Ep 286: Why Relationships Win Deals When Acquiring & Selling A Business with M&A Lawyer Omeed Tabiei

Buying and selling a business is not just about the money. You need so much more than that to win a deal. Hi, I'm Jarrod Krauss. I'm the host of the Buying Online Businesses podcast and today I'm speaking with Omid Tabai, who is a lawyer for SaaS founders and acquirers with nearly a decade of legal experience.

With his experience as an in-house lawyer as well as working with boutique and large firms, he prides himself on helping his clients make great deals. In this podcast episode, Omeed and I have a great connection and have a really, really good chat about how to raise funds to acquire a business and where you can go to get those funds.

We also talk about how to raise funds to scale a business, different stages of scaling a business, different types of raises, and where to get those funds from as well. We also talk about the advice that Omid would give to sellers, everything from his vision for people who do want to exit their businesses to what they need to do and get in place before they exit their businesses, as we used to talk about trusts and how building trust in relationships is super important, how this can be done unconsciously, and how you can start to do it consciously to be able to win deals, have a far better experience in business, and get far more ROI out of business by having stronger and healthier relationships. I also share a lot on my side about the buy side of negotiations and how to test sellers.

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Welcome to the Buying Online Businesses podcast. Thank you for coming on and having a chat. Yeah, I look forward to digging into your career and, you know, just picking up your brain a bunch. Now, why? How did you get into law? What's yours? What's your journey? You mentioned that you would like to know who you work with in terms of acquisition entrepreneurs and what you do. But we'll get to that. Why law?

and how to &A like, yeah, because law is pretty broad. Totally, totally. Yeah, why law? Well, you know, I come from a Middle Eastern family. So, you know, for all your listeners out there that are Middle Eastern, there are really only three options for Middle Eastern families in terms of careers. It's like a doctor, lawyer, or engineer. That's it.

So from a very young age, know, my father told me, you know, you're going to be a lawyer, this and that. you know, he kind of trained me to be that way. He would always make me negotiate for everything that I wanted. You know, he loved to debate that sort of thing. So there wasn't really an option in terms of choosing to become a lawyer. I think he saw something in me at a very young age.

You know, he obviously had some aspirations of his own, but that's essentially how I was set up to become a lawyer and how I became an A&A lawyer is because I've always loved entrepreneurship. And so what's really interesting about my journey into law is that, like so many lawyers, there's a show here in America called Law and Order.

I don't know if you guys have it in Australia or not, but I think a lot of lawyers watch or, like, a lot of youth growing up watch law and order and they're like, That's so cool. It'd be really cool to do that. And, so, that's what happened for me. I watched that show and I kind of fell in love with the concept of being a lawyer. I really wanted to be a public defender, which is what I wanted to do. But I ended up working in government and that's how I got introduced to the small business community.

Once I got introduced to the small business community, I learned about startups and tech. And then I was like, Whoa, this is like next-level venture capital and tech and that sort of thing. And I was like, This is like a whole other field, but I always thought about impact. That's what it's always been about for me.

And so, you know, the intention of becoming a lawyer was to change people's lives. What I realized was that there's nothing that changes people's lives like business. And specifically, what is so interesting to me is that for the entrepreneur, the exit is kind of the promised land.

It is where all of the hard work that a business owner has put into their business pays off. And so, so many entrepreneurs, especially in tech, you know, with the bubble, the web bubble, you know, so many years ago, as well as the number of booms that we've experienced since then, a lot of entrepreneurs, especially software entrepreneurs, you know, create the next app and they're like, I can't wait to be acquired by Facebook, Google, Apple, whatever it is, you know, everyone's kind of like aspiring for that golden exit, if you will. So, you know, in the yacht and so on and so forth, or, you know, whatever it is that is inspiring the philanthropist journey or whatever.

So that's why &A, that's how &A, there's both kind of quirky parts of the story as well as, you know, a genuine desire for impact there. love it. I love it. I love the initiative for impact. This is exactly why I got started, as well as my story of being a plumber and not liking being a construction worker; most people don't like their nine-to-fives. It's repetitive.

And let's be honest, it's typically boring and then just serves people to get out of that. And it's very fulfilling. I'm sure that you see that in your work as well. It's very fulfilling, you know, to see somebody's life dramatically change after an exit. I see people's lives dramatically change when they acquire a business and no longer need to do, you know, employee life. And then, as they grow up, you know, they can sell and acquire another one or maybe make a grand exit.

It's another massive life change, right? So absolutely, what sort of acquisition entrepreneurs do you work with in terms of what sort of business model and size of business? types of people on the buy side of the sell side, Even growth, like, what's some of the most typical work that you do now that you've gone out of, I guess, corporate and into, you know, I think it's two years ago.

You said you started being an optimist illegally. Optimists are legal. that's right. So for all the listeners out there, I own a law firm. It's called Optimist Legal. It's a corporate and A&A law firm. I started about two years ago after almost 10 years as a lawyer working in various positions in-house at tech companies, helping them raise multiple rounds of financing. I've worked in-house at a studio that was acquired by private equity. I've worked at a big law firm, so on and so forth.

Two years ago, I started this corporation, and I'm a law firm. It's focused on SAS, which is software as a service for all the people out there. If you don't know what it is, it's software as a service. So it's different software applications, cloud-based softwares and things like that. Two years ago, I started this firm. so we primarily represent SAS founders and so what that looks like is that we're on the sell side, though.

It's been interesting. Some of the SaaS founders themselves have, you know, jumped on the acquisition train as well. And so we see, we are seeing a bit of that too, but primarily we sit on the sell side when the founders want to exit. That's where we come in. We also do a lot of financing. So when people go to raise funding, seed funding.

Series A, that sort of thing, or angel. These are like different ways to refer to different rounds, depending on the stage of the business. So, in terms of financing, sales side & A, we do a lot of incorporations, helping them set up and get the business going and running, and that sort of thing. So, pretty much anything from the birth of the business, from the creation of the business, to starting the business, to exiting the business, we handle everything from start to finish. Yeah, cool. Let's go in a linear fashion here.

I really want to learn about exits, how you help people set up at the exit and what they need to be thinking about with an exit. but you mentioned raising funds now. You've got people here that are, you know, starting off with smaller businesses, but they might want to raise funds. I know that, you know, sales and marketing are part of raising funds and you need certain data points and things to be able to raise funds and you can do that with all levels of businesses. So what are some of the things that you have done that have helped you acquire financing for particular businesses? What are things that the business tend to have in place first?

What do you need to present in terms of data points and how does that work? Yeah, great question. So in the US, you know, this is not what most startup founders do, but for US-based people in the small business administration, the SBA has a lot of acquisition opportunities Entrepreneurs are using SBA funds to acquire businesses.

Yeah. lot of them use that. They use SBA. Yeah. Yeah. I'm pretty familiar with it. Cool. So, you know, it's not too different from, you know, getting a loan. I mean, it is a loan. It's a government-backed loan. And so, you know, what you need to show the bank is that they are going to let you know exactly what they need to see from you.

But generally, you know, they want to see three or three to five years of financials, profit and loss statements, balance sheets, that sort of thing. There needs to be a certain ratio, and you know the debt-to-cash flow pretty much needs to be there to be a cash-flowing business. It needs to be a profitable business.

If it's not a profitable business, you know, the bank is going to have a difficult time underwriting it Typically, digital assets won't qualify for SBA. And so if you are trying to raise money through SBA for a software acquisition, SBA is the right vehicle to do that. But yeah, you know, pretty much all the things that I just said are what you're going to need to show to the bank.

And then, of course, legal documents and so on and so forth, ensure that the business is duly organized. But for the most part, the thing that the bank is going to care about the most is that they are going to make their money back. And so the financials of the business are probably one of the most important aspects of the business to show. Yeah.

So you say typically SBA is not the way to raise funds to acquire a SaaS business. Now, that's typical. It can be done, obviously. I've seen it done. I've helped somebody do it to acquire a SaaS business, a mid-six-figure business. But what would be the typical route of financing to acquire a SaaS business, then? What's the alternative? Yeah. It's a great question.

Well, think, you know, a lot of SBA, or not SBA, a lot of ETA entrepreneurship through acquisition—a lot of these kinds of searchers are developing independent searcher models. And, you know, so there are people, there are private funders, there are private lenders out there, and there are private backers out there. You know, you can raise money from this private capital. You can raise a fund.

And that would probably be one of the best ways to go out and acquire these businesses. There's another entity that's known as BUPOS. They are also a great potential resource for people to raise capital to acquire businesses. They're very familiar with SaaS businesses. In fact, they're a financier that's focused on SaaS businesses.

So I'd say those two channels are probably the two best channels for people to raise money if they're looking to acquire SaaS businesses. Yeah, I'd say those are the two best channels. Do you have any? What are your thoughts, Jared? What do you think? SBA and BOOPOS are typically the main ways to go other than outside financing through family and friends. Yeah. That's a good question. Thanks for posting that to me.

We do get people that do go and raise funds and want to create a micro-PE firm. That's where I'm moving into: helping people not just raise funds and acquire businesses but also build out holdcos to acquire the first one and then a bunch of other ones that, as a roll-up in the online business space, typically at the start, are just SBAs and BUPOs.

BUPOs, though, aren't as nice as SBA, but for people that aren't in the States, it's kind of like the really only route unless you can raise them from friends and family. Yeah. Outside, you know, maybe start up angel investors like we mentioned earlier. Yeah. Or like any sort of high-net-worth individual.

For example, it doesn't have to be friends and family. It could be anyone who has capital that they're sitting on—large amounts of capital, for example—and they're looking to deploy that capital. The difficulty for first-time entrepreneurs, though, is that you're going to have to show some track record for a lot of these high-net-worth individuals.

So that might be a barrier that people run into. Yeah, and sometimes people have access to higher-net-worth individuals and don't even know it and they haven't opened up to having the conversation with them. There are some pretty wealthy people out there with tens of millions at their disposal—maybe more—for different types of investments. They understand that it could be a bit more of a gamble, but they're investing in a bunch of different things with a bunch of different people.

But for somebody sitting on the side of, like, I just want to raise a couple of mil, to them, it's a lot. To a wealthy entrepreneur or investor, sorry, should say wealthy person, that is putting a couple of million through a bunch of different investments, they might want to invest with you if you have some experience, know, growing or running that type of business. So those conversations are important to have with people, I think, because those are...

There's a lot of money out there. And typically, what we hear is that if there's a good deal, the money will come. Yeah. Another, another really high-net-worth individual. Another really good place to look is previous founders that have had exits. Yes. Yes. I love that. That's a good option. Yeah. Thank you. Thank you. So by selling the site of the process, you help people raise funds.

So before we get to the selling side, we just talked about raising for acquisition. What about raising children for growth? You've got it; it sounds like you've. You have helped people grow and make an exit as well. Right. So, yeah, venture financing. How does that work? Yeah. So, I mean, it depends on the stage of the business, right?

So, you can be in the early ideation stage. So in the early 2010s, what we were seeing was a lot of people being able to raise off of pitch decks, right? Or we also saw this during the ICO craze of crypto during COVID as well.

So people create these, like, really sexy pitch decks that are designed really beautifully and all that kind of stuff. And they go out and they're able to raise money. that the state of the market that we're in as of the taping of this episode on July 1st, 2024, the state of the venture capital market is not conducive.

Actually, in general, what we're seeing is like just a tightening of funds on the VC front. So even founders who are interested in raising may have been interested in raising; we're just not really seeing them raise.

We're seeing the entire market for the most part except for one area and I'll tell you what that area is and I'm sure you can guess what it is, but for the most part, founders are turning to become bootstrapped and a lot more of them are actually thinking about selling and it's this interesting dynamic between when VC money dries up and founders start thinking about, well, where else can I get money? It might be time to exit; as I mentioned, it depends on the stage of the business.

So I'm not saying that it's impossible to raise an idea. If you're an entrepreneur who has a track record of being successful, for example, you might be able to raise an idea. If you're already well-networked with high-net-worth individuals, you might be able to raise an idea. If you have people who just love you and want to see you succeed, and they love your idea, you might be able to raise money.

So I'm not saying that it's impossible to raise money. I'm just saying that the state of this market is more difficult than other time periods that we've seen. But where you start is typically that you have to have a pitch deck. you have an idea for a business, you create a pitch deck, and you'll be raising your angel or friends and family around it.

If you are a little later stage, you might be raising your seed round. So your seed round is usually like a couple million. Angel, you know, might be anywhere up to like 500K; for example, a seed round is 500K to, you know, two to maybe 5 million. And everyone has like different designations for these things. These are just kind of arbitrary names for the rounds and they've changed many times over the years.

What is now seed used to be series A, and the numbers just keep getting bigger. And so, you know, anyway, so it just depends on the stage of the business that you're in. But so after seed, most likely, you know, a series of investors, you're going to go to institutional investors and maybe some of your seed investors will carry over.

They'll become your series investors, but right now, it sits around 10 to 15 million, which is the typical series A stage round. But in terms of what's needed to raise, you need investors. So you need a pool of investors and you need to have a strategy to... It's the same, like the same way you acquire leads for your business. It's much the same. You need a way to acquire an interested, warm…

investor leads, need to nurture those leads. Yeah, those relationships—you need to build the relationships; you need to sell them on your value proposition, on your mission, on your vision—that sort of thing. And they're investors, so it's not too different from going to a bank. The only difference is a bank is an institution, you know, that's responsible for holding your money and also distributing capital.

Same with an investor. The investor holds the capital; they're going to conduct much of the same diligence that a bank would. So it's not too different of a process. And I actually always tell that to entrepreneurs too. Entrepreneurs will often come to me and say, I've never raised money. I'll be like, well, have you ever bought a house? If you bought a house, it's not too different from buying a house. Yeah. Yeah, absolutely.

Also, I'm very glad that you mentioned about the state of the market it does; it's going to date this episode a bit, but it's important for people to know that as funding or even just like the whole of the world, it's, you know, finances have tightened up a bit with, obviously, increasing interest rates. And as this happens, there's less funding and fewer people can afford what they used to.

Money becomes a lot tighter and it's the same in the online business space. There are people that might have large mortgages or they bought a bunch of property through COVID because it was going really, really well and their repayments have gotten higher and higher or they've got a bunch of debt on other things. And so you've got these people with a bunch of debts and maybe a cash-flowing business sort of going, okay, how can I continue paying for some of these things?

Money tightens up and that's why we are in a seller's market and have spent most of the year in the online business space. That might change in 2025. I can't see it changing through 2024. That's just a bit of a prediction, in my eyes and in the state that we're in. And I think maybe even through 2025, we might still be in a bit of a seller's market for online businesses. So yeah, it's great.

It's a great place for my audience to be thinking about when's the right time to buy a business, typically when money's tight because people need to offload some investments they have. Right. Yeah. Yeah. So I told people that I would tell them the one place where money is flowing in terms of venture capital.

It's AI if you couldn't guess already. So AI is the one place where venture capital is like flowing uninhibitedly. So, if you've got an AI startup, good for you. Go out there and raise money if it makes sense. And that's, you know, the one place where we're seeing kind of venture capital doubling down. Clearly, the entire world sees a future in AI. it's pretty insane. What is coming? Let not open that can of worms and that conversation. Yeah. More than just a can of worms.

So we've talked about acquiring funds for acquisition as well as acquiring funds for growth. Now, when it comes to exiting a business, what are some of the things that you do to help people get in place for the exit and how do you sort of work as a shepherd in that, in that role of a lawyer, being on the sales side of a business? Yeah.

Let me tell you about the world I envision and we'll start there. So the world I envision is one where people who sell their businesses think prudently about selling their businesses. They have a plan to sell their business in terms of a time period. They know at least 36 months in advance of selling their business. They don't wait until the last minute; they plan out three years from the date that they actually decide that they're going to list their business for sale.

And they spend the time and the diligence to put together a team during that three-year period that consists of an accountant, a sell-side advisor in terms of, like, an &A broker or an exit advisor of some sort, or a lawyer. And that team coordinatedly works together to get their financials all in order to get their exit data room in order to get all the systems and processes in place to make the person obsolete to the business so that it can be properly handed off to the buyer.

That is the world that I envision, Jared. so... That's 36 months. that far ahead. I love that vision. love it. Yeah. Thank you, man. Thank you. Yeah. Now, okay. So, if this were the matrix and you took the red pill, the actual world that exists right now is that business is on fire, not in a good way. you know, an entrepreneur is up to the business and wants nothing to do with it anymore. Literally, it's a hot potato that they're trying to offload to the next person. Nothing is in order. They haven't had a bookkeeper. There are no financials.

Their illegal documents are a total mess. There's almost no systems. The software has no documents. So, you know, that's the red pill, like matrix. If you're awake, wake up in the pod; that's like the world that you would see. Yeah.

So it's pretty typical that people will; it's an entrepreneur who's like running their business, super busy. They haven't incorporated, you know, work on the business, not in the business as well as maybe they should from reading the book The E-Myth by Michael Gerber and replacing themselves out of the business.

That's pretty typical, especially for businesses, you know, up to the mid-seven-figure range. And yeah, it's so, so then what? What's your role? So my role is to expand on that vision. so, you know, it depends on what stage people bring me to. typically we come in, oftentimes like post-L-I.

So the person has already started to negotiate some aspects of the deal with the buyer. They realized that they actually, you know, need an attorney that is focused on and knows and Ause and A Law are a different breed of lawyer than your general corporate lawyer.

For example, just because a lawyer is a corporate lawyer or a business lawyer doesn't mean that they have a specific profession. A&A is a very niche area of corporate and business law. And so, you know, maybe one of their advisors tells them that they need an &A lawyer, for example. So when they come in, there's an LOI on the table.

Typically, once the LOI has been signed, there'll be a due diligence request list that comes in from the buyer. The due diligence request list will have a number of different items on it. There will be a whole slew of legal items on there, you know, speaking to the state of the business, the legal state of the business, the contracts, the intellectual property, so on and so forth, that sort of thing. So that's where we come in to help set up what's called a data room. So a data room can be as simple as a Dropbox, for example, or a Google Drive.

Yeah. And all the documents that relate to the business go into that repository for the buyer to conduct a review. So we come in, and we help compile those documents. You know, and what's really important for the sell-side advisory team to be doing with the seller is preparing the seller.

foreign negotiations with the buyer and anticipating, you know, questions that might arise from the buyer in terms of risk. Yeah. Yeah. I love it. This is me. I'm on the opposite side. I'm the buy-side advisor, where we come in and say, Okay, we've got this LOI. This is what we're thinking. This is the data we need to prove. It's worth what it's worth. And then we get our valuation based on that data.

And then we start negotiations, I guess. Typically, I don't do too many negotiations. I like to come in with one price and one price only. And if it's not the right price, then let's not waste your time. Let's not waste our time. I don't like to play games. And yeah, I mean, it's super important. This data room has a bias-side advisor and a sell-side advisor so both parties can come to an agreement and have a win-win situation.

There's so much emotion, you know. This is the thing you probably don't talk about much but it's, I'd say, a big thing for lawyers: managing people's emotions and, through the process, setting some realistic expectations because there's a lot that goes in. You know, there's data and the data's not just about what the data is.

It was also about how we feel about the data on the buy side and also how the seller feels about the current state of the business and the seller is in this position where they've just been grinding for a ridiculous amount of time and they're done. And, you know, they also do so because of the effort and time that have been put into this business.

They have this certain level of expectation of, like, what it's worth versus, like, what the market actually might see it worth, see it's worth, and the buyer. So how do you manage people's emotions and hold their hand in a way that ends up being the best experience possible for them with an exit that they're like? I'm happy with that. What are some of the things that you need to navigate? It's tricky waters, right? Definitely. Definitely. Yeah.

I mean, at one point or another, it may still continue to be, as you said, it's like, It's their baby, man. You know, I think one of the biggest challenges for entrepreneurs out there, by far, for entrepreneurs selling their businesses, is identity in the business, where the business becomes so interconnected with who the person is.

Yeah, so they take things very personally. For example, if a purchase price comes in, you know, that doesn't match and it usually never does because sellers usually have a very unrealistic expectation around what the business should go for. and again, the reason is, as you mentioned, like they spent so much time working on the business and so on. And so they feel they should be compensated a certain amount.

Maybe they had a number in mind about what that business should go for. That's why I'm saying you should plan out 36 months in advance, because if you have a number in mind, 36 months in advance of selling business, you have three years to get the business where it needs to go to hit that number. You can definitely get what you want for the business. Let's say you want to sell the business for $100 million.

You can absolutely get a hundred million for your business. You just have to have the right things in place for the business to be able to have a value of $100 million. You can't just go into the market and say a hundred million if, as you know, the numbers and the financials don't necessitate that number. And there needs to be a certain amount of buffer window time so when reality hits in term and you figure out what the actual valuation of your business is, which, by the way for all the people out there, if you're listening to this and you're contemplating selling your business at any point, I would highly and strongly recommend just going to talk to a broker. There are so many brokers that will give you free valuations of your business, so go get it. Yeah. you do that. Yeah.

There you go. Jared will give you a free valuation of your business. So go talk to Jared. He will value your business so you can figure out where you are at right now. And maybe you don't want to sell for another five years.

Maybe you don't want to sell for another 10 years, but just figure out where you're at right now and figure out where you want to be when you exit so that you don't get hit with that harsh reality of, you know, the number that you want to exit at is not the number that you're going to be offered. And it's not the number that you're going to get.

But to your question, Jared, how do I help walk people through that? To be honest, you know, empathy is something that I value highly. Actually, I often refer to myself as a therapist of the law in that, like, I'm a legal therapist. We really have to be therapists for our clients.

I think the broker often gets a lot of flak as well because, you know, they're the ones that kind of guide the process, list the business, field the LOIs and that sort of thing. so by the time I get involved with the business, the seller has had to go through a pretty significant process of coming to terms with the fact that, okay, this is what we're going to get and we're going to either let it go or we've seen all types of things. Sellers change hearts in the middle of deals. It could be some benign term that throws them off. Yeah, it's a tricky one.

When you see that their identity is wrapped up in the worth of the business or wrapped up so much in the business, an offer might come through and it's just a direct hit to their self-worth in their view and their eyes, right? You can clearly see why you're a therapist of the law. It's so, there's so, there's, and it's also throughout acquiring a business, the similar thing, and also through growing a business, the similar thing.

So, with my clients that I work with, I'm helping them acquire and then grow when we do one-to-one coaching. A bunch of them call me a business therapist because they come to me with all these crazy ideas or all these problems and at the end of the call, you kind of just go, All right, this is, you've got two or three things you need to focus on and that's it. And just calm down the other emotions and all that sort of thing and start to, like, see where we're really at in reality. And it's not just you; it's not just me that's a therapist and it's not just you that's a therapist and I'm sure you're excellent at it. I mean, what I think is that most consultants are just therapists.

There's probably like 20–10% of the IP that goes into a call with somebody and the rest is really therapy. And that's why I think consultants are really the best therapists, right? Would you agree? I would absolutely agree. 100%. 100%. Yeah. I think, you know, the skills of listening, empathy, and relating.

And these are the core skills of great negotiators. These are the core skills of great deal-makers. You know, one of the things that I stress to my clients and often point out is the state of the relationship. Like, how do you feel about this person? Like, do you like them? Something as simple as that. It sounds simple, but it's so big.

That's so, so yeah. mean, when the deal-making is relational, there is no making of deals with some sort of relationship involved. You can't make a deal if there isn't some sort of relationship involved. And so for the seller, you know, it's really important that the seller feels that this person that they're going to pass the business off to has the best interest of the business in mind, that the seller feels some sort of connection to that person, not all the time.

Not all people care about these sorts of things, but to some degree they will. And it's often the relationship I've noticed that saves the deal. When the relationship between the seller and the buyer is good, the deal will go through, no matter what. If the relationship between the seller and the buyer is bad, a pebble in the shoe can destroy the deal. Yeah. And you know, relationships are everything in business and in life, I believe. And I'm big on helping people build a great relationship with a seller.

And if you think about it being very transactional, like, why would people buy a product from you or a product or service? I served you with trust, right? But how do you gain trust through a relationship, typically through content marketing, seeing you a lot of times or listening to a podcast?

On your podcast, you have people listen to you multiple times and once they've heard you, they build a relationship with you and the better the relationship is or the better they feel about the relationship with you, the higher there is the trust and trust is what makes great transactions and win-win situations happen.

And that's, I think, where deals are. That's why, as you start to do this, you can start to, and when you do, there's these, and they may seem little and insignificant, but when you send an email, ask a question or ask five questions and they get back to you with three answers, you might not see that consciously, but unconsciously, you're like, the trust metric has dipped a bit because there's two answers that aren't there, right?

When you're building a relationship, whether it's an intimate relationship, a business partnership or anything else, even an employee is throwing things into the universe that allow you to see whether you can trust them or not based on how they walk through the process of buying or selling the business.

And these are absolutely critical metrics that I don't think anybody really talks about when it comes to how you build a relationship and then how you quantify the amount of trust you have for that person based on the relationship and how they behave throughout the transaction.

And for the seller, you know, on the sell side, it's a bit different in terms of, you know, they kind of are holding the jewel, you know, that the buyer wants. what are some of the trust? So, like, that's a really good site to talk about for us as acquirers on my side, as my audience, but the sell side, what are the things that a seller is doing to sort of test the buyer's willingness to work how much they trust them to take over their baby.

Is there certain things that they do that they might not be conscious of that happen? Yeah. I think every seller is. Anyone who's ever bought a business has experienced this, but the broker is usually going to test to see if you have the capability to purchase the business. That's not necessarily so much the case.

For a lot of the software businesses, they get acquired by strategic acquirers, for example, or private equity. So, and a lot of the software founders, you know, that I work with, they will tell you, like, I get hammered with emails every day, every week, and every month from these PE people trying to buy my business. Right? But they're always low-balling.

The only time that their ears ever really perk up is when the number starts to get to a place where they're like, Ooh, that actually is getting kind of warm to, you know, the amount that I actually might consider selling my business. But it really is, you know, I think we both know, you know, money talks and coming forward actually really like your approach is like, I'm not here to go back and forth on price.

This is the price; either you want it or you don't. I think that's actually a really great approach. It's very straightforward. It's very direct. gets to the point. And it's a great starting point to understand whether this relationship is going to move forward or not. But yeah, so what do other sellers do to suss out potential buyers?

For sure, price and ability to buy. I think in general, another thing that people don't really talk about, which is really qualitative, is what is the vibe? I have no other word other than to use. Yeah. Is it?

I think people like doing business with, as you mentioned, people not only that they like, but they just like to be with. If you're pleasant, if you, you know, connect with people easily, you make an effort to get to know people even outside of the business relationship or the deal we were on in negotiation the other day.

It's actually one of the software founders that I represent that's acquiring a business. you know, we're just talking about how they're going to go on vacation. Perfect opportunity to be like, Where are you going on vacation? Have you ever been there before? Don't make it so much about the deal that it's so structured. and we saw it—like, we saw the relationship really soften up over time. As time went on, initially, you know, they were very kind of a standoff. We were in the running with a number of different other acquirers, all gunning for the seller's business.

What makes you stand out? They like you. Yeah. Yeah. People connect with people who are real—you know, not too rigid. There's nothing to grab onto and to like, you know. I've found it hard to build relationships with people who like you every time you speak to them; they're like, How are you going? What's happening here? How's life? That sort of stuff.

And they don't really give you anything. And they say, I'm going on a holiday. It's like, yep, no, everything's all good. Kids are good. Life's good. And you're like, Come on, man, give me something. Yeah. Is there something in there? Are you a person or are you, you know, going to be one of these AI robots? And we're not going to know the difference between you and an AI robot. Hey man, apparently we're heading there.

Here's another thing that just came up for me too: the other thing is that sellers are okay, so once you get past the price gate, if you can meet the seller at the purchase price, that's, you know, going to be the number one thing that most sellers look for but the other thing is that, as the buyer in the business, you really want to say, Hey, like, what has your journey up until this point been like?

You know, where did you start? Where did you end up? How did you end up there? What was your vision? If you were to continue running this business for another 10 years, what would you have done? What would you have created? What were you excited about that maybe you didn't get a chance to get to that you saw a lot of potential in? Where did you want this business to end up? These are things that you want to connect with.

It's like the same way if you were to meet the child of a person that you loved, for example, what are you going to ask them? You're going to ask them, like, Okathem, like, you know, how's life? How's school? How's it going What do you want to be when you grow up? You know, like, take those kinds of questions and apply them in the same way. So I love that. And I like to ask questions like, What have you done that didn't work? And then why didn't it work?

You know, are there things that you could have done differently and if so, how and why? I feel like we talked about relationships a lot. That's what business and life are. And to make a transaction happen, the relationship needs to be solid in order to have trust or for that trust to be built. Now, with that transaction of one business, I typically tell people there's more value in the relationship than the business you acquire or the business that you sell alone because maybe, on the sell side, you're like, okay, I've built this thing up.

I've sold it. It was a SaaS tech startup, whatever it was. And then this large tech firm acquired it. Great, you've got a relationship with them or a couple of people in that firm. Maybe you're going to go and start another one and build it up. And then you could just keep that relationship going and then build them a product or a service that they might need that you can roll straight in and you don't need to go and look for a, you know, a seller and you might not need a broker to be the intermediary.

Like it or not, there's so much value in the relationship. I'd typically say more so than the transaction itself. yeah, I honestly need, and I really appreciate, this chat with you and building our relationship. I feel like we've got a great connection and I want to thank you so much for coming on and sharing everything you have with all listeners. So thank you so much.

Yeah, man, absolutely. Yeah, so I just want to squeeze this through is I always tell this to software founders. Every time I talk to them, as I mentioned, their inboxes are usually filled with both investors and acquirers that want to buy their business. That vision that I described of 36 months out. Imagine if those software founders were building relationships with all those people in their inbox—not all those people, not all of them, but you know, pick the ones that are the most promising.

And what usually ends up happening is with your investors, Either I introduce you to introduce you to your acquirer or your investor becomes your acquirer or one of the acquirers that has been in your inbox trying to acquire you ends up being the company that acquires you. So imagine, you know, not having to go out there and rush and be stressed.

in the exit process, but rather having already identified the person or company that's going to acquire you, just how much more of a pleasant process that is, and it all is as a result of relationships. Yeah, and it's organic, right? And that's what we're looking for.

It's so nice. I mean, where can we go That's so good. Thank you so much for coming on. I really appreciate all of your wise words. I know the audience would have loved this episode. Where can we send people to find out more about you and Optimist Legal? Yeah.

You can follow me on LinkedIn, connect with me on LinkedIn, or send me a message on LinkedIn. My name is Omid Tabiah; you can see it right here, I believe. You can find me on Instagram, sasbizlawyer; you can find me on Facebook; or you can go to our website, optimistlegal .com, and yeah, feel free to reach out; we'd love to connect and are happy to be a resource.

Awesome.

Again, thank you so much for coming on. Everybody who is listening, thank you so much for listening. If you guys have more guests, like Omid as suggestions, bring them on. Also, I typically don't ask for much from you guys, ever. I think the last time I asked for a review was, I don't know, probably years ago. If you're open to leaving a review, please do so. I'd love to see that feedback there.

Thanks again, guys. I will speak to you soon. Thanks!