Transcription
You have to think about the enterprise value that you bring as the owner of that business. You're clearly going to bring a huge hockey stick to growth. If you're really AI literate, you're bringing two of you or three of you versus what was happening 12 months ago. And so you're going to build enterprise value a lot faster with two or 3x of the founders capability, at least in the short term, than you were beforehand. So if anything, if you find an undermonetized business today and you think you can improve it, the time to value just went from 12 months to six.
Hey, I'm Jerry Krauss, host of the Buying Online Businesses podcast. And today I'm speaking with Tony Hugh. He is the CEO of Flipper, the new CEO, which is the world's number one's marketplace of buying and selling online businesses. Now Tony has a background spanning economics, accounting, and a CPA qualification. And he spent years as Flipper's head of product and engineering, architecting the platform, the tools that have powered, you know, hundreds and thousands of digital business transactions. So he's led development. He's been in Flipper for 5 years. He's also built the gamechanging innovation Lauren AI which helps with all deal sourcing and the buy directory and FL's AIdriven valuation tools as well that we mention in the podcast.
In this pod, we do talk a lot about AI. Is AI good for acquisitions right now? Is it bad for acquisitions right now? And why? I talk about why I'm bullish on it. We also talk about why Tony's bullish on on it and why so much fear-mongering can be thought about in a different way or maybe even ignored completely especially when it comes to acquisitions and AI. And we also talk about due diligence. What are the type of businesses that Tony would be looking at now to purchase and why and what he would be avoiding in due diligence. We also talk about building a portfolio of businesses. If you wanted to acquire multiple and you've already bought one or just thinking about the strategy to build that hold co or portfolio, how would you go about that?
Now, obviously buying a business, doing DB, you're here listening to this podcast because you want to acquire business. So, do yourself a massive favor and dramatically decrease your risk of buying a lemon by getting my DD framework. It's what I use, it's what my clients use, and it's not only made people millions of dollars, but it's saved people millions of dollars. So check it out. It's free and there's a link in the description.
Also lastly, you've been asking for many, many years and I've been building our full stack DD service. Due Dolan service is finally live for deals of 100 grand and up. Every package includes a personal M&A strategy with me, which honestly no other due dil get due diligence done by the experts. And if you'd like to check that out, buying business.com/due diligence and you can see our different packages there.
But now, let's dive into the pod.
>> Tony, welcome to the pod.
>> Thanks, Jared. Great to be on.
>> Yeah, long time coming. Congratulations. You are now the CEO of Flipper.
>> Yeah, I know. It's been a long run with Blake and you know he's done some fantastic things over the I think it's eight years so it's really long service for for him and fantastic and you know really really honored to lead the business and I guess inherit such a such a thriving buyer base and seller base over the past 8 years. So full credit to Blake I guess and some pretty big shoes.
>> Yeah mates lots of credit to him but also lots of credit to you as well. Like you've been on the team for how long now in your head of product for how long?
>> I've been head of product engineering for 5 years. So, ever since so many of the features that your your buyers and your sellers are seeing on the platform today and the evolution we've had over the last few years, the team and the team and myself have kind of led that development. So, you know, great to see too we're in a good good space with product and engineering and it's a great great thriving platform.
>> Yeah, absolutely. Absolutely. It really is. There's so much to to chat to. I don't know where to start. I guess you know Flipper being such a massive platform and you've made a lot of changes. What are some of the the biggest shifts that you know that you've seen in the last few years especially the last 12 months in how buyers and sellers are behaving on Flipper now?
>> Yeah, the the the first one is it's a really global platform uh at the moment. So our we've got sales team in in the US, the EU, APAC, we're seeing great assets come along in any part of the world um and being bought globally. So some 60 odd% of European businesses are being bought by Americans. Um we had a lot of we we had a very large sale multi3 million US plus of an Australian business that was again bought by an American who had had exited an ESOP and and made himself a little bit of money and actually found a a great business to buy in Australia. Um so so that's a that's a great story for crossber trade. And finally, with our European localized sites, our French and Spanish sites, what we're seeing is more Europeans come along and buy global assets again. So, I think that's probably the biggest change. We we've become a very global organization and with all the challenges that that that entails, but the great part about that is, you know, these assets are truly global. The buyer can be found anywhere. The seller can be residing anywhere. And it's a it's a you know, it's a great little little story for crossber M&A, I guess.
>> Yeah. Absolutely. Absolutely. I mean, there's always been international buyers and sellers, but it sounds like what do you think has promoted more international now?
>> We we've put a lot of features in to make that easier, and we've put some sales teams on the ground inside of Europe and the US and AP pack to help broker those deals. But I think there's multi- language, there's multi- language on the site. So, there's an AI translation inside of our deal room. So, someone can come in from France, they can type in French, you see the translation in English. that makes life a little easier. The site itself, the the the entire inventory and all the all the businesses that are listed are automatically translated to French and Spanish. So again, you you've got the SEO presence in those different languages that are bringing in buyers for globally. And the other part is, you know, we got multilang, we got multi- currency available. We've got our own payments network um able to disperse out to 158 different currencies. So all of those changes have just enabled have made it a little easier for someone in any part of the world to search in their language, discover businesses um in their language. And if you're looking for an Amazon, an e-commerce, a YouTube, a SAS, really if you find a great asset, you know, you can there's really not not much difference in it other than some regulatory changes that might be specific to to each jurisdiction. But a product that can that can do well in Australia can do just as well in the US.
>> Yeah, for sure. What price range are you seeing bulk of the businesses being bought and sold in? Are we talking 10 to or under 10, 10 to 100K, 100K to 500K or more? Like what's the bulk bulk part of sales or acquisitions in Yeah. through Flipper?
>> I think the story of Flipper has been a little bit of the story of this this segment of the market, right? You know, first we found a lot of liquidity in domains and and sub 10k sales. This was, you know, a decade ago. And then it went from 10 to 10 to 25, 10 to 50. So, a little bit more than a side hobby and not a fullyfledged business type type acquisition, more of an asset with with a customer base and and some revenue and profit. And then you then we've built a lot more liquidity there and that becomes much easier for everyone to exit, but it's not really a stretch price point for Flipper. It's got lots of buyers in there, thriving network. And then we see it moving up to 1000,000. This was a few years ago where the bulk of them the bulk of ours are now sitting 250k plus US. So 250 500 a million US. That's about the price point that we're again unlocking mass levels of buyers along with mass levels of sellers.
>> Yeah. I mean I mean I've been in the industry for 12 years now and I've seen a lot of changes to flipper. A lot like you said over a decade ago with just domains and I bought my first business for $15,000 on flipper. actually
>> be inflation adjusted, mate. That'd be that'd be about 75 grand today, wouldn't it?
>> Yeah. Yeah. Yeah. I'll be in the bracket for sure. Yeah. But you've got flipper changes, but you've also got so many market changes. Like obviously content sites have declined by 37%. Right. While SAS business acquisitions have grown by 19% and e-commerce 28%. You know, over the last sort of year or so. What for someone looking to replace their income through acquisitions? What sort of business models are you most excited about for somebody coming in as an entrepreneur acquisition entrepreneur to purchase in over through flipper like what's what are some of the more exciting assets and business models that people should be looking at?
>> I think from a buyer perspective
>> from a buyer's perspective, e-commerce is definitely your tried and true I would say stand gold standard for returns as a as a as a buyer and there's a couple of things in there to unpack it. Traditionally, the people that are interested in that specific niche of an e-commerce business do have an interest in the product itself. So, you know, maybe you're into supplements, maybe you're into baby wear, maybe you're into fashion. E-commerce is so varietal that it scratches the itch of someone that's actually got an interest in in in that particular vertical. And a lot of times if you've got an interest in it, that's that's a pretty important step because I used to be in e-commerce. I spent 15 years in in e-commerce between post and web farmers. I can assure you that I never touched the fashion or beauty verticals because I knew nothing about them. And as it was always for me electronics, it was gaming, it was it was books. Those were the three that I was strong at. And I never never moved outside of that that particular range for me as an etailer because I just wasn't interested in in the in in the product that was in the beauty side and in the in the fashion side. Right. So that's a great thing about e-commerce. You got so many verticals.
>> Yeah.
>> I am a strong believer of it interest in the product not being the only thing. I've bought businesses that I'm not super interested in. for example, e-commerce brands in furniture and even like fashion as well. But I was more excited about the numbers, the business model, and could see ways to optimize it and grow it. And that's where I found passion in the business is working in operations to scale it and grow it. The reason I say this is because there's a lot of people that when they have this belief system, okay, I'm interested in surfing, which is for me personally, Tony, is my my thing. That's what gets me out of bed. But for me to go find a surfing e-commerce business, it's very limited and I could be sitting around for two to three years. But I hear what you're saying is be open to other things that you could be interested in as well. And what's which is a massive bonus and at the same time you might find something that you're not super passionate about but you do are passionate about the business growth that you can add to it. I find that important important part for people to not pigeon hole themselves into thinking I need this perfect unicorn asset which you're the other one Jared you're your passion is for the operations and the logistics and the and that financial side right and yes we we have lots of those that's that that it's not just categories you know categories is probably the easy one but yes you do have people who are very very open to the category because they like the logistics they like the logistics and the and the optimization of ads and and the sell through and numbers
>> when with sticking on the fle the theme of your market place flipper you've got over 450,000 registered people on on flipper you know and you've got like four to 6,000 active listings I don't know it's an insane amount these are rough numbers obviously and feel free to correct me but how does the average Joe go about winning a deal in an environment like that
>> yeah we we've got a lot of things at flippet to to kind of find the perfect deal for you. Now, it might look like a pretty amazingly large amount of businesses for sale. But I I always think about it in terms of property. You know, your average property in say Melbourne, there's 11,000 properties for sale. And really, when you come down, go down to suburb and the number of bedrooms and the price point you have, you've got a selection, but it's not 11,000, right?
>> Gotcha.
>> And so, Flipper, the search is is probably one of the most important features there. your keyword, your price range, you know, the the type of business that you're interested in. That'll that'll again narrow that down significantly. Um, you have watch list features on top of that where you can add it to a watch list. You can see similar businesses that have opened up. And then just based on your pure browsing habits, Flipper has an AI recommendation system. And so, just like on Netflix, based on what you what you look at, you'll be served similar businesses as soon as they list. Uh and that's really useful because what we see is preferences change from when people sign up with us. So they might tell us you know you I want an e-commerce business uh for you know in the US but suddenly what you might find is they're looking at YouTube channels uh or they're looking at SAS businesses and so you want you want the recommendations to change in line with what people are looking at and and the AI recommendation system does that. So search, your classic search, your classic watch lists along with AI recommendation and that makes that really really big number of listings feel a lot more homely and personalized for the average person. Uh in the same way that you know property market feels really big for a single state, but when you come down to it it's a couple of suburbs, you know, and and and a short list of five to 10 10 houses that might be of of interest.
>> I like that. It it's a great way to think about it. be very specific with your search, especially, you know, when you got that many deals out there, but be open to other, you got to play this like happy medium game. Be open to alternatives and have just a few that you're seriously looking at. And what I would suggest people to do is once you have those few that are in that say suburb street as this an to use this analogy is do due diligence on each of those and stack them up against each other to see which one feels or is on paper better for you depending on what risk tolerance you have size and what's important for you. So, say somebody starts out and they buy, you know, one business and then there's you've got somebody that's thinking about building a portfolio of businesses, not just by acquiring one. Have you got data and I'm sure you follow people's journeys at flipper on what is like what they've done with the smartest sequencing of like you know sizing strategy and acquisition strategy to acquire more businesses. How are your users building more of a portfolio than just looking at you know one acquisition?
>> Yeah, we've got some prolific acquirers. Yeah, I think there's a believe years ago we we found a Serbian DJ who acquired about a million dollars in 140 different businesses over the years. We've seen a few of those. Their acquisition strategy was roll up of multiple small 50 to 100k businesses rolling them up one by one. Each of those businesses had a customer list and for them it was effectively we have some centralized operations and we want to roll up subscale businesses into that centralized operation layer and we're going to go do that where we have wellpriced assets inside of a target range of 50 100 150,000. So that's your typical aggregator strategy of you know we we know we have a circle of competence whether that be in e-commerce we actually see it a bit in YouTube because the content creation capability is quite centralized and so you can have a team that just creates content for 10 different channels and with AI that that just accelerates the capability of that team to create more and better content and and you know stops some of put some of the more traditional things that used to be really hard to do. So animations used to be really really hard to do, right? Yeah. You you had to you had to draw stick figures and things like that and you're seeing more and more animated infographics coming on YouTube and that's primarily because the AI is getting really good at drawing, you know, basic animations. So rolling up with a strategy is is definitely a one that we see prolific acquirers doing.
>> Yeah, I am a big fan of YouTube. Not just because it's a it's a great channel, but when the content site era sort of had a massive shakeup due to search, Google search disrupting blogs and the content website space. I was sharing with people how valuable it is to not only acquire YouTube channels but newsletters because you have you are creating content. It's a media business and now AI is lending to that where you can massproduce so much great content. I don't I'm not the biggest fan of mass production with AI and I think that's going to definitely get disrupted in YouTube in years to come where people are probably going to still prefer to watch humans than just every video be AI animated. However, there's a a time and a place and there is certain different YouTube channels that are valuable for that where we would prefer to watch just animations and I agree the roll up of those with one centralized hub of creators doing that for 15 channels is you get the e economy of scale. Have you got any other buyers that have done it or are doing it differently to just rolling them up?
>> Yeah, we do we do have some buyers. The the second part I think from the rollup is is a what specialist buyer. So that's someone who has some specialist capabilities in a certain area whether that be operations, logistics, marketing. Uh and what they're looking for is a business which with their capabilities added to the business is going to go in the hyper growth of that business. Right? There are two major ways you can grow grow the valuation of a business. The first one is operational. You improve your profit, the cost structure, the unit economics of that business. And the second part is actually you've got the capability to to really grow the top line with your own brand or with your own specialist capability. So what we'll see is typically someone that likes that that may have come from a B2B background, has some industry contacts, sees a business that they that their old industry contacts would absolutely love to put in a B2B channel. All right, they'll go and buy that. Walk over to some of their old contacts. Perhaps they've got some that have store distribution. they'll suddenly have a new product, they'll suddenly put it on some shelves and you get you get a distribution network that way. So specialist buyers identifying what kind of skills you have looking for a business where it's a great business but it may have been undermonetized in that sense and then buying it applying that skill. The most common one is that we see is clearly digital marketing. So you get you get an acquirer who's a great digital marketer and you know that can do absolute wonders for a SAS business or a e-commerce business if you're great with if you're great with Google ads and if you're great with with optimizing on meta there's a lot to do on those businesses.
>> I've got a client that scaled or started an e-commerce brand FBA business selling you know almost eight figures worth of one product and they came to me wanting to buy a business was completely separate. We went and bought them a business in the same space as FBA uh and did a great acquisition and then now we're acquiring more because they have that skill set in how to scale FBA brands. Yeah, it's just using that skill and it's not just their skill set, they have the knowledge, right? But they also have the team as well. And the way I think about it for somebody as a first-time acquirer is buying something that you don't know what like if you're brand new to acquiring a business, you don't know what you're good at in the online business space. But you might buy a particular business and it does quite well and you know how it has you've grown it. Then you can acquire a similar business and either you know get that economy of scale through distribution like you said having some products on the shelf here and then selling and crossromoting to or rollups or whatever it is. There's there's so many different ways to run out a a port proper portfolio build and it can be the thing I think about is not having the end in mind too specific because that goalpost will change with your skills and what you've learned along the way. Right.
>> Yeah. I'll just share at Flipper we've done exactly the same thing. So our YouTube category which grew some 60 odd percent last year and grew some 200% the year before is led by a guy called Nelson. And Olson ran a YouTube business that was competing against Flipper. It was called Trust Are You. And he came over to Flipper about 2 years ago to run the YouTube category for us. And you know, that's exactly what we did with him. He benefited from Flipper scale, the SEO, the fact that we're ranked number one for buy and sell a YouTube channel. Uh, and we instantly kind of supercharged that category for us. We've done a very similar thing with KDP. again a specialist that understands how to buy and sell KDPs, what KD, how to transfer them and is quite ingrained into the network of KDP writers. So, two of our fastest growing categories which are which are well over double digit to triple digit yearon year. They're all led by kind of what I would call specialists that that got aggregated into flipper bringing kind of specialist knowledge on that category. And so, it's it's probably a little interesting point for for everyone that's in your community. You know, Flippet does the same thing as our buyers do, right? When it comes to acquisitions.
>> For sure. For sure. I would love to pivot now to AI where like this going to be a bit more of a a topic to stay on for a little bit, but it's no longer just like a nice to have. People aren't just, you know, buying business with just systems and defensibility. They want a future proof their business and they want something that's like I would say the buzzword is AI proof. I look at it quite differently, but I'd love to hear your perspective. How should firsttime buyers be thinking about buying a business that you know and and valuing it and being AI ready?
>> Yeah, look for the old CTO of Flipper. So from AI from you know I've got a little bit of a different view for most on on AI as well.
>> You're deep in the you came from the product team and CTO you in the tech. So I would love to hear this view.
>> Over the medium term AI is not a strategy. it'll just get competed away into operations. So, everyone's going to put AI in. And the fact is, you're just going to have to you're just going to have to compete. If you don't put it in, you just obviously you're behind. And it's going to be the same kind of operational tool that got used when FBA came along, 3PL's came along, you didn't have to run your own warehouse. You were ruthlessly efficient for maybe 6 months and then everyone else cottoned on and they became ruthlessly efficient and 12 months later, everyone just ran the same cost structure. So, going to be not going to be something that's like cuz a lot of people are scared of it but it's just going to be like it's there we use it it's a normal thing and it's not like it's any other it's not going to be any other option it's just like the it's going to be the go-to systemization tool like just go oh okay this new CRM came out or this new email software provider came out and say it's Clavio or say it's just like Shopify like you know you just if you're going to start a e-commerce brand and it's direct to consumer without FBA you just use Shopify Like that's what you're going to do in all your businesses. You just use AI.
>> Yeah.
>> Right.
>> You just use you're going to be using it. So I'll go through each of the business models. Right. If you do do an ecom, clearly your product listings, your product descriptions are going to be AI written now or at least your product photos for the first time in a long time. Those pesky photographers, you don't need a photo of every single thing. You just need a good, you know, in a perfect white background. And I remember my catch days where, you know, you had to get the white background perfect and otherwise it wouldn't the images wouldn't pop. I'd focus on the the basics of business haven't changed, right? Great distribution, great product, an engaged customer list. They're what they're what you should look for when you're inquir. And when you go about thinking about building value onto that business, that's where the AI bit comes in because you're going to find businesses where, you know, the founder is still taking photos and you're going to sit there and you go, "Well, you scratch your head a bit and and you go, that's that's perfect. You got a whole studio set up and you're paying three bucks a photo." Well, I'll tell you, I have a friend called Claude that can do it for a couple of cents. So, I'd more use AI to figure out what are the inefficiencies that I can now make really, really efficient. One of the things that I couldn't grow that I can now grow on. So for example, one of the things in YouTube is creating new content is really really hard. Right? Whole studios used to be done to create infographics. You probably don't need such a large investment today to to do that. For for e-commerce expanding your skew catalog used to be really hard, right? Your new descriptions, updating the skew catalog, you know, your product master, everything like that. um all of that gets made a little easier with with AI coming in. So, but the basics of business is still the same. Do you have great distribution? Do you have great and for SAS businesses was building new features now that's a lot easier today than it was than it was years ago. So, you know, so all of those growth levers are now easier to access provided you again focus on the great basics, right? Do do I have a great product? Do I have a great distribution? Do I have a customer list that's happy? Um, and can I look at the operations and can I make them really efficient and and scalable?
>> I love that. I I'm people are worried and there's a lot of fear around it with AI and like if I buy a business, am I going to lose this business because of AI and all that sort of stuff, but I see it the opposite. I see it as like what an opportunity now to buy something that is underutilized or the operations aren't performing as well because it hasn't been enhanced with AI that you've got a great time right now to go away and acquire a business and make it better and have it makes so be far more profitable and scale your distribution. increase your the value of your product and your relationship with your brand through AI. It's and it doesn't like I'm not I'm not saying that just make everything AI because it can take out the humanness of things. I think you can become a better human using AI and you can be become a better operator using AI, not it be the answer. You know what I mean?
>> Yeah. No, no, the the one thing that we're seeing across the board though is a is a K-shapedness in human productivity. So your for the buyer of the business, they are likely going to be the most productive person in that business for at least the short medium term until the business gets to such scale that you've got a leadership team and and staff and and things like that, right? Being able to We're in a world now with AI where the most productive human is probably two to three times more productive than they were 12 months ago. For sure.
>> I'm definitely as a you know head of product I was probably 2 3x I had to write these horrible product requirements docs. They they you know I get three pages and I start contradicting myself and engineers would turn around and say you know this doesn't make sense and and that that that you know Claude does that really well now and he writes consistently. So you have to think about the enterprise value that you bring as the as the owner of that business. You're clearly going to bring a huge hockey stick to growth. If you're really AI literate, you're bringing two of you or three of you versus what was happening 12 months ago. And so you're going to build enterprise value a lot faster with two or 3x of the founders capability at least in the short term uh than than you were than you were beforehand. So if anything, if you find an undermonetized business today and you think you can improve it, the time to value just went from 12 months to six, right? Cuz you can scale yourself well. You've got these phenomenal tools that that kind of help you out. that that's how I think of AI. It really supercharges the most productive team members uh on your team and it provides a layer of guidance for newbies that are coming into the business and and speeds up the training curve for them.
>> I'm excited for for how AI is evolving the space and for people that it's a great time to acquire something. There is still the risk and the fear that people like what if AI just people spin up my business using AI and the business I acquire just becomes non-existent and the answer I would love to hear your answer to that uh Tony but I believe it comes back to what you have mentioned the basics of business being distribution a good audience and a relationship with that audience which adds the trust which allows you to distribute at a better rate. An AI doesn't it's going to struggle to build an engaging like it can spin up some marketing strategy to build out an engaged audience and it can try to scrape data to get emails. But a business is is all about like the value of the business is how much market share you have and how big your audience is and how good you are at distributing an amazing product. And how is AI just going to replace that in a click of a finger? I mean it can replace product in terms of SAS but that means everybody can do it as well. So I don't see that as a massive risk. That's how I view it. How how do you view it Tony?
>> You got to think about the choke points in value for your business and then you got to ask would I would I do I think AI is going to get to a point where it's going to replace that and then you know too many people see just a product is the kind of choke point of the the value and in e-commerce in many respects it's not because unless you have a custommade product that's highly engineered most everyone gets it from somewhere in overseas that's manufactured custom manufacturer or the like right so you know let's go through the list of things that if I give my Google ads budget. I just give it to Claude. Do I trust Claude to spend it well and make me more money than I currently am making? I don't know a single founder that's done that by the way at the moment.
>> All right. So, here Claude,
>> I mean, they've just introduced Meta can directly link in to Claude now. And I mean, when I'm doing due diligence on deals and I'm using Claude, it's wrong a decent percentage of the time. And it's if I didn't have the experience to see that like somebody that's a newbie doing DD on a deal, they're it's very very scary. So to just go, "Yep, Claude, run my ads for me.
>> Claude, here's 50,000 bucks a month. Run my ads for me." Right?
>> Are you going to do it? No.
>> No. No one's doing that at the moment. Right. The other part is going down to say again, would you And Claude's the most powerful frontier model. This is trillion bucks worth of value in here, right? Again, would you make skew buying decisions from Claude? like what new SKUs I'm going to make put into my put into my putting to my e-commerce business am I going to or new features I'm going to build in my SAS business new videos I'm going to make on my new podcast members who I'm going to take to my podcast I don't think we're at the point where Claude just makes all the decisions yet and you don't review them there's some seriously nonsensical things it still does so again you know you got a human review and a judgment there that that is to say that the big value drivers of of most businesses actually remain remarkably untouched. So, you know, Claude's not managing your P&L. It's not managing your working capital, right? It's not asking for a line of credit from the bank. It's again not performance managing your employees. It's not doing a lot of things in the background that build enterprise value. What it does do, it makes everything fast. And what people mistake a lot of times in the industry that we're in is speed with operational or or what I would call you can get there first. it doesn't mean you have the customer base, the operations or the capability to actually sustain it. So, I can build HubSpot tomorrow. I can build the exact same UI. Um, and I've actually done that on my on claw code by the way,
>> but it doesn't quite mean that you're going to get the distribution, the, you know, all of that kind of thing in there.
>> You don't have the audience. You don't have the years of branding and the marketing campaigns and the Yeah.
>> You basically don't have any of the things that you're looking for in due diligence. So when you open up a book for due diligence, you're looking at the customers, the marketing campaigns, the assets of the business, how much cash is on the balance sheet, all of those kinds of things so far untouched, I would say, with the vast amount of AI that the velocity of them has gone up, but it's not autonomous.
>> Yeah, it's it's it's just scary to think that people are listening to podcasts where everything's going to get replaced by AI, but they don't understand what parts are missing. Like, yeah, in theory, in theory, you know, you can have Claude run like manage your money and your P&L, but when the rubber hits the road, are you gonna you're going to do it? You going to trust it? Nobody is. So, AI is not replacing that. And it could take a long time before it's like super accurate. And even then, you're still going to want to have human, you know, correctiveness as well.
>> I would say for e-commerce in particular, AI is a far far lower disruptor than the internet was. So the internet was a big thing for for retail for e-commerce in general and I can't imagine I mean that gave us Amazon it gave us all the marketplaces on the planet mobile shopping I mean if you if you think characterize a scale of free shipping if you characterize the scale of disruption that e-commerce did I can't imagine AI doing the same thing in the physical trade of goods it may do a very large change in it may be what the internet was to software development and I think that That's probably going to be the case longterm. It's going to be quite disruptive to software development, but for retail, I don't think so. For content and videos, I think it's it's a tailwind, but you know,
>> a good way to look at it. I like that word.
>> It's tailwind to content. It's it's neutral for ecom. And, you know, for for SAS, it depends on how you play it, right? Clearly, your velocity goes up and the rest of the market's velocity all went up. And so, maybe it's neutral cuz you can execute just as fast as anyone else can now. uh but if you're not particularly good at executing then yeah it's probably going to be a little bit more competitively uh difficult going forward just because the cost of executing is going down.
>> The way I think about it is depends on the software and the product. But if you already have an audience that is paying a recurring revenue for a product and then they want that product to and you want to grow that and AI comes in. You can use the AI to make pro products so much better than competitors at a fast rate and retain your audience and your revenue because you're able to you've got that distribution. You've already got paying members versus somebody is like like you said you just create HubSpot you know but you don't have any paying customers cuz you don't have any long form long-term marketing relationship and trust.
>> Yeah. I products can be taken over. I actually advise a couple of SAS business and I I tell them it's pretty simple, right? The revenue base next year is your current ARR plus your net revenue retention, your upsell minus your churn. What drives your net revenue retention? Great new features that people love. What drives down your churn? Great new features that people love, right? Can you can you do Can you build great new features that people love that make them use your software more? Yeah, I can do that quicker with AI. And all you got to do is just focus on that. And and guess what? Those businesses are in much better spots today. They're they're releasing at much quicker velocities than they were, you know, 12 months ago. And frankly, you know, AI has made it more difficult to acquire their customers away from them, right? So, I think you got to look at each part of your revenue equation, just figure out whether, you know, it's just the world howling that that AI is going to take over everything or really just, you know, you scratch your head and you go, "Well, if I can reduce my churn, I can increase my net revenue retention. I've got this big backlog of features I can suddenly put in. Um and and lo and behold, you know, if you work through that, your next six to 12 months looks a little brighter than the last 6 to 12 months.
>> For sure. Absolutely. Love that explanation. Now, sort of finish off, Tony, if you were brand new to this space and you were first time acquirer and say you had like 100K to 300K and you you jumped on Flipper and you want to deploy that into your first acquisition, what what would you be looking for? And then what one to two things would cause you to immediately walk away from a deal?
>> I'd be looking for the the same, you know, good product, good distribution, particularly particularly if you've got a site that has some global customers, has fulfillment in a few locations. That's that's quite a lovely way of seeing a business. So some you may be on a Shopify store that's Australianbased, but you've got an FBA store in the US that's doing some trade for you there. the logistics are sorted. It's a kind of great little crossmarket strategy. So, I'd like I'd like to see some of that. Some good customers, some good distribution. I'd like to see, you know, there's some unique creative uh available. So, do do you have a bit of a brand? Is it a bit quirky? Uh does it feel a little different? Does your mailing list work really well when you when you email them really quirky things? You know, does business have a bit of a personality? Because at that range, too, you want you want a bit of personality. You don't want to look generic corporate. You can't get corporate at $300,000 value, right? You you want to be a little quirky. You want to have some fun videos. Does it have a bit of a brand? Do you kind of like it like that brand? So, those are the big two. Uh and the third one, you know, is it operationally sound? Have you got some standard operating procedures in place and and things like that? So, those are the three things that I look for uh when when I'm buying it. And then obviously then for me the financials and then the the the the product niche. But I'm a big distribution fan. So I like buying distribution and I like buying brand as my two main acquisition kind of things that I look for. Those are those are probably the two big things that I I'd look for in any any due diligence process.
>> What what would be two big things that would cause you to just go no that's that's not something I'm I want to like through DD that would cause you to walk away.
>> I I'd be very I'd be careful around government regulations. There's more and more of them coming in. So, you know, things that aren't that require a license to sell some kind of regulatory approval. You've got you you if you're going to go through that, just make sure that you you've got the right lawyers in the right jurisdictions and not say a lawyer that's local trying to advise you on US law or a US lawyer trying to advise you on Australian law. That typically doesn't doesn't end really well because lawyers aren't skilled in that particular area. And that's probably number one. legal or regulatory barriers. Be really really careful around that. And for me, number two is, you know, be really clear around, and this is this is one thing that I've seen around who the key people are after you purchase. So, you want some you want someone there that's got some experience about the business, whether that's a VA or small team or something like that. Or if you don't have that, then you've got a pretty extensive coaching and tutorial session with the old founder to to take that business over. So during if I was going to buy a business, those those two flags would would definitely warrant me to investigate a bit more, make sure that you know the regulatory compliance is is something that that is is taken care of. And for example, think things like sunscreens are now you might not think it but they are regulated, right? Supplements too. And finally, you know, is there a little team there I can draw the expertise on? And if not, do I have an extended handover period with the founder so I can learn how to run this business? cuz typically it's you know 3 to 6 months the first 3 to 6 months you you're getting across all the detail and and how how it operates.
>> Yeah, absolutely critical to have good support and good training especially for something you know you're running an operation if you've never done it before. It's not like somebody would just hire you give you a job and say work it out. Second, secondly, your first first answer being regul regulations is like that's what we need to be looking for in due diligence is the invisible, the unseen, the unthinkable and being prepared if this was to change. What would that look like and how do I mitigate that risk and factor that into my valuation as well? It's very, very important. Tony, it's been so good to have you on. Thank you so much for your time. Congratulations on CEO now a flipper. I'm really looking forward to seeing how Flipper progresses in the years to come with you, you know, steering the ship.
>> Thank you. And I'll give a little plug out to the some of the new features coming out of the platform. We've got a new AI powered P&L builder. And what that's going to do is it's going to you're going to be able to upload your bank statements or connect directly to your bank. It's going to create a cash P&L acquisition ready cash P&L class using AI to classify your revenues. Each of the category of expenses is going to come through. So you're going to get be able to build, you know, really really great easy acquisition ready P&Ls for buyers. We know that that's commonly an issue for our for our sellers, right? As well as a a data room with AI powered indexing. So you can again ask and query all the things inside the data room for to to help with your due diligence. So those two things are just really going to be really supercharged that $250 million range for our sellers. better better financials, better data rooms, make that acquisition journey a lot easier for our buyers in terms of getting the complete financial picture.
>> I love that. Far more clarity on the data is what we're looking for when we're doing DD. So, love that. Guys, check out flipper.com. Obviously, there's links in the show notes. And for Tony, I can Would you like me to add your LinkedIn if you want to reach out and speak to you?
>> Yeah. Yeah, no worries. DM me at any time.
>> Cool. Cool. Thanks again, Tony. Appreciate you coming on. Thank you.