"Be a giver. Not a taker." - Jon Stoddard
Jon Stoddard is a partner at Investor Acquisition Partners. For over two decades, Jon has perfected the process of raising capital from investors.
Today Jon helps businesses go public in the OTC market and has ra...
"Be a giver. Not a taker." - Jon Stoddard
Jon Stoddard is a partner at Investor Acquisition Partners. For over two decades, Jon has perfected the process of raising capital from investors.
Today Jon helps businesses go public in the OTC market and has raised over $122 million.
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This podcast is brought to you by the Deep Wealth Experience. In the world of mergers and acquisitions, 90% of deals fail. Of the successful deals, business owners leave millions of dollars on the deal table.
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Your liquidity event is the most important financial transaction of your life. You have one chance to get it right, and you better make it count.
But unfortunately, up to 90% of liquidity events fail. Think about all that time, money and effort wasted. Of the "successful" liquidity events, most business owners leave 50% to over 100% of their deal value in the buyer's pocket and don't even know it.
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Learn how the 90-day Deep Wealth Experience and our 9-step roadmap helps you capture the maximum value for your liquidity event.
Enjoy the interview!
Jeffrey Feldberg: [00:00:05] Welcome to the Sell My Business Podcast. I'm your host Jeffrey Feldberg.
Are you thinking about an exit or liquidity event?
This podcast is designed to help you increase the value of your business, and at the same time, give you the certainty to capture the maximum value in your liquidity event.
At the heart of the Deep Wealth Experience is the nine-step roadmap of preparation. Learn and master the same strategies that had me say no to a seven-figure offer, and a short time later, say yes to a nine-figure offer. In the words of a business owner who went through the system, "the Deep Wealth Experience was hands down, the best program I've ever participated in."
To learn more about the 90-day Deep Wealth Experience, please visit www.deepwealth.com/success.
Jon welcome to the Sell My Business podcast. I'm really excited to have you with us today and for our listeners here's what you're in for. Jon has a very unique perspective. Are you thinking about raising some capital? And I definitely know you're thinking about selling your business or having a liquidity event.
When you want to win, it's really important that you know what the person across the table is thinking about, and what they go through and what their challenges and opportunities are. And that's exactly what you're going to find today with Jon. So, Jon, welcome to the podcast, such a pleasure to have you here.
Why don't we start with the story behind the story, Jon, how did you get to where you are today?
Jon Stoddard: [00:01:43] Thanks for the invite. Jeffrey, I really appreciate this. I've been following you on LinkedIn and I love your podcasts.
Jeffrey Feldberg: [00:03:17] Thank you.
Jon Stoddard: [00:01:49] I've been an entrepreneur all my life, entrepreneurs go through ups and downs, but I started way back in the engineering school in Northern Arizona.
And then I worked for software companies for a number of years. Small companies, big companies. At some point, I just got together with my CEO and said, hey, this is in the dot com era. And I said, hey let's build a company. It was a marketplace company called Turbo Squid.
It sold 3d assets to animators, it's buying and selling. This was just after eBay. So, there was nobody writing blogs about KPIs or metrics then. We just had to find some inventory and we had to find buyers and that took a long time to get together. We raised capital from Intel and Kodak just tagged along there because they were trying to get out of film and they put some money in and a local VC.
So, when we raised that company and that’s doing well, it's the number one marketplace in the industry for 3d assets and just recently sold to Shutterstock. So, that's a nice deal there.
And then we just kind of migrated into working with startups. Raising capital for them. A couple of years ago, I started working with a buddy of mine who was an attorney out in San Diego. We started with investor relations. Helping companies sell the story on stock.
And then we migrated into working with OTC companies over the counter OTCmarkets.com and looking for companies needing help raising capital and helping them acquire do M&A work for their business. So, that's where we're at right now.
Jeffrey Feldberg: [00:03:17] So, you've run the full gamut here. You started a company, you built that up. Got that out there. All the challenges with. You recently sold that. That's wonderful. The important thing here for our listeners is that you've been down this path and that you've done that and that you can relate to what a business owner goes through from really start to finish.
Jon, as you're going out there right now, let's firstly, start with what you're seeing today?
Jon Stoddard: [00:03:39] Yeah. So, we're seeing a couple of things. If I look at the OTC markets business, I mean, that's AAA clubs for baseball to the major league, but OTC markets, there's a number of businesses out there that would like to grow and just need help to grow. And the OTC markets is actually cleaning that market up.
OTC markets was attacked maybe 10 years ago by the Jordan Belfort guys with all that toxic debt and the raising capital and the crazy stuff that he did and that stuff.
And the SEC is cracking down on all toxic debt lenders. They should see their demise in the next year or two. They're just going to stop those guys. You got to be a broker-dealer to be able to go from debt to equity. So, they're moving those guys out.
So, the OTC markets cleaning up this is one data point we look at. The second part is there's a ton of dry capital out there. So, much of it is willing to invest. Financial family offices and the SBA. They're all trying to get the money out there and get it to work because where they have it now it's not making any money on top of their money.
So, that's two things. And the third thing is doing Reg A crowdfunding. Crowdfunding allowing people to sell your product, your equity to the general public in general solicitation, that could be accredited and non-accredited investors. Getting access to millions and millions of people to look at your stock is at the click of a button.
That is part of the business and getting in front of millions of people to just look at your product and your niche is so much more available today. So, those three data points change what your capabilities are on growing your company today.
Jeffrey Feldberg: [00:05:26] And so that's interesting, Jon, let's take it from the beginning. And here's the question for you? A business owner comes to you. They have a business; they want you to help them with that. As you look at the business, as you look at different deals, you know, depending on who you speak to the failure rate for businesses that are looking to have a liquidity event can be up to 90% and that's not an accident.
So, I'm wondering Jon, from your vantage point, when you're analyzing these businesses, where do most business owners get it wrong in terms of why it's not going to work for their company and what can they do about that?
Jon Stoddard: [00:06:00] That's a good question because we're not going to do a Reg A anymore for a private company. We think it's dead money, meaning there's no possible chance.
Where does the investor get his ROI on the business? He's got to be a purchase, has a call or put option or they go public. So, if you're not going to do any of those three, then why would an investor invest in you? Unless it's just a, hey, I think it's cool. Here's $500 dollars. Or here's a $1,000 or $10,000.
We don't do that anymore. We look for companies that are going public and they have to have momentum, $5 million revenue, they're profitable. And they got a big email list or a big customer list because that customer list is really critical that, they have a good brand reputation on the social media platforms.
Because one of the first places you go to raise capital is the people that buy your product or service. So, we moved away from private companies to public or going public companies and the companies with momentum. That's our niche right now.
Jeffrey Feldberg: [00:07:03] What I'm hearing you say is you have a presence on social media. It's easy for other people to find out about what your company is doing. You have some decent revenues and profits; I'm assuming along the way that go with that. And you also have a terrific customer list. What else are you saying, Jon?
On either side, the business owner not being prepared because that's our specialty at Deep Wealth is preparing business owners for some kind of liquidity event and what you need to do with our nine-step roadmap to make sure that you're prepared, or where are you seeing on the flip side that they're just hitting it out of the park.
Maybe you can share some examples for our audience of what not to do. And on the flip side, what they should absolutely be doing.
Jon Stoddard: [00:07:42] That's a really good question because a lot of people that own businesses want to have some liquidity. They want to get some cash-out or the investors want out, or they got a minority owner or something right there.
But if you're going to go public on OTC markets or you qualify for NASDAQ or any of the listings, the CEO has to be a charismatic, attractive character. I'm going to give you an example, Tesla is a manifestation of Elon Musk. So, if the CEO is an introvert, doesn't want to do any videos, doesn't want to post, doesn't want to get on LinkedIn or all the other social medias, whatever social media channels appropriate for them.
It's going to be a very difficult time to tell that story. And we say, look, you look at every movie today and the most successful movies, follow a template. That's the hero's journey. And if you're not willing to share that hero's journey on social media, to everybody out there, it's going to be very difficult for people to follow your story and want to invest because they got to know who you are.
They got to like you, they got to trust you before they're going to invest in you. It's back to that attractive character that people follow people they like trust and know. People love Elon, he's out there. He tweets all the time. He does interviews.
He's out there all the time. And sometimes he's out there doing weird stuff like selling flame throwers or tunnels. When he's behind there and says, look, I'm going to write my comp plan based upon the value of the equity of my stock.
And if I increased that stock, I win, but I don't win if I don't do it. So, the CEO has got to be out there. The manifestation of his company has to be a direct reflection of that CEO.
Jeffrey Feldberg: [00:09:29] And for listeners was really interesting here. And I don't care if you're thinking about going public. If you're thinking about just having a more traditional liquidity event and having an investor, come in and buy you outright, whatever it is. What's interesting Jon are two things. Number one at Deep Wealth are step number two, we call it X-Factors that insanely increased the value of your business or your enterprise value.
And one X-Factor that's often overlooked is your management team. So, for starters, your business better be running without you. So, in Jon's case, Jon brings up a really good point. If you think you're going to be a public company while you need to have a management team and a CEO in this case who has that kind of personality.
Who's a magnet for media and can get that kind of attention. And if it's going to be a different kind of outlet while you have the opportunity to prepare and you can choose the kind of management team and who's on the team to do that. But Jon, the second thing that you mentioned, and I think it's so crucial for any kind of liquidity event, whether you're going public, whether you're going to be purchased by private equity or a strategic buyer, anything in between, and that's step number three of our nine-step roadmap, your future buyer.
What's your story? Why you? Why should someone take their hard-earned money and put it and invest it into your company over all the other choices that are there? Jon let's talk about the narrative or the story. What would be the elements of a narrative in your experience that work really well to get the kind of attention and traction that wins the day?
Jon Stoddard: [00:11:05] There's a number of stories you can tell, but the one we always start off with is the hero's journey. And if you don't know what the hero's journey is, go read Joseph Campbell's book. Hero With the Thousand Faces. And basically, George Lucas used his book to redo Star Wars.
And that's the basis of how Star Wars became so successful. And you look at any movie template today. It's based upon the hero's journey. Where you got to character then. Lost, not going anywhere. He meets somebody that becomes his Obi-Wan Kenobi. He goes through this process of learning.
He fails, he meets his enemy and then he finds a solution way through and he's forever changed and he builds his business and helps customers though. We always look for that and tell that story in what you're trying to do, because the other side, if you're watching the movie and you don't follow some kind of template or your business story, doesn't follow some kind of template.
It's disjointed. And it's out of place and investors just don't follow it as easily. So, that's what we look for. But there are other stories we look for customer testimonials story, came back from tragedy story, whether it's to five business losses in a row we look for all those three.
Jeffrey Feldberg: [00:12:21] Jon what's interesting, and what you said is so true, given the choice, people prefer to do business with friends as opposed to strangers. And so, you have a terrific story. Well, now they are getting to know you, they can relate to you. They can empathize with you. And one of the things that we talk a lot about at Deep Wealth in your liquidity event, be vulnerable.
Talk about, hey, this is where we really messed up. And here's why, but here's how it can be made even better with your expertise or your capital or your talent. People want to hear that people want to see that and know who they're dealing with and what that's going to be all about.
So, Jon let's now switch gears and this would be step number three of the nine-step roadmap and Deep Wealth.
And as I like to say, if you want to see a grown adult cry, you mention these two words due diligence. It's always easy to talk about companies that just hit it out of the park. Let's talk about though, the flip side of that. What have you seen Jon, where companies have just fallen down because they didn't do enough due diligence on themselves before looking to have in your case, go public in their liquidity event?
Jon Stoddard: [00:13:27] I got a partner and my partner runs an eight-figure business in the dating space. He's a kind of a lower end of the Match.com and he does courses. He's got a marketplace. Does everything. I found a business that was a Clubhouse for dating. It had 8 million downloads. We got into the due diligence of it.
First of all, my partner loved it. And we looked at it, he goes, oh, 8 million downloads. That's great. Oh, it's in the dating space. That's great. And it's Clubhouse because that's the craze right now. Everything looked good. So, it's the due diligence. Two things. He's losing a ton of cash like $60,000 a month.
And he's only making about $5,000. He tried to monetize it and lost thousands of users. Probably has down to maybe 3,500 people that actually want it. So, the cash flow was ugly. We're not going to bring that on and just be responsible for that. And then he tells us the technology that allows the audio, that in-between technology is owned by a Chinese company. And Clubhouse pays for that too. They pay $2 to $5 million a month for this technology. And he said, look, we had to use it. Clubhouse was using it, but we want to go around it and build our own. Okay. So, you're trying to sell us a technology that you're not even going to use in the next version of what you're working on?
So, that's the second thing. The third thing is that he tells us we're going to be running out of cash by the end of the month, probably. And we haven't told her about stirs and I go, you haven't told your investors that you're running out of cash? Look I said, you should have told your investors, you keep them updated about what's happening.
And they could have helped you. They could've said, hey, either this we need to pivot, or we need to find a bigger player or something. This is going to look ugly. So, we ended up passing on that deal, even though. originally, initially, all of the information looked right, exactly what he was looking for.
So, due diligence killed it.
Jeffrey Feldberg: [00:15:27] And just what a horror story step after step after step of what you're sharing of what not to do. Jon, let's flip that for a moment. And if you look back at your success stories with businesses that you've either taken public or possibly acquired along the way, what worked for you as a buyer in terms of the due diligence and the preparation ahead of time that those companies did so that our listeners can say, oh, okay if Jon is saying that this worked for him as an acquirer, let me build that into my best practices to do the same things. What would be some tips or strategies that you can suggest?
Jon Stoddard: [00:16:06] Yeah, I got to tell you. I'm, I'll give you the most recent one. It all came down to the people in the individual behind it. The CEO we're working with at a healthcare company that just up-listed to NASDAQ. Ethical guy patient guy serious guy and ambitious person, all of those looking together.
And he said, look, this is what I want to do I want to, build a billion-dollar company. And then he executed on it. He said, look, we're going to do this and this time, and then we're going to uplift. And then we're going to acquire this and we're going to do this and this. And you could see the traction from these accretive actions he's taken.
I say, okay, that's proof right there. And then just getting to know where he wanted to go, how we could help him. So, I knew of another piece of technology that was mostly face-to-face clinics. And I have another business partner for another business that I work with has got a telemedicine solution for that industry.
And it's not just a Skype app. It's a little bit more that with the blockchain effect. So, we put this technology in front of him and he loved it. Because of where it sat. We basically delivered it on a platter for him and we've got an LOI and a term sheet on the table for that piece of technology.
Getting to know the CEO and where they're going, the character of them and asking questions like, what are you looking for? How can we help? And be of service to him and understanding exactly what he needs to accomplish that goal. Because he goes, I'm not going to even get involved in running the business.
He's the who, not the how. And once we knew that we could deliver something to him, so that's an example.
Jeffrey Feldberg: [00:17:43] And what a terrific story. And it really highlights a lot of points. And for business owners that are looking at having a liquidity event and Jon, here's the question for you. Because an acquirer is going to be looking at who's the founder or the business owner? Got it. Who are the members of the management team and what are they like?
And I suspect that most business owners before they go to a liquidity event, they're not doing background checks on their people. And one of the things that you're doing in due diligence on the financial side, you're finding those skeletons in the closet. But what about on your executive leadership side?
What are the backgrounds of the people or the skeletons in the closet there that you don't know that you need to know about? And Jon, I would love to hear your thoughts or any stories on how a potential deal may have blown up because nobody did background checks on the management team, and some interesting facts came up during your diligence.
Jon Stoddard: [00:18:38] Yeah. Working on a deal where the CEO was the Wall Street guy and didn't have any background information. You could type his name in you look for search from him. And there's not a lot of information about him. He's either an introvert or he's in the mob and doesn't want people to know who he is, right. Change his name or something. So, you have to look at that, both backgrounds and, and we dug into his background a lot more and find out, he's just more of an internet guy just put systems in place and people underneath them in place to be able to do it.
He wasn't the other guy, which was, just humorous, but you have to look it's both sides. Cause if you don't know, you're going to have to guess both ways.
Jeffrey Feldberg: [00:19:16] And so for our listeners out there the takeaway is transparency. And I've said it before. I'll say it again. The currency in mergers and acquisitions isn't money. It's trust. So, in Jon's case, you need to earn the trust of Jon. You say what you do, you do what you say. You demonstrate that all the way throughout the liquidity event.
And now you have a raving fan in terms of your future buyer or acquirer. So, Jon let's circle back. Let's talk about another X-Factor. I would love your thoughts on this and to share some insights with our listeners. Culture is such an important part for a business. Money can buy a lot of things with money; you can copy technology of the competition.
You can take other people away from the competition to come to you. And your competition can do that to you, but money can't copy someone else's culture. So, I'm curious as someone who's on the other side of the table, when you're looking at companies in terms of, do I take them on, am I going to help them?
Am I'm going to get them across the finish line for their liquidity event? How do you view culture and what kind of role does culture play in your thought process?
Jon Stoddard: [00:20:23] Yeah. And I'm not referring to culture when I speak of it, it's like joining a company and being on the org chart. I'm just talking about doing deals with people that are in the network that we need to know whether it's the capital or the services or IP or whatever it is. An example of this is I got a guy on the phone the other day and just had a conversation with him. He has some capital and some great sources, but he was a taker. He was just like he disparaged the guy that I am in a mastermind with. And I said why would you do that? I am in a mastermind with this guy. I follow this guy. And I've done deals with this guy. Why would you disparage him? It's a really clear indication that you and I aren't going to be doing business.
And I'm 59. I'm too old for that stuff. It's just not money. It's people you want to work with and like working with, and enjoy and have fun working with.
Jeffrey Feldberg: [00:22:14] We do business with people, not with companies and who you are, what you do and what you say or what you don't say can make a difference. Jon, why don't you walk our listeners through this? So, a business owner decides yes, for my liquidity event, I want to go public.
What would be the advantages that you're seeing of going public and contrast that to what we were speaking about earlier of the more traditional route where you're going to have perhaps a strategic company come in and buy you, or you're going to have a financial come in or perhaps private equity. Why would somebody go public?
When does that make sense for what you're doing?
Jon Stoddard: [00:21:51] The big criteria we look for in an individual is if they want to go public, a lot of people do it for ego reasons. You know, I had a guy who did a little bit of work with a while ago and he had a goal of saying, hey, I want to go public. I've done it on OTC. I've done it on NASDAQ. And I'd done a New York Stock Exchange.
I just, I like doing that. Somebody that wants to go public and doesn't mind being in front and center telling their story, sharing, being vulnerable, their ups, their downs, their successes or failures. We kind of look for that area there, but usually, the case is that the CEO has other investors involved, or they have employees that have been with them for a while and they love their employees and they want their employees to have liquidity.
Not just the paycheck, but an ability to sell their stock. If they want to go on vacation, their daughter has some kind of school or whatever the reason they give them an option to say, hey, you can sell your shares if you want to. It's, $5 a share now, but it hit $25 because we do this. Fine. They want that liquidity, but it also, the CEOs ambitious.
They want to raise capital from investors, especially with the Reg A. And they see a bigger future. There may be in a $5 million company or 10 or 15, and they want to be a $50 million company. They've been working with one of their suppliers or vendors in their ecosystem and said look, I'd like to buy that company and become that $50 or a $100 million company.
Jeffrey Feldberg: [00:23:21] And Jon for the benefit of our listeners who may not be familiar with your world, when you talk about Reg A, what does that mean for someone listening and what's a Reg A. Yeah. I'm sure some of our listeners are saying, okay. Yeah. I've heard about a liquidity event. I've heard about going public, but you mentioned Reg A.
What is that for our listeners?
Jon Stoddard: [00:23:38] Yeah, that's crowdfunding it was based upon the Crowdfunding Jobs Act about four or five years ago in the Obama administration. But a Reg A tier two is you could do larger raises up to $75 million. You could take them public essentially and sell to accredited and non-accredited investors.
So, it's a nice vehicle where you can raise capital. We mostly deal with publicly traded companies. And the option is with a Reg A is you could sell directly from your website. They say if you had a website and you could have an invest now button right at the top. And when somebody comes in like a family office or retail investor, or somebody purchased from you, that working capital goes right into your business.
They could also buy in the open market. But that money doesn't go to your bank account. A Reg A goes to your bank account and you could use it for anything. Inventory, acquiring a company, hiring people, all of that. We like that because again, back to the social media. If people love your product, you're doing great things.
You got a big list and you've got a good social media presence out there. You can get people to invest. People are investing millions of dollars in these crowdfunding platforms, even the Indiegogo and Kickstarter platforms where it's basically a donation. It's so easy to get in front of people today with that social media.
Jeffrey Feldberg: [00:25:04] It's incredible what social media and the internet has done. Now, I would imagine that our listeners are asking themselves, okay. If I go public what does that mean for me as a business? How do I have to change? Because I'm sure there's all kinds of regulations that would govern what I can and can't do.
So, what would be different Jon for a public company versus a private company?
Jon Stoddard: [00:25:26] Yeah. And let's just talk about the OTC markets. You got to meet compliance with the SEC and FINRA. There's a lot of what you can say and can't say, but you can look that up on the SEC markets. If you went public on, let's say the OTC market. It's not very expensive in the big picture.
Let's say you need an SEC attorney and spending $55,000 or on the Reg A, tier two, you need PCOAB audits from an accountant CPA. And that could be anywhere from $40 to $50,000. If you started listing on the OTC markets, the admin fee is $2,500 and maybe it's like $12,000 a month. But one of the most important parts is marketing. That's investor relations and telling your story and having people focused getting brand awareness for your equity, your stock, .Your product is your company and what you're doing and your that manifestation of that company. So, you got to keep access to that. So, you're going to spend like an IR anywhere from $15K to $25K a month.
If you're moving up to NASDAQ, we're $4 a share there's minimum enterprise-level requirements of what your value of your business is worth. Your assets. And stay in public is usually pretty expensive anywhere from $200 to $500,000 a year. You need some momentum with your business, $5 million or more, profitable accretive actions happening all the time.
Because you can't make up stuff. You got to be true. If you're going to acquire a company, you can turn that 8K into a press release. And that gets noticed by investors. But you have to keep that up. Hiring, profits, quarterly reports. All of that information. That's a lot different than staying private.
Some people like that, some people don't.
Jeffrey Feldberg: [00:27:12] And it sounds like Jon between let's say an OTC or an over-the-counter and then to something like the NASDAQ, where does an OTC stop? So, at what dollar value would an OTC cover from one penny up until what dollar amounts?
Jon Stoddard: [00:27:30] Yeah. If you're over $4 a share and you have $5 in assets, you're qualified for NASDAQ. You have to be ready to do that. Meaning, you're seeing major organic growth or you're seeing growth through M&A and you're going into the investment bank world and institutional investor.
So, it's going to be more expensive, but you have more eyeballs with the NASDAQ world. A lot of companies that stay on the OTC market that are doing $25 to $50 million. The yearly admin fees are a lot less than it would be up in NASDAQ. So, it's up to the CEO and the board whether they go up or not.
Jeffrey Feldberg: [00:28:07] And what's interesting and I'm wondering if this is exclusive to the OTC market or not. When you talked about the Reg A, and this is where someone can come in and buy shares in the company, but pay the company directly. So, there's no middle person. It's going directly to the business. Is that something exclusive to the OTC or would that be in other public markets?
Jon Stoddard: [00:28:28] The Reg A has not gained a foothold in NASDAQ because the Reg A bypasses the investment that traditional route. So, it's not really gaining a foothold in the NASDAQ, New York stock exchange markets.
Jeffrey Feldberg: [00:28:42] Fair enough. And so let's circle back. Now, let's talk about what is often talked about with public companies, the word accretive and this is where, because you're public where $1 doesn't equal $1. You can have that $1 turned into many dollars because I'm sure listeners are saying wait a minute.
If you're saying it's costing up to half a million dollars a year to pick a number year over year to be public. Why would I want to do that? What am I going to get as a public company that I can't get as a private company?
Jon Stoddard: [00:29:13] Yeah. So, the public company, it's all about the liquidity. There's a premium associated with the ability to buy a stock and sell it the next day. That could be 20% to 30% more value to your company having that liquidity. If you look at GameStop where it was, five, $15 a share, and then the story got out on the Reddit channels and it went up to $25 a share, but that's the liquidity somebody got in, somebody got out. Some of our funds that come in after you're public and you have trading volume are transactional funds, meaning they'll buy into the Reg A at the share price that you set for your company. And then if the IR team is doing the job right, and your stock goes up to $4, they're probably selling out.
Jeffrey Feldberg: [00:30:05] So, it's interesting. It's a whole different ecosystem compared to keeping a company private and having a more traditional kind of liquidity event. Jon, with your company, you're doing a few different things at once. So, you're helping companies go public and taking care of all the details that go there.
But I also know that you're out there and you're finding investors and putting together investor pools. So, for business owners out there that are maybe thinking gee, I didn't really realize that I could go public. I don't know how to do that, but somebody like Jon could help me. What does that mean, Jon, of working with someone like yourself, where you have both investors and you have the experience to take somebody public, what does that look like? For me as a business?
Jon Stoddard: [00:30:49] Yeah. It comes back down to let's say if you want to go public and then you can spend a year trying to figure out how to do it yourself. You have the how to do it. When you're in this area, it's the who that you need to do it. So, we're the who, and we have a deal team six in place.
From an M&A attorney and SEC attorneys for your 1A, that's a tier two. We have funds in place on the front end. That's if you need to do acquisitions. We have funds after you go public and you have trading volume.
That's a private equity firm with the transactional. And we have CPAs that there are PCOAB compliant. They can do your audits to get you publicly traded. And then the marketing team, we help with that. So, that's our deal team six. And we come in and partner with you. So, when we look at a company we say, hey, look, we're driving along with this big farm we see. We go up to the farmer and we say, Hey, we heard you have a 67 Corvette in your barn. And it hasn't been touched in 50 years. We can do this, and this and rehab it. And at the end of it, it's going to be worth $115,000 fair market value.
And here's how we're going to help to get you there. And we'll take a piece of it and they say yes or no.
Jeffrey Feldberg: [00:32:06] And for our listeners, here's what I want you to keep in mind. And this is what I love about the word liquidity event. Whether you're the quiddity event is going public and Jon can help you do that. And he has a lot to say about that today. Whether it's going more of a traditional route, maybe it's raising capital, maybe it's taking some chips off the table, or maybe you just want a full exit.
The one thing that they all have in common is you absolutely have to prepare. And when you're prepared and you go through the nine-step roadmap at Deep Wealth, as an example, you go through the preparation, and then you show up to Jon. Well, now you have your management team in place and you have the right CEO who can speak to the public markets.
And who's going to be a media magnet. You've done the background checks on your team. You have your narrative down; you have the hero's journey in terms of your story. When you've done all of those things, Jon is someone who takes people out to market. Maybe you can share with our audience why it's so much easier for you and why the enterprise value increases when a business owner takes the time, spends a little bit of money to get the preparation done in advance of working with you.
Jon Stoddard: [00:33:14] We go back to the value or the premium on public companies. It's probably 20% to 30% more. Say you're doing $15 million, and you want to purchase a company doing $10 million and really profitable. It's got a high, multiple and they're asking, a lot of money for it. Let's say a 15 multiple because it's a SAAS company. They're probably going to ask for cash for it. And that's something we can help with, but because you have a premium because you're public and because you have liquidity, you use the stock for currency.
It's an incredible cachet when you're coming to a business and you can offer stock, you can offer a premium because usually, you'll see these companies about twenty-five million dollars a year in revenue. They'll have a hundred million shares out, and you could use that as currency to purchase companies.
Jeffrey Feldberg: [00:33:58] And Jon so true when you're public, one of the advantages of being public. If you want to hire top talent now you have some stock that you can offer that actually has value today. Somebody doesn't have to wait a year or five years or 10 years. If you want to buy another company there again, you can use your stock and not have to pay all the upfront cash to do that.
So, many advantages when you're public and you have publicly traded stocks that you can use as leverage to help supplement whatever the kind of deal is that you're going to be looking to do.
So, Jon, as we begin to wrap things up here on the interview and you take a look at where things are today and where the public markets are going. For a business owner, who's on the fence of well, you know, do I go public or do I do more of a traditional kind of liquidity event?
What would be some words to the wise?
Jon Stoddard: [00:34:46] You got to be really sure that you want to go public. And that you're that individual that, doesn't mind being out and vulnerable in the public eye. Because people are going to ask you questions like, you know, where did you fail? And you've got to be constant.
There's a lot of cash available out there to going public. There's a lot of resources out there. Money loves momentum. So, if you're out there, you've got to be thinking about how to grow fast. And let's say, you're going to be on the plan for the next five years. How do you take a 20-year plan and put it into five years, through acquisitions or organic growth?
Look at Jon Chambers over at Cisco. How many acquisitions has he done to get the value of his company? I think it's over a hundred. So, that's how he grew. That's what we look for in a public company. Momentum profitability, making acquisitions, telling a story, and having fun.
Jeffrey Feldberg: [00:35:42] Yes, the F word, having fun. How often we tend to overlook that. and when you're having fun the better off for everyone who's doing that.
Jon Stoddard: [00:35:50] Yeah. You get so much better relationships if you've set the attitude and the template for you know, look, this is what I want to do in the next three to five years, and I want to have fun doing it. And I can only work with people that I like, trust, and admire
Jeffrey Feldberg: [00:36:05] Absolutely. Love it. Now, speaking of fun, I'm going to have a little bit of fun together with you, Jon, for the last question. And this is the question I'd like to ask every single guest on the Sell My Business Podcast.
So, Jon, think back to the movie, Back to the Future. And in the movie, you have the DeLorean car, which can go back to any point in time.
I want you to imagine it's tomorrow morning, you wake up, you look outside your window. Lo and behold, it's the DeLorean car. The door is open. It's waiting for you to go into it. So, you go into the DeLorean car and Jon, you can go back to any point in your life. Maybe it's when you're a child or a teenager or a young adult, whatever, wherever but you're going to go back in time and you're going to give yourself some life advice, words of wisdom, lessons learned, whatever you choose it to be.
What are you telling your younger self?
Jon Stoddard: [00:36:57] Drop the ego. Whatever that was just drop it and serve others. I was in the air force for a while and I do remember writing a paper before I left the service and went to college. And I wrote a paper. we're talking about 1977 and said, hey, I think computers, technology is going to be the future. Drop the ego and serve others. Ask how you can help others sooner rather than later, instead be a giver, not a taker. If I were to follow that advice and heard that advice and just incorporate it. But I'd probably be a lot further up further than I am.
Jeffrey Feldberg: [00:37:33] Terrific life advice and words of wisdom. I love it. A life of service, be a giver, not a taker. And so Jon, the last question here for our audience that would like to find you online, where would be the best place someone can find you online?
Jon Stoddard: [00:37:49] Yeah, just go to LinkedIn. I'm there. I do a lot of business there. I've got a lot of connections. It’s Jon, Jon Stoddard, S T O D A R D. Just look me up say, hey, you heard me on Jeffrey's podcast and we’ll connect.
Jeffrey Feldberg: [00:38:01] Terrific. And for our listeners, I will put all that information to make it easy for you in the show notes when you come to the Deep Wealth website.
Jon, thank you, so much for taking time out of your day to share your insights and your wisdom with the Sell My Business community.
Really appreciate that. And as always, as we head out of this podcast interview, please stay healthy and safe.
Jon Stoddard: [00:38:22] Thank you, Jeff. I really appreciate it. Really grateful for this opportunity to talk to your audience.
Jeffrey Feldberg: [00:38:26] If you're not on my email list, you'll want to be. Sign up at www.deepwealth.com/podcast. And if you enjoyed this episode of the Sell My Business podcast, please leave a review on Apple Podcasts. Reviews, help me reach new listeners, grow the show and continue to create content that you'll enjoy.
As we close out this episode, a heartfelt thank you for your time. And as always, please stay healthy and safe.