the clients know to come back to you. So I think there's value there just beyond brand, if that makes sense, Bill. Yeah. Okay. That makes sense. So does it trade for three and a half times cash flow? My opinion is it potentially can.

I think it all comes down to the quality of those assets that we just talked about. How good is this development team? What do the relationships look like with the customers? What type of customers are they? What type of contracts do you have? what types of problems are you solving for them? Are they mission critical? Are they recurring?

Are these things that are going to be coming back to you in the future? This is totally just like a SaaS business. One of those things, in my opinion, just depends totally on the quality of the customer base. And you don't really figure that out until you start to talk to the seller and figure out what sort of customer base he or she has. And just for extreme clarity,

what you want is a whole bunch of customers in the same niche, you want the niche to be growing. ideally, right? So there's a tailwind behind your client's businesses. And you're hoping that a decent number of them are coming back for more and more work and using you for the recurring hosting and maintenance, right? Yeah. Like that's what makes this a great business. I think that's perfect there. And, you know, and you're not seeing, you're not seeing margin pressure. You're not seeing a bunch of, you know, competitors coming in. You're not seeing the solution space that you're in getting, you know,

getting competed away because somebody comes in with a repeatable SaaS product. I think all of those are the things I would want to ask myself when I dug into that customer base. But, I mean, I think the good news is this is one of those ones you can figure out all those questions in the first phone call with the seller. You start to ask about their customers, who they are, what the dynamic is, what does churn look like? How often do people churn? What is the, you know, revenue retention, all that kind of stuff? You know, you figure it out pretty quickly how good that unqualified that customer base is just in the first phone call.

So for me, you know, it'd be worth a phone call if I thought I could finance this. And, you know, I think that's the bigger challenge with this one is because it's Canadian, you can't go back and use some of the U.S. funding sources like you've got to figure out how to, how to get $3.9 million Canadian dollars to buy this business, which is, you know, it's not as easy as the U.S. for something like this. How real are the switching costs for customers of a business like this? you know, it totally depends upon how specialized your knowledge is and how the deals are set up. You know, if this is a eat what you kill type of business, then it depends also a lot on the dynamics of the projects themselves, right?

Are these, you know, fire once and forget, are they rolling out stuff enterprise wide? How big are the clients? Like, are they referring you to other deals inside the company? again, ties back to that idea of what is the customer dynamic and what is our relationship with each one of them. So that's what I would dig into to know. With this listing, I think it's kind of tough to know. It could be terrible or it could be great.

Well, 53 people who are in active conversations on Acquire.com are learning the answers to these questions, yes. Man, as of somebody who's going to start selling stuff at some point in my life, because I'm almost 50, the liquidity that, Acquire.com offers to businesses like this is really good because you don't see this stuff on Biz by Sell and makes me want to start an agency. So we'll buy this one because it's okay. For what it's worth, and they did not pay me to say this, I sold a business on Acquire.com.

The day my second child was born, it closed. So this was like two years ago. It was a business that you could set up text messages for your wedding. It was called textmyguests.com. So you could prescript wedding text messages like, you know, the services starting, turn off your phones or the after party is at Connolly's bar or whatever it was, right? And I listed it and from the time I listed it on Acquire.com to money in my bank

account 11 days. It was insane. 11 days from list to wire. 11, like I had never seen. And I had probably like three or four offers, like the liquidity on the Acquire.com. And this was small, It was like low six figures, but it was crazy. I just couldn't believe the liquidity.

It's amazing. Yeah. It's also a testament to how people should, I think, approach side hustles as like a real way to like make some real money and also learn how entrepreneurship works. So I think it's a cool thing. And yeah, I love these platforms or enable them to be sold this kind of velocity. I will do a Twitter thread with more details on how that one. went down, but Andrew and the Acquire. I think you did once, didn't you?

It was fascinating. Yeah, a long time, like a couple years ago, I'll resurface it on Twitter if you're listening. Go find it up. That's an amazing story. I don't know about you guys, but I'm totally like, I totally consider whether, you know, I have a whole checklist and whether I should start a new project or not or work on something. But one of the things recently that is entered there is I look at it, I'm like, oh, will this make good social media content?

So it's totally part of my, it's still part of my decision matrix now. fortunately or unfortunately. But anyway, the one thing I just noticed here, it says pre-approved for financing, which, you know, when people say pre-approved for SBA and stuff like that, we typically are like, no, there's no such thing. But it says, acquire the startup with flexible, non-delude of financing from something called Bupos. Have you guys heard of Bupos?

Heard of it. What a weird name. Business financing solutions for online businesses. I've just Googled it, as one does. Quality listings. Don't, no, you don't know. I have seen a couple term sheets from Bupos, from people who asked me to review them,

to help them review their term sheets, because, you know, I do kind of consulting to help people buy businesses. And I had a couple folks come to me and go, I'm going to use Bupos to finance my business acquisition. And then by the time I stopped chuckling, it feels like a terrible name. Bupos.

So, but anyway, if I could summarize it is that it's basically using a merchant cash advance loan to buy a business. So like the way this works is they analyze the cash flows, the revenue of the business you want to buy, figure out kind of how much they can charge you as a percent of revenue and then you get a merchant cash advance loan that is paid back as a percent of revenue after you own the asset. It's a little bit more, the terms can be a little better than that, but that's functionally what it is. Cost of capital's 30% plus, usually. Wow. Okay. Yeah.

It's a simple girdly rubric, but like I generally don't want to borrow any money unless it's like mainstream bank rates. And, you know, I'll go up a little bit from there, but it's kind of one of those things where I'm just like, oh, if I have to pay more than that for capital, it's probably too risky capital for me to borrow. But anyway, well, you guys have already heard my merchant cash advance loan rants. So we'll leave it there. It's complicated, Bill. If the loan is priced as a fixed fee and not a real APR, run. That's the short version. Do you guys remember what happened? What was the name of those guys? Pipe.com? You remember those guys? Like, they were like such a darn. Yeah. I don't hear anything from them anymore. Are they still a going concern?

I don't know. I'm not a hurdle off from them. I thought it was a cool idea, right? Basically, what they did is they sec cash flows and then try to sell them as bonds. I don't know if it worked or not. So, like, the idea would be, right, if your SaaS business is going to generate, you know, $1,000 a month of receivables for the next 12 months, like, that's a bond. And you can turn that into security and you, SaaS company can sell your future revenue.

And then Pipe was going to package it all up and sell it to people who wanted to invest with a yield. and Pipe was, I think, going to make a spread on it. It was a great idea. I don't know if it ever got traction. I think it did briefly during COVID, but I don't know if it's still going. Yeah, I guess it is. I pulled up their website here,

but man, they were just such a darling for a while. It's one of those darlings and then disappeared. Yeah, one thing that if I, the one thing I'm seeing on the website that I don't like is that they are now working with CPG businesses, which tells me they've gone toward more, merchant cash advance style. Because I think the beauty of it before was that it was SaaS recurring revenue,

you know, kind of locked in contracts versus revenue-based financing, which is, I think, I don't know, less good, I think. Yeah, this pave here that they have listed is education loans. Because their base whole idea was packaging out future cash flows and selling it to investors, which is very interesting. But they've got a really tough, too, side of marketplace. They've got to originate all of the revenue, right, at a cost of capital that makes sense to the businesses, which in and of itself is hard enough, you know, even if you had a

bank balance sheet behind you, just originating functionally originating loans all day, right? But in their model, they then also have to originate the people that want to buy the instruments, the securities. So kind of classic two-sided marketplace problem. Well, that's why you raised the venture capital. That's right. That solves all your problems. always yes no problems after you raise VC it's all it makes things really easy so back to this a core.com deal like I think

this is one where I think a lot of people will pass on it just because it's a digital agency and it's either you know it's got a bad rep agencies do often but one worth like double clicking on because there's just signs here where it's like oh it's Canadian they've been around since 2008 so 15 years old

there's potentially green flags here amongst the red flowers, if that makes sense. And something, you know, I can see why 54 people are expressing interest in it and taking a look at this one. So, yeah, take it. Yeah, you could double click on this and there could be something there, something really unique and cool. Yeah. And look, that's where you find, that's the only way you're going to find deals in listing sites. Either you know something, other people don't, or you find something that is an ugly duckling and you go look at it and you're like, oh, this is a beautiful swan.

because, yeah, there's something missing in the translation there. So something to like about it. But, man, digital agencies are just a great business to be in when you're getting started out. I mean, this guy started from nothing. He's making $1.2 million a year. I mean, Canadians, which is what, like $50 in Doritos, Chili's gift cards, but it's still a lot of money. Sorry, these Canada jokes are too easy. And Tim Horton's gift cards, I think you meant to say.

Tim Horton's gift cards. Yeah. All right. Cool. Anything else about this one? Otherwise, I think we can wrap it up. Let's wrap it up. All right.

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