How FE International CEO Thomas Smale grew FE International to $3.9M revenue with a 43 person team in 2021.

hey everyone thanks so much um so firstly I'm Thomas I'm the founder and CEO of Fe International we are a m a firm that works with business owners of software e-commerce digital media based businesses um like James mentioned over the last 13 years we've been in business now we've represented over 1200 Founders we've completed over a billion dollars in transactions um and Nathan invited me today to come and talk about a transaction we worked on recently so never seen before going behind the scenes of a real deal that I can talk about that closed a couple of months ago so over the next 20 minutes I'm going to talk about three main things so firstly Thrive cart was the business we represented they sold for eight figures I'm going to go through some of the things that went into that I'm going to talk about why the deal happened many of you in the room if your Founders you're all going to be at completely different stages of your business maybe you're you're literally just starting out your idea phase maybe you've already had multiple exits or maybe you've thought about selling one day in the future so I'm going to talk a little bit about the motivations of Josh who is the founder here and the things he thought about throughout the sale and then I'm going to talk a little bit about art of the deal so how does m a really happen what kind of things go into it what do you need to be thinking about without as a Founder if you're going to run a successful m a process so firstly let me give you an idea perspective of size for a business like Thrive card that sold um so they started out in around 2016 bootstrap company no outside funding um the founder did not have any entrepreneurial background he came from a family that had no money he had no experience in the space at all launched in 2016 as you can see from the revenue chart he grew pretty steadily and consistently it was by no means a rocket ship business was growing every year he got to the stage where it started to slow down a little bit so he got to Stage for him he wanted to know like what was next and he had a small team so even an exit he only had a team of four people very small team um and for him it was a case of did he want to hire more people manage more people or did he want to get out of the business now while while things were good so good business growing steadily but the growth was definitely beginning to slow down lots of businesses we represent look very similar to this you don't need to have a business that's growing 300 year-on-year to exit there's a lot of not necessarily misinformation but often you only hear the stories of the founders who have sold for huge multiples or amazing deals or their business was growing a huge amount the reality is a lot of M A happens for businesses that are not in that situation which is Thrive got good business but not not rocket ship so in the first section we'll go through talk a little bit about how the X did for eight figures a little about by the revenue which I showed you already and how they time the the market so Beyond just Revenue growth in the current market particularly so yesterday I was at Bloomberg on Bloomberg Radio talking to them about what M A looks like in Q2 and all they wanted to talk about was Silicon Valley Bank and how that's going to affect things hopefully none of you in the room have been overly affected by a no-founder path and Nathan's team have been working a weekend um so I'm sure hopefully some of your clients and have like benefited from help from companies like Nathan's um but um this is part of my interview on Bloomberg yesterday and I'll share it again with you guys all today businesses that are small profitable and don't have outside funding don't really care what's going on with the debt Market as long as you have access to your Capital you own in in this case Josh owned 100 of his business himself he had no reason to no reason to sell for the financial perspective no reason to read out raise outside Capital um and he was making a very nice living 100 of the business himself he got to the stage he was paying himself over a million dollars a year if his office is actually in New Zealand if you go to his office he has a Ferrari a Porsche and a Lamborghini parked outside so most of his money was going back into cars not into into growth um but profitable is very important when we got into the the buyer process I want to talk a little bit about some of the things that buyers care about and some of the things buyers don't care about um and like I said at the start this has never seen before we don't usually disclose this kind of information but we speak to hundreds or thousands of buyers on every business we represent and sell and if you show the same business to a hundred buyers you'll get completely different feedback from everyone generally you're going to fall into some people hate it some people love it most people are somewhere in the middle and some of the things that people hate are things that other people will love and some of the things people love other people will hate so there's no perfect business there's no business you can build which everyone will love there's always going to be people who don't like things um so in this case we took a selection so we I had my team I would lie if I said I got this day to myself had my team go through all of the feedback because we had hundreds of buyers who sent back feedback on this business and I think these are all things which are relevant to many in the room and relevant on many businesses so with the Thrive Club business things they liked was the fact strong financial profile so I showed you the revenue growth I showed you the profitability it was a good slow growing business profitable almost every buyer is going to like that we survey 100 people 95 of people will like the fact it's growing and profitable some will say they want it growing a little bit more some people just want to buy distressed businesses But ultimately it was objectively good um most buyers when they're looking at acquiring a company wants some sort of synergies with either their personal experience their existing portfolio or something they've done before people very rarely buy or private Equity firms private companies very rarely buy businesses that they know absolutely nothing about have no personal interest in and don't really understand so a lot of the positive feedback we got was that there were synergies with What that particular boy was already doing and again to my point around you survey 100 buyers some are going to hate it some are going to love it in this case the ones who liked it understood the space the ones who didn't did not I think so the key really like one of the lessons is speak to a lot of buyers don't just speak to three people get three bits of negative feedback and stop because you're not going to have a successful process this was a business so Thrive car is a platform where you can sell digital products online um a big part of the the business is monetizing the gmvs the gross merchandise volume that is essentially the volume of payments going through the the platform um so I've got our time of X I actually had over a billion dollars a year in um gmv and for perspective uh if you look at stripe who's just just raised it down round a 50 billion dollar valuation to be a top hundred partner of stripe the the number 100 process is about a billion a year so the perspective they're about a top top 100 strike partner pretty big business in their ecosystem a lot of GMB um so a lot of buyers liked that particularly those that had fintech or payment experience it was a lot of volume um and ultimately with this business there was a lot of unexplored opportunity a lot of Founders do a great job building their business but they do a terrible job negotiating often the easiest way to grow and improve your business is just to negotiate better terms with existing vendors suppliers not necessarily team but anyone you work with you can negotiate better terms and in in this case if we skip ahead six months and now the deal is close to con and completed my understanding is to buy is about tripled revenue of the business by renegotiating a partnership agreement with stripe so that's what they saw in the business you could have 100 negatives but they knew they could pretty much triple the business and that's what they've they've done but some buyers would look at that and say that's a bad thing like I don't know anything about stripe don't know anything about parent processing why would I buy this business some of the negative feedback we got is at an entirely international team like we're all seal in the US like James mentioned I'm originally from the UK hence the English accent but I moved here to build a business 80 of acquirers we work with are us-based so the vast majority of private Equity are in the US um the vast majority of large strategic buyers are in the US definitely does not mean it's impossible to sell your business outside of the us but in this case a lot of negative feedback a lot of U.S based or even European acquirers don't want to touch businesses with International Teams he had he was actually an English guy who lived in New Zealand his entire team were English they were all friends he had known for years um hence why he didn't want to keep building the business because he didn't want to hire anyone that wasn't a friend um the revenue base it was quite quite a small business so five million dollars he earned...