How2Exit Episode 60: Tim Mueller - Co-Founder and President of ITX.

Ronald Skelton  0:06  
Hello and welcome to the how to exit podcast where we introduce you to a world of small to medium business acquisitions and mergers. We interview business owners, industry leaders, authors, mentors and other influencers with the sole intent to share with you what it looks like to buy or sell a business. Let's get rolling.

And now a moment for our sponsors. I want to highly recommend you get acquisition Aficionado magazine. Every month acquisition Aficionado magazine brings you tactics for business buying and selling you won't find anywhere else learn firsthand from industry leaders who share their success stories featuring in depth interviews and stories from leading figures in the business acquisition industry. This multi platform mobile magazine speaks to acquisition entrepreneurs wherever they are in the journey. And I want you to visit acquisition aficionado.com today. Hello, and welcome to the how to exit podcast today. I'm here with Tim Mueller. He's the co founder and president ITX for more than 25 years and has held leadership at startups from mergers and acquisition firms to even the government. I want to thank you today for being on the show. This is kind of an exciting show for me. And we'll get to that here. And then. But thank you for being here today.

Tim Mueller  1:27  
Good to be here with Ron and big fan of your show have been watching it for a long time. And, and some of the people you've had on have been really instructional for this industry.

Ronald Skelton  1:36  
Yeah, it's been, it's been a it's been of fun ride for me, I get to, to really meet some incredible people. And today's a special show, I want to go ahead and get this out of the way because I'm, I'm a big believer in full disclosure. You and I actually have reached an agreement to where I'm going to be what you refer to as a channel partner, right?

Tim Mueller  1:53  
Yeah, that's right, we, we look at the audience that you have in how to exit and understand that there's a lot of people out there that are contemplating the sale their company. So it's good to partner with you right now and offer this m&a service through ITX, which, you know, really specializes in kind of this small mid market technology space. And we could talk more about that. But we're really excited to, to partner with you.

Ronald Skelton  2:19  
I'm excited. Let's just jump right into that. What is ITX? And, and what do you guys do?

Tim Mueller  2:24  
Yeah Ron, Well, you know, we were founded 25 years ago. So this is our 25th anniversary, have completed over 225 technology deals, and we only focus in on the IT sector, those deals are typically less than 30 million in transaction value. So not to be confused with companies that are under 30 million in revenue. Because you know, we have sold $200 million companies that might be more hardware sales that will sell for less than 30 million, but we really specialize in that smaller bid market space. And we could probably say that we've done and are doing more deals in this space than anybody on the globe. And our specialties really go into cybersecurity, managed security's managed services programs, as well as vendor relationships, Microsoft, Oracle, Salesforce, ServiceNow. And these are typically integration firms that take either pre existing software and integrate it, or they might be companies that are software as a service that have launched and, and are very viable, growing businesses that are, are seeking to exit.

Ronald Skelton  3:36  
That's awesome. And let's talk a little bit about kind of what is that going to look like? I know we're talking about this mergers and acquisitions marketplace. And, and we're going to tie that into how to exit so people that listen to the show can enter into the mergers and acquisitions marketplace. How does that what is that going to look like?

Tim Mueller  3:52  
Yeah, so we know that you know how to exit has 1000s of followers and 1000s of viewers every single week, when you put out these podcasts, and so many of them, and, and we look at those that might be baby boomers that are you know, over 60, 65 that want to move on with their life, and they may not have a management team to buy them out. Or they may not have children that would want to take over the business. So their only option is to sell. There are a big part of our market right now that are looking at or maybe preparing to sell. There may be also folks that are in their 40s or 50s that have built a strong IT company that say I'd like to do something else. I'm a serial entrepreneur, and maybe it's time for me to sell and move on. And there are some that are you know, software developers who thought it'd be really kind of cool to develop a business and then all of a sudden they say, Gosh HR, taxes. I don't think I want to do that. But I think there's value to the business. And so I'd like to sell it and maybe join the acquiring company and maybe have a prominent place in their family photo of their business. And so if any of those are looking to or planning to sell, they would then enter the how to exit IT m&a marketplace, and then our professionals will coach them create all the materials. And then we tap into our database, which, you know, over the last 25 years has grown to more than 50,000 buyers globally. And those buyers are either private equity firms, they could be strategic buyers. So a larger business that looks like that client, but just are making acquisitions, could be family offices, or what we call search funds, which we could talk about a little bit later, they're become a lot more common in today's m&a space.

Ronald Skelton  5:44  
Let's talk about like, a lot of these guys that are thinking about selling, they just went through a heck of a ride. And it's not quite over yet the whole COVID thing and how it impacted the marketplace and stuff. What do you see? What did that do to the m&a sector specifically to IT and stuff?

Tim Mueller  6:00  
You know, that, that's a great question. And really a good way to start off this discussion. Because there was a combination of uncertainty, that all of a sudden flipped and became opportunity. And, and so without disparaging and all the people that got sick and lost loved ones and everything, that was a real issue that our, our whole world has dealt with, from the M&A space, you know, March of 2020, we're all livid on pins and needles to say what is going to happen here, a lot of our counterparts in industry, we're all talking about furloughs and what's going to happen. And somewhere in that mid part, June of 2020, it felt like a switch just flipped. And all of a sudden, private equity firms that were sitting on funds have hundreds of millions of dollars. And we all know through your previous webcasts that you know, the full time job of these private equity firms is to deploy money, that's what they're hired to do. And then three to five years later, or so they're looking for an exit. Well, instead of just waiting and worrying about businesses, perhaps going backwards or down, they have decided to buy their way out of it. And so we saw this trajectory up into the right, with a record year, two years in a row of acquisitions. And I think what we really saw in the IT space is that digital transformation as a movement is not taking a breather, because it can't, the way that businesses moving along and accelerating today, they have to continue on with digital transformation. And all of a sudden, you blink, and now you have a whole workforce that are working remotely. Well, what does that do, it creates opportunities for the bad guys to try to come in with cybersecurity issues. So now you're doubling down to make sure that that remote workforce is safe and secure. And so companies like these managed service providers that essentially have these IT workers that then you know, on a, on a kind of fractional basis come on to your staff to run your IT department that all of a sudden starts blowing up in a good way. And then cybersecurity has never been hotter, particularly in these last couple years. And so as a result, private equity firms and then the pressure that the strategics have now, now remember, a lot of these strategic buyers have boards of directors, shareholders that are putting great pressure on growing more than 10% per annum. And the only way to ensure that you can grow beyond 10% and 15% is through acquisitions. So inorganic growth, and so we see that pressure coming on, so they bellied up to the bar as well. And then they started making acquisitions at a torrid pace. Remember, too, that interest rates went down, the Fed really kind of cooperated with our industry. And they brought interest rates down to record levels. You know, when, when you and I grew up, our parents had mortgage rates that were 10, 12, even as high as 17%. And the idea of being double digits, let alone in the one and a half 2% range is just almost unheard of. Well, that helped M&A because you're now allowed able to then layer in debt financing with equity financing and cash. And that all of a sudden was that perfect storm to, to really allow this area of the last two years during COVID. To your question to, to be pretty frothy.

Ronald Skelton  9:34  
So how do you think the interest rates going up right now are going to impact out I mean, they're still comparative to the history. They're still pretty cheap money, but put in perspective or in person? That's the word I'm looking for, in relation to what they've been in the last 12 months or the last 18 months? There's that sense that's gonna go up and it's impact purchasing powers. What do you see that that's going to do to this whole space?

Tim Mueller  9:58  
Well, you know, there are a couple Fed things that happen. So the Fed is trying to control inflation. So they're been ratcheting up interest rates. And you know, a couple of things could happen, buyers can look at that and say, we don't have as much access to capital. So does that cool off M&A a little bit. So perhaps we'll start offering lower valuations for people if things going to cool off. And if there are less buyers out there, then the sellers will not be able to enjoy as high evaluation as they have, since roughly 2013, or 14. And let me take a sidebar here for a moment is that, you know, as you might imagine, we track all valuations in this space pretty closely. And coming out of the housing and banking crisis of 2010, 11. And after, when everybody kind of shook off their hangover, we saw the valuation start to climb. And they climbed all the way till about 2018, where they leveled off for the IT industry. And that's where they didn't really move down or up since 2018. So roughly four years of maintaining nearly record valuations. And so that was really good for the sellers, buyers knew that they could have some kind of incremental value in it even with the higher valuations. So here comes now these higher interest rates, you had mentioned in astutely that these are not extraordinary interest rates comparatively. But when you get used to something being so cheap and easy, it becomes a little bit more difficult. So the real buyers, the professional buyers, will, will look at it and say you know what, instead of doing it a lot with that with, with interest, debt to layer in there, we'll just layer in more cash and maybe use equity where, where the cash may not work. And so instead of a three pronged attack of cash equity and debt, debt might pay play a little bit more of a backseat role, and will do more cash and more, more, more equity. So we, we have not felt a slowdown, there are consumer goods and things like that those retail, those have seen a little bit of a chilling and m&a. But again, because of this digital transformation, and what you and I are doing with this marketplace, now we see that particularly these smaller mid market companies continuing to move right through it, are they inflation proof, no, none of it is bulletproof. But a lot of these folks really are in a situation where they really have wanted to sell or need to sell. And so we see that pace continuing pretty strongly.

Ronald Skelton  12:39  
So you say smaller to mid market, we're looking at like 1 million revenue to 30 million, what's the range we're talking about?

Tim Mueller  12:45  
Yeah,

you know, the smaller guys might be three to 5 million in revenue. So it's it they've got some wind in their back, they're not early stage any longer. And, and truthfully, there are a lot of these guys that, you know, started their companies 20, 25 years ago, and they're billing four or 5 million a year, maybe they're pulling in a half million in salary, total compensation, and living a great life. Those are lifestyle businesses. And those really, truthfully make up a majority of this industry of guys that didn't want to be 100 million or go public. And they have a good lifestyle. They're not working 90 hours a week and having heart attacks or dying at their desks. And, and so it's time for them to unlock the value. Because like a lot of the other guests that you've had on the show that I've seen, you know, they recognize that most of the net worth of these small mid market guys are tied up in their business. So while they've made a good living and put kids through college and bought a home and maybe a summer home, their, their net worth any kind of wealth vacant crate is really tied into unlocking these businesses. And that's where we come in, we, we help them unlock that. And in allow them to either move on to another venture, we've had some guy last week sent me a shot of a nice Manhattan drink on the railing of his back porch looking over a golf course with water in front of it. And all we did was say thank you. And for us, you know, can people look at m&a and say there's anything altruistic in m&a? I, I tend to believe as you know, as an operator for 25 years, I've walked in their shoes, and to take the weight off their shoulders and put that money in the bank. And now in some ways, they become even more valuable as a consultant or advisor than they ever have been. But also be able to quit at four o'clock and go on the links or play tennis. There is some altruism there that I feel is really good, particularly with the smaller owner operators. So three to 5 million, maybe as high as 30 or 40 million in most cases are what we consider those smaller mid market.

Ronald Skelton  14:52  
You know, one of the reasons I said yes to working with you guys is you're not just your standard broker, right you're more of an advisory, there's a role you're playing in successfully making sure this happens. Can you go through a little bit of that for me, like, if somebody comes to us, they put their, their information inside of the marketplace, and they would want some help selling their IT services company or their software as a service company or whatever. And what's what does that look like? What's the next step? they get contacted by you or

Tim Mueller  15:22  
so I think the story the, the true strength of ours, because a lot of these guys like us, we all look the same. And when a deal process starts to take a life of its own, you know, the truth is the buyer starts getting in control of the process, they determine the pace of the due diligence and when they get to the final purchase agreement and such. But the strength of ITX is truly in the network that we've built of buyers. These are personal relationships with 1000s of buyers that we've done deals with over the last couple of decades. And we know they're hotspots. A while ago, we hired a data scientist that took our database, and truly segmented it to be pinpoint accurate. So if we're selling a Microsoft integrator, there are lots of flavors of Microsoft integrators, you know, some are just specializing in integrating Microsoft Teams, some are just doing their accounting ERP. Some might be in what they call Business Central that for a lot of small businesses. So we segment all of our Microsoft buyers by exactly what they're looking for. And that's just talking with him on the phone, getting an idea of their profile, they send us a lot of information to say, going into 2022. Here are our investment imperatives. Here's our thesis for investing, we take that and we keep integrating that into our database of buyers. So when we talk about the advantage that you and I agreed on and going after this marketplace, first and foremost, we're a matchmaker, where we tap into that, that database. Secondly, we really try to make things simple with the marketing materials that we create. For every one of our clients, we do this expanded infographic. So that when buyers look at it, you know, we've, we've surveyed the buyers, to look at a 40 page confidential information memorandum, otherwise known as a sim, a lot of these guys are saying, You know what, it's repetitive, we don't have time to read it. In order to make something seductive for us, we want a quick hit. So we create this infographic that has all the real major elements of the seller on there as a profile. And then once they do express interest, our team goes in, we filter that interest in any one deal, because our large database database is so large, we may get as many as 40 buyers interested in one of our assets. And so we want to make sure that we can call that list down to 15, maybe 18 or so buyers that we think are best qualified for it. And then we do NDAs to keep everything confidential. And then we start introducing people all along the way we're coaching these guys, because most of them, most of them are neophytes, they've never sold a business before. And so you know, someone that's going to have a baby for the first time. It's not against them that they haven't had a baby before, but they've never experienced it. So they go through classes, and they try to read and everything else. And then they get a doctor to give them coaching along the way. And that's what we're doing. We're coaching them, holding their hands, trying to make sure that you know, they're asking the right questions, but more so that they're prepared with the answers. Again, if you've never gone through before, you don't know how deep the, the questions are going to be. And sometimes the more sophisticated buyers will do a, a video call like this and get into it for half hour. And if they're not, the sellers are not prepared with those answers. The buyers will go you know what, not sophisticated enough. I'm out. So

Ronald Skelton  18:57  
right

Tim Mueller  18:57  
we go through all the questions of the usual suspected questions. So they're prepared and have cliffnotes for those calls.

Ronald Skelton  19:06  
You go out if you if you've never interviewed before you'll, you'll go out you'll interview a two or three and then you'll learn the answers all the questions they asked him then you'll get your fourth or fifth job when you really want a job number one because you took that interview right? So why burn the, the ideal strategic buyer who would pay more, you know, for the company while you're still learning so I love that you guys are are setting them up for success. So let's talk about

Tim Mueller  19:29  
first impressions are great. But um, one point I want to add is that there's also a strategy behind not pouring all of the information to the buyer. In many cases, your best buyers your biggest competitor. And so our belief in our philosophy is that the buyers need to earn the right to get more information, meaning we want to show a commitment we want to show genuine interest from the buyer. Before you start opening your books up and showing everything about your strategy. Your customer base, your employee certifications. And so the more time that the buyer spends and truly digs in, and we have a little, we have a little bit of a gauge to say, are they acting like a buyer. And if they are truly acting like a buyer, then they're going to earn the right to get more information as you go along. And that might take a couple of longer calls. You know, are they willing to get on a plane now with the ability to travel more? And are they willing to go into the city and sit down and, and, and talk over dinner and then spend another day digging into the business? Or are they just going to put a couple of animals Senate and dig through the information and say, you know, what, we're not interested. But all of a sudden, they've got now a little bit of your secret sauce. And we want to safeguard from that.

Ronald Skelton  20:46  
And it's very competitive in the tech space. I remember I came from the tech space, you probably already knew that. But I remember like having to get on to I was at the senior director level, by the end of it, I had to get on to some of my managers, because they were solving problems through interviews, they would have a problem they're trying to solve either, you know, software or you know engineering or whatever. Systems Administration or they'd interview five or six lead guys top guys and say, if you had this problem, drop it all on the board. What would you do with no intention of ever hired Like, that's, that's not okay, stop that. But uh, you know, they were getting consulting through interviewing, some of that's going on inside of the mergers and acquisitions space, a lot of these guys are saying they're looking for acquiring something, but they're just want to see how you did what you did, because they want to take it and use it. So I can see the importance of making sure the buyers really legitimate buyer looking to looking to do something before you do that. So I love, I love that, you know, earning the right to see the next bit of information. Plus, there's a report that needs to happen. I've seen way too many deals already. You know, just in a couple of years, I've been doing this where we jump into deal negotiations, who soon before there was trust, and it makes it almost impossible to get to the other end. Right. There's no report, we haven't had enough conversations and know whether or not even think you're confident enough to run the business. Rather, let alone you know, why, why are we sharing this information with them? Are they legitimate buyer? So I, I can see that? Are there any other trends going on in the in the IT space or anything like that impacting, impacting the industry right now? Or?

Tim Mueller  22:20  
Yeah, there are. So I, I think we, we touched a little bit on software as a service, or even you know, some of the things with cybersecurity. And one of the reasons why those businesses are really held in more esteem is that they have high recurring revenue. So in most cases, cybersecurity firm pitches a company and says, hey, there are a lot of bad guys out there. And here's our 24 by 7 monitoring, and here's what we do to try to close any gaps that come in to when, when they might, you know, jump into their system. And because of that they do then 1,2,3 year contracts. And that to us is truly recurring revenue, a lot of IT companies say, oh, that client just signs up with every year, they do work with us. And that's recurring revenue. And the buyers go like on chief, you know, that's not it. That's a good solid customer. But it's not backed by an agreement. And so once you have those one to three year agreements, they're pretty tough to lose those unless you really mess up, buyers come in and say, Wow, you're mitigating a lot of our risk, if we know that we buy you. And, and let's say 80% of your business, is now backed up by recurring contracts. And we come in the chances of us a year later, or 18 months later losing all those guys. Much, much like the IT services space where it's kind of eat what you kill, you do a project and it has a finite sunset on it. 12 months, 18 months. And when that project is over, it's over. And there's no guarantee that there will be follow on work. But with the recurring revenue model, we're seeing a lot of trends where the buyers are certainly kind of pivoting over to that, because they believe that not only it mitigates their risk, but then it also shows great trust that the clients have customers clients have in that business, to say we'll give you a three year agreement. And the more those agreements are staggered, so that they're not all expiring at the same time. That also increases the value of a business when a buyer comes in. So we see that certainly as, as one of them, but the other trend is the lack of resources. You know, we see this in, in just your regular restaurants right, help wanted everywhere. Businesses are closing earlier than ever because they don't have the help to continue. Well, that shortage on steroids is happening in the IT space. And partially because we do have people that did call today and retired and they're moving on. And the younger folks have really got a, you know, a leg up right now in their negotiation. So a lot of buyers are acquiring businesses purely for the resources, the certified engineers, the developers in such that are there. And we've even seen the big dawgs Accenture, KPMG, they're really swimming downstream, where they would never touch normally a 30 or $40 million deal before because the due diligence alone was too expensive for a little company that didn't move the needle for revenue for those guys. But now, if they could swoop in and get 200 certified engineers or developers with an acquisition, and, and pay a lower amount than they're normally doing, as far as total transaction value, they're doing it. So Ron, a big side of it now are our resources that are suppliers, that automatically then get integrated into that side of it. And then another trend is, you know, a lot of the virtual companies, you know, if you asked me three to five, three or five years ago that a virtual company how they would sell, people just scratch their head and go, I'm not sure what to do with these guys. There's no brick and mortar, where do they all go to work every day, you know, there's no, there's nowhere that is called home. And so we had we struggled selling a lot of virtual it businesses in the past. But in the last two years, again, harkening back to COVID, where everybody's scattered, and a lot of them don't want to come back to work physically within brick and mortar. Now, all of a sudden, you know, talk about seductive. They're saying, Boy, we you guys have perfected how to work remotely, because you're a virtual company to begin with a lot easier to integrate those folks into now, with a very least a hybrid environment of working two to three days in the office and the other day is gone. And so the virtual business has been a trend that really has gained a lot of momentum.

Ronald Skelton  27:04  
You know, what do you see coming in the next 12, 18 months, you, you see people coming and continuing to come back to work, or you see this continuing trend to allow the remote work or whatever, what else is coming? You guys probably have a, a better finger on the market than most. So what do you see coming down the IT space in the next 12 to 18 months,

Tim Mueller  27:22  
I do think a lot of commercial real estate brokers are going to have a tough time in cities. Because in, in the last, let's say, 30 years, when you and I got out of school, and we're looking for jobs, you know, you had to physically move to that city, whether it be you know, New York, and now you're living in Hoboken, New Jersey, because you can't afford to live in New York City. And now, you know, we've seen this big push that they're calling COVID cities, personally, and, and I know that I could call myself old school on this one is that I think that has a long term negative effect on our society. Because the, the you know, my mentor always talks a lot about propinquity counts the proximity of two human beings to be in a room. And I did some experiments, because a lot of our business, a lot of our company is remote. We've got some folks living remotely and working out of Silicon Valley in New York City, Tampa, Florida. And then a majority of our staff is in Scottsdale, Arizona, or Cleveland Ohio, where I am. And I did some, some my own experiments, not scientific about the kind of dialogue you have and what things you talk about. So in the office, we talked and got deeper into some creative elements and how to grow our business. When people were working remote on Tuesday, Thursday, I would try to broach that. And it seemed almost uncomfortable to go into a brainstorming session, because they felt like they had other things on their docket they had to do and those meetings got cut really short, I flew out to Scottsdale to do the same thing with that team. We got into a conference room and literally came up with three new guiding principles for the business that we're now using to implement going forward. I then came back and tried to talk more about that with them on the screen, and it just didn't happen. So if you're in a task oriented job, yeah, remote, crank it out. If you're doing code, you want to be in the dark corner with no lights on everything else go at it. But when it comes to growth for these young professionals, interns that are working remotely and never see the office, new professionals that are being trained in a job, you know, one of my good friend's daughter has worked for salesforce.com for two years. Two weeks ago, it was the first time she ever went to a salesforce.com office in San Francisco and literally shook hands and saw people and I, I as an old school guy, I don't feel that that's really healthy for all of us. But I do to your point, see that as a trend continuing because they're able to have that quality of life and you chop out of our commute on both ends. And now you have those two hours to either work out, you know, read a book, do some kind of hobby that is meaningful to people. I do see the trends, also looking at how we approach our business. And I do think on the upside, the, the ability to get a business from ideation, to launch, to success is a lot shorter now, because of all these technologies. You know, I don't know how long it took you to get your how to exit business up and rolling. But today, I don't know if it was a weekend or a week, and then you really start doing promotions on it. But it, it wasn't nearly as as crazy as setting up a radio studio in the past, right?

Ronald Skelton  30:44  
Oh, definitely not right. I already had a mic laying there. I picked it up one day. And I'll be honest, the way that the way they started off I called somebody who wanted their advice. And I think this is really good. I probably should record it. And I hit the record button on it and record it. It's like, you know, hey, do you mind if I share this with other people? And then the next thing I knew we were like, every conversation, you know, I had about this industry space. I started doing that. Now I had an idea that would be a podcast because I almost started a different one when COVID hit. I had a different podcasts. I love talking to people that had overcome adversity. And I had a podcast we were launching called the twisted I still don't want to (inaudible) called the twisted.com people who twisted the standard rules of society and made it their own right. You know, I've taught I, I know a lot of people who went from living in their car homeless to being multimillionaires, like, you know, I know somebody who was what I would refer to for referred to as second generation homeless who's putting out $100 million now. And his parents were homeless, he grew up taking food come out of dumpsters. And now he's pushing, you know, trying to leave $100 million in a trust before he, before he passes him and his wife. And so I was creating a podcast around that. So it just naturally fell into I'm having these cool conversations. Let's record them. And what Wait, I've already set up this whole, like I, I had rented a studio and everything before COVID hit. I was like, I'll just bring the equipment in house, we'll do this online. Nobody has to fly to Dallas, which was where I was at the moment. And to, to meet me in the studio, let's just do this. They stay where they're comfortable as they were uncomfortable with pull it off. So that's kind of how this, you know is came about was just having really conversate with cool conversations and industry I was entering. And now I get to work with guys like you that are out there making a difference in these, in these lives. Before COVID I actually the other show, I had 19 guests already booked to fly in, sit down with me in the studio in downtown Dallas and get interviewed. Because it wasn't if you looked at some of the older podcasts and shows out there, that was common, right? If you look at Joe Rogan stuff, he has a studio and the guest is in the room. Right? It was just COVID was at the right perfect time for me because now you know I can get people on this show that you know don't have time to travel like these. You guys are busy. The mergers and acquisitions space isn't, isn't your normal. You know, Joe Rogan's interviewing all kinds of stars and comedians and fighters and stuff. And they're, they're not pulling 60 hour weeks, right? I'm interviewing guys who are buying tech companies, and they're pulling 4050, sometimes 60 hour weeks, because they're they're still in the hustle of getting their stuff done. And breaking loose for an hour and a half. Okay, but it's been a day to travel there. In fact, did you know to give an hour and a half for his show, it would have been, it would have been hard to do. Let's circle back around to what ITX does the stuff in the fact that I see that's facing a lot of these guys that are thinking about selling they're at this point right now they either have to learn to run their business a different way. And that's the hybrid model of how, how much can I let people work remotely? And when do I need them in here so that we can actually see eye to eye and do something creative? Or how do I change the way that we do things to like to me and maybe you and I don't figure it out. But the next generation? I think so they end up figuring out how do you create those can creative environments to where people are actively engaged in a situation where it's virtual. But, you know, a lot of those guys just don't want to make the shift. So it's like it's, it's time. Like they either make the shift, or they can start looking for somebody else to take over the reins and do something different.

Tim Mueller  34:11  
What you know, to put it in its simplest form, they only have one of three options. You could buy, sell or partner growing organically any longer past a certain startup stage is just not feasible anymore, because the competition, everything is accelerating. You know, a lot of the guys in the IT space don't have the depth and breadth to offer a lot of services. So someone that has two clicks ahead in size are saying you know what you only offer, you know, integration of let's say accounting software, I could do accounting, I could do cybersecurity, I could do managed services, and I also can do customer relationship management. And so who do you want to go to? If prices are the same, but you know that you can go to a one stop Shop and either have one throat to choke or one hand to shake, depending on how you look at it. And so that's what's forcing a lot of these smaller guys in a, in a maybe a sad way, because you look at the same thing that's happened to the corner grocer that has been taken over by the Walmart. So the cost goes and everybody else. But, you know, you could also look at stagecoaches, that were taken over by, you know, the railroads that were taken over by the aeroplanes, it is just how things evolve and, and grow. And, and so if you only have three options, either to buy, sell or partner, then I you know, that area then does benefit, certainly our industry. But I don't I go back to the altruistic side of it is that we have the ability to help them transform. And if it doesn't make sense anymore, to be a sole practitioner, but you can then fold your business into a larger company, your employees may have more opportunities to grow, they may be able to go and work in other places around the world or see clients around the world that they want to travel, have better certifications. And you as a business owner can take a little the weight off of laying in bed, sometimes at night, staring at the ceiling worrying about payroll, or a new business development or cybersecurity issues, that gets taken away. So there are a lot of benefits that we see, when an owner finally does come to the conclusion. And maybe they're looking in the mirror in the mirror says you know what, it's time you know, it's time to do it, they'll talk to their husband or wife about it. Because oftentimes, these sole practitioners have a lot of they bounce a lot of things off their spouses, whereas the large, you know, behemoths, those are decisions in the boardrooms. And, and one of the things that I think we pride ourselves on with ITX is that many of us are former owner operators, I, I was an operator in the IT business and technology business for 25 years before doing this. And so we've walked in their shoes. And so during some of these, you know, and, and again, I've seen your shows where you're such a good interviewer because you're part like Big Brother, Park priest, Park, Rabbi Park psychologist, and, and that's the role that we play, oftentimes, in these were, you know, their personality is so wrapped into their company, because of 25 years. And whether they go they have a, you know, the club they go to, or if it's just the Rotary, or it's some, some buddies, they're all known for that business. And so it's a pretty monumental decision to sell. And a lot of guys have different, you know, I had one guy that we sold a business, and he got 25 million for the business. And his biggest concern was a, I no longer have my ability to run my car through the business. And then what about my health care, and some might look and go, you just got $25 million for your business, and you're worried about that. But you can't help but I can see that, legally, these guys ran all these costs, do their business, and no longer have those perks. So put it all together, a lot of guys do get cold feet. So our role is to make sure that we're a warm blanket in many ways around them to say, You know what, hold my beer, I got this. And you then work at trying to match the best buyer with seller. And if I can, let me pivot over to the softer side of m&a with these smaller deals, you know, these, these owner operators care very much about where their employees land. So they want to create a soft landing. So the personality of the buyer, the, the ecosystem, the environment is really important. And so we tell the sellers, our clients, that it's very few times in your life, that you are both a buyer and a seller at the very same moment. Maybe when you get married, you're a buyer and a seller because you're trying to pitch yourself, but also is this the right person for me. But when you're the seller of a business, you have that same power, whereas you can evaluate the buyer and say, you know, do they have the right, you know, benefit policies? What is their idea? And how do they treat their, their, their human capital, their people? And what do they feel, you know, as far as the environment if there are offices, and we've had, you know, a number of our clients tanked the deal in the 11th hour because they dug in and started talking with the buying CEO and said, I'm not going to subject my employees to that guy, he's a bully. And we're sitting there going, God, we had your right at the end, we were about to sign the deal. And he's I don't care. There are more buyers out there. And I'm not going to let my legacy be tarnished by handing over to guy that I don't trust to run the business. So a lot of those softer sides is, is very heartening for us to see that there still is a soul behind these businesses. And that's what we get with those lower 30 been $30 million deals that we, we push through.

Ronald Skelton  39:55  
Let's talk about the deal itself are there, are there different? Like I know, I know the answer. But I want to hear from you guys the like, there's a different there's different types of buyers, right? There's strategic buyers, there are private equity companies, there are search funders and stuff, do the valuations from one type of buyer to the next vary greatly,

Tim Mueller  40:15  
you know, again, going back five, six years ago, you may have seen one group that was a lot more aggressive, or let's say frugal than the others. But we have seen the market shift where it can no longer be where you know, private equity, usually known for just number crunching, and not looking at the softer side of a business where the strategic would obviously be sensitive to price, but they're digging in to make sure the cultures can then have simpatico and come together. And I think you're seeing both sides kind of come more toward the middle, where they're understanding that if they get frugal with the deal, because the numbers don't exactly crunch, they're gonna lose some really good deals. And, and what we do is, you know, we look at what the value of the business could be in three to five years. And that's called a creative value, where you buy a company, let's say, for 10x of your adjusted EBITDA. But you know that within three to five years, the combined business can be now more toward like 15x. Well, that gap between the 10 and 15 is what we call a creative value. And so the buyers that it might be a search fund, again, you know, defining a search fund, it oftentimes is a CEO, one person looking to land to run over or take over a business. And that person may have been a senior VP at a much bigger business, and had a package they can jump out at, circled a little bit of money from some, some colleagues or friends and family, or maybe even you know, certified rich guys, you know, that say we'd like to not necessarily run a business, but we still want to be in the game, here's my check for a million bucks, and you get a few of these guys together. That is a search fun, you don't see their websites online. So it's hard to do a little bit of diligence on them beforehand. But absolutely a market that is continues to grow. You mentioned you had a few on your show. And they're legit, they but compare that with a private equity firm that shows, you know, 100 tombstones and we do a deal a month and everything else, if you know, you don't have that ability to do that much research, family offices, still very viable buyer sets, you know that there could have been someone who had a large exit, but again, wants to make sure that they're still investing their money. So they have a certain formula for some is going to go back into the market, some might be for philanthropic, but then a balance could be for investing in smaller businesses, family offices are, are very much active in our deals. And then the two other that you mentioned strategic and private equity, or the others, all for those groups have kind of figured out where the pulse is on valuations. And they'll give a range of what they're willing to go into. And if you lose, you know, nine out of 10 deals because your range is in there, then they need to either get smarter and get to where the market values are, or continue to do a lot of work and not get anything out of it. So to answer your question is, I think a lot of these, these sets of buyers are really kind of morphing into each other and understanding what the value is in order to get a deal done.

Ronald Skelton  43:33  
Cool. So it's storytime on so I always like a good story to start here. What's the craziest, funnest, most memorable business you've actually held by herself?

Tim Mueller  43:45  
Oh, boy, that's that is a great question. Um, you know, we had a client that we had landed nine years ago as a client, great guy. His business was just in broad terms, he had started a business because he was a systems administrator. And he was he was told to go out and, and bring in brand new firewalls in into 20 of the locations where he was working. And when he called up the vendor, they said, Are you you know, a VAR. And he's like, what's the VAR? And they told him what a VAR was, he goes, Okay, I'm gonna deal on it, I'll become a VAR. And all of a sudden they started asking him first projections and he didn't know necessarily what to tell them. So he creates one micro website selling that product, and all sudden takes off. And he then starts building all these other like 10,20, 30, 120 Micro websites, and each one of them are only selling one piece of product and his revenues now going from 1 million to 3 million. He hits five nine and decides he's going to quit his job. And he comes to us when he's at 30 million and says I'd like to sell my business and he gives us The number that he wanted, well, we got a buyer to buy it to, to offer that amount. Just as that happens, he lands Boeing as a client of his. And he said, you know, what's not the right time, let's hit pause. So hit pause, he comes back to us a couple years later, hey, I want to sell this is the right time, we get the number that he wants. And all of a sudden, he lands to more big clients and says, I think I could be 60 million, hit pause again, we did this for nine years, never have most clients eight to 10 months, maybe a year, if it goes a little longer. This is nine years going back and forth. And we finally sold him for a number that was pretty astronomical, because he grew his business. And now he and the other company they joined with will likely go public. And so what a journey that was to, to watch this guy feel like his gut, maybe it's not the right time, I'm going to keep moving on to a point where he now we just spoke last month is happier than anything about where he is right now. And the ability to have that second bite at the apple, when they go public is going to be incredibly that's generational wealth, that he can now start playing around with his kids and grandkids are going to make

Ronald Skelton  46:15  
this jump into like, there's one more thing I want to hit up that's personally about you. I also see it on the profile that you are a member or have been a member of the Rock and Roll Hall of Fame. That's really cool. How did you end up there? Well, I mean, like, tell me

Tim Mueller  46:28  
Yeah

Ronald Skelton  46:28  
a little bit,

Tim Mueller  46:29  
probably one of the coolest things I've ever done in business. So I had worked real closely with the Rock and Roll Hall of Fame when I did some public service. So I jumped out after my one tech deal, and became Deputy Mayor of my hometown, Cleveland, Ohio. And as many of you know, the Rock Hall is based in Cleveland, and just really got involved quite a bit from the government side to help them grow. It's one of the hallmarks of Cleveland as a as a landmark, the Rock Hall, and was fortunate enough to join the board was on for 15 years. And during that time, we you know, we launched a technology committee so that we understood that a lot of things need to be virtual in what was a physical museum. And I think one of the proudest things that we did over that time is that we had a lot of competitors that were kind of like mini rock halls, Hard Rock Cafe would have guitars on the wall and, and the Jimi Hendrix Experience up in Seattle was somewhat competitive. But what we had were storytellers. We had these rock musicians like bano. And, and Paul Simon and others, truly say, let, let us tell our story, and let that be preserved forever. At the Rock Hall. I'll, I'll tell real quick story on the Rock Hall. And I know you want to wrap up soon. But Paul Simon came to see what was then the Cleveland Indians play the stadium, he was taking his son to all the stadiums around the country. He landed in the city of Cleveland. And he called the CEO of The Rock Hall and said, Hey, this is Paul Simon. I'd like to do a short tour of the Brock Hall before the game. I don't want any fanfare. I'm just going to put my sunglasses on baseball cap. And it's Yeah, great. We'll have our curator come and walk you through and they bust through over a couple of hours, which isn't nearly enough time to see this, like the Smithsonian gets in the game. And all he could do is start thinking about the Rock Hall. He had been inducted as an individual and also part of Simon and Garfunkel. And he calls him back up toward the end of the game and said, Any chance we can get back in tonight, it's like, it's Paul Simon, he wants to go back in. So the curators came back, they went for multiple hours, did the white glove test where they were picking up instruments and everything, didn't hear from him for the longest time. And all of a sudden he calls back and says, You know what, I've now that I've been inducted, I've done a walkthrough, I would like to create an exhibit on behalf of the Rock Hall. I've got everything that already and I've ever done handwritten notes of songs on the back of napkins, we saved all of it. So let's do a hand curated side of it. And I know contents important to you. So just get the camera rolling. And I'll just talk for hours about every facet of how the career was iconic, right, Paul, Simon's iconic. And so we're able then to transform that into a living, breathing and traveling exhibit that went to multiple cities. And it's those type of things that again, distinguish the Rock Hall away from everyone else, because you get the depth of the, the storytelling in it. And so couldn't be prouder of that. That time that I spent the 15 years on their board and having a voice obviously and how the, the, the, the museum and the Hall of Fame evolved.

Ronald Skelton  49:45  
I'm a big fan of like, any type of rock and roll like Soul solo guitarist and stuff like that. So when he's talking about Jimi Hendrix, and those guys, I mean, just to be in the same room with him once would be kinda cool, you know, having that experience and stuff. So I think It's really cool. Let's Let's wrap up by like, let's talk about the m&a marketplace initiative and how that's going to help our listeners and what they can do and kind of how to get. Let's just talk about that a little bit before we win the show.

Tim Mueller  50:13  
Yeah, I think it's safe to say that any listeners that are in the IT space, and we realized that's a subset of all the m&a that you've talked about with your folks, I know you, you crossed the gambit. But I've seen a lot of shows that do focus on technology. So we know that a lot of the owner operators are part of your audience. And so whether you're contemplating a sale in the next six months, or the next two to three years, we'd like to talk with you and, and perhaps give you some ideas on helping you create the value creators, that increases what your company's worth, we could talk about how to prepare for sale, you know, what are some of the things you could do with your legal papers with your accounting, but more so how you then build your business so that you have the best hit when you do sell any of those or open games. So we would suggest going through the link that we have now that you're showing on the screen, to get to the landing page for our collaboration with how to exit, and one of our professionals will walk you through what it is. And if it decides that it's the right time, because either you're ready, or you feel like the valuations in the marketplace can hit your target number, or you're just wanting to move on and do another startup or something, let's talk. And if in fact, if we don't feel like we can get to the price that you want, we'll be very transparent, because the last thing that we want is to engage for eight to 10 months, and have an empty ending. And both of us are looking at each other with crusty eyes going, that really wasn't very much fun. So if in fact, we can't hit what your targets are, we'll tell you. And if we can, we'll go at it. We believe that speed is the issue when you take a business like yours that has a smaller bid market to, to, to the marketplace. And we, we move in an accelerated pace, we never rush you on how to make a decision. But we do make sure the process moves. Because the longer a business is out there, the more that the buyers look like there's some kind of hair on the deal. And we think that you know, and all of a sudden valuations go down if you're out there too long. So we get it through. And more than anything else, we want to make sure that it achieves the objectives of the owner operator because, again, laying on your back all that time, this staring at the ceiling at night in your bed, worrying about things, you deserve a great exit, and you deserve to unlock as much value as you can for your business. And we believe that the reputation that we've had over the 25 years, and the over 225 deals we've done, you know, we've left a lot of skin on the sidewalk with those deals. But we feel very strongly about the, the way that we go about these sales. And so if it's time to start talking, let's go through that how to exit m&a marketplace. And let's, let's see where we can go from there.

Ronald Skelton  53:02  
And for the listeners, if you're looking for that, it's going to be on the how to exit.com be in our sponsors. And, and, and I'll put it in a couple of prominent places on the website so that if you, if you have an IT company, you want to explore this, you have a way to get to it, it also be in the show notes. So if you're just listening to this expert episode, and maybe I sent this to you or something, it's the first one you've listened to just look at the show notes and links will be inside of there on how to, how to explore that opportunity. And I want to thank you today, I'm sure we'll have you back on here as this relationship between my company and your company proceeds. I'm sure we'll have more conversations in the future. But thank you for being here today. Thank you for the information you provided. It's been it's been really fun.

Tim Mueller  53:43  
That's great. Take care of those two kids yours and great to see again, Ron, we'll talk again soon. So

Ronald Skelton  53:49  
awesome. 

Tim Mueller  53:50  
Hey, take care 

Ronald Skelton  53:51  
hang out for just a second. And we'll that's the show, guys. Hey, it's your host Ronald Skelton. I want to thank you personally for watching the show today and invite you to call our new hotline 918-641-4150 That's 918-641-4150 Call us and tell us about our show, ask questions, suggested guess or even tell me about a business you have for sale and we'll reach back out to you. Again that number is 918-641-4150 call our hotline leave us some information. Thank you. I don't want to announce our new channel partners the ITX marketplace since 1998 ITX has created 5 billion in value by selling more than 225 it businesses in 20 countries. IDX works exclusively with it enabled businesses generating between 5 million and 30 million who are ready to be sold in m&a to decision makers who are ready to buy for over 25 years ITX has developed industry knowledge that helps determine whether a seller is a good fit for their buyers before making the match ITX mergers and acquisition marketplace As we have partnered with has a proprietary database of 50,000 plus global buyers seeking it service firms managed service providers, Microsoft service providers software as a service platforms and channel partners with Microsoft, Oracle ServiceNow itself and the Salesforce space. If you have an IP enabled business you're ready to sell. I want you to visit the I T exchange net.com/marketplace How to exit that link will be in the show notes visit them now. The investors and entrepreneurs professional mastermind, the investors and entrepreneurs professional mastermind combines that additional peer to peer mastermind entities first in Napoleon Hill's famous book Thinking grow rich with accountability partnering, where your peers help you ensure that you set goals take action and get results. If you want to scale blow past roadblocks and achieve success faster than you might think is possible. I suggest you take a visit over to tiepm.com That's T i e. P m.com. And check out the investors and entrepreneurs professional mastermind