Episode 19 - Alison Anderson, Succession Matching

Alison is the founder of successionmatching.com, an online community of business buyers, sellers, and succession planning professionals.  

In this episode she speaks about her personal journey investing in penny stocks, working in finance, for a startup accelerator, and the benefits to humanity she is trying to promote by facilitating business succession planning.

Transcript

00:00:00 NICK LALL
So the big question is this, how are entrepreneurs who aren't scaling tech startups or building lifestyle businesses from scratch doing it? How do acquisition entrepreneurs find businesses, buy them, and then create generational wealth while taking on less risk? Welcome to the Entrepreneurship Through Acquisition podcast. I'm here today with Alison Anderson. She's the founder of SuccessionMatching.com, which is an online platform that's redefining how people step into the world of business ownership. Allison has had quite an interesting entrepreneurial career starting in Canada, spent some time in Denver. Now she's here in New York, worked for Techstars, and she's done a lot of really interesting work with small businesses that led her to launching Succession Matching. I was wondering if maybe we could just start out with you telling us a little bit about your origin story. And

00:00:49 NICK LALL
I think what's a little bit different about you is that your why is sort of centered around economic development as well as being an entrepreneur. So I was wondering where that drive came from and how it led to you launching Succession Matching and doing what you are now.

00:01:02 ALISON ANDERSON
Yeah, absolutely. Thanks for having me today. I joke, I'm a reformed banker. So I worked with one of the big Canadian banks. And I got invited to sit on a local economic development board. And that was kind of my first exposure to small business lending and how much impact the small businesses really have in our community. I think my parents really sparked this level of importance of community in me. And I just really loved how no matter where you go, your community is really the local businesses in it. So I jumped ship from the bank to do small business lending for economic development organization when a position came up in the office and didn't think I'd get into entrepreneurship myself. But one day a plumber came into my office and said, Hey, I want to sell my business in five years. But if I put up a for sale sign, my suppliers are going to start asking for cash on delivery. So what's a private way I can do this. And I didn't like anything that was out of the market in 2011. Amazing.

00:02:01 NICK LALL
Yeah. I think a lot of these entrepreneurial origin stories that end up being successful are when there actually is a need that's presented to you and you have to figure out a way to solve it rather than looking to solve something that may or may not be there. So always good to see that. Maybe you could talk a bit about how that experience was. I mean, I guess you were still in Canada at that point, but then you eventually moved to the States and New York. What made you want to make that shift to come to this part of the world? And what was the experience that you had before that led you to coming here?

00:02:32 ALISON ANDERSON
That's a really good question. I guess I should also add in one thing that I haven't really talked about publicly here, but I've been told this is kind of a funny part of the origin story. So I'm kind of impactful in my own journey. In my early 20s, I was very sick. And I took out a large loan of credit and dumped it into penny stocks. And my penny stocks went up about 500% in 2000. That might give you a little bit of my risk profile as well at the time. So I think I've always just had that gene that I think is required in entrepreneurship. And so it was a calculated risk at that time, but I thought I should do something with the found money I essentially had. So it's not normal for a 25-year-old, 24-year-old at the time, I guess, sitting on a couple hundred thousand dollars to look for something more productive to do with it than just in an e-savings account. So that's always kind of tricky when I'm raising capital and the VCs are like, so where did your seed capital come from? Pink slips? I don't know how comfortable I am with that. But I'll never forget the day a friend of mine, you had mentioned Techstars in the intro. He called me and he's like, Alison, you need to go through Techstars. And so this is in 2018. And we had quite the journey as a company leading up to that. I think because of my background in government, I've always been like a policy wonk. And so we've always focused on how can we change policy through what we're seeing in the market and our marketplace. So by 2016, we were named the place to buy or sell a business online in Canada. 2019, we got into Techstars because my friend Riley called me and he said, you know, you're going to be a different entrepreneur and you're going to be a different business once you go through Techstars. I was like, that's a pretty bold statement if you're a seven or eight year old company, but he was 100% right. The network in the US, the mentorships, the connections, the mind mapping we're able to tap into through that network has really springboarded us so much further and super grateful for that opportunity. I think as I look back in my life, seeing what some of those turning points would be going through Techstars and tapping into that network here down in the US. I have got to know Sunil who runs the Toronto program and absolutely adore him and respect him. But yeah, that was kind of our path to the US launch.

00:04:56 NICK LALL
Wow. Yeah. That's really helpful advice. And a lot of people who are going into ETA, the benefit of some of the ways you can do it is that there is that mentorship or there's that ability to connect with someone who can really allow you to save so many years of experimentation and learning on your own. So definitely very helpful advice. And it's interesting how you're already seven or eight years into the company and then shifts geographies and learned a lot. Maybe you could talk a little bit more about what succession matching is and how it operates differently from a traditional business broker. I mean, you mentioned that there wasn't really a good way to do it in Canada before you launched your business. So what is it that sets you apart as much as you feel comfortable telling us what's your secret sauce or what's your business model? I love

00:05:37 ALISON ANDERSON
shouting this from the rooftop. So I appreciate you saying share as much as we want, but we're very proud. We're such an anti-business broker taking a completely different approach. So our biggest differential proposition is we don't charge a commission on the sell side. And so when you think about it, it doesn't seem like a big change, but when you actually get into the weeds of it and look at our membership, so 25% of our members on the sell side are looking at selling to family members. 25% are looking at selling to their employees. And then about half of them are looking for a third party sale. So that completely changes the demographic that would even think about approaching a business broker and the timelines in which those individuals are looking at transitioning out. So the average transition takes two to seven years, but business brokers are only really interested in them in three to six months before they actually exit because they're getting paid on such a substantially high commission. So we work with some people sometimes 10 years before they want to sell. And it's really opened up investment opportunities in a very neat way that the market hasn't had access to with those off-market deals. So, you know, we've got a seafood distribution company for sale right now. The second generation is looking at taking it over. It's a little bit larger than a traditional bank would look at. So they're looking for a private partner to come in and finance the deal. Typically, you wouldn't have access to those types of deals. And so it's changed the structures and really the market share that we're able to go after because of those first two demographics that we work with.

00:07:16 NICK LALL
Definitely. You've talked a lot about economic development and your background and also your goals with succession matching. I was wondering if you could expand on that a little bit and how your model helps with economic development.

00:07:27 ALISON ANDERSON
Yeah, absolutely. So there's an industry term that's, I'm not sure if you're familiar with it is smokestack chasing these economic development organizations. They go after like the Amazon to headquarters. They go after bringing in large industry, or there's been this huge shift in going after digital nomads. And they're all so hyper focused on bringing this new business, they've almost forgot about their main streets and the businesses that have already been owner operating there. And if you zoom out and look at not just the economic part of it, but also the societal impact, 89% of a small and medium-sized business owner's personal net worth is tied up in their business. And so we're having the largest generational transfer right now. And if they can't find that liquidity, then this is going to impact the number of elderly we have living in poverty. And that has a trickle down effect as well. And so economic and social impact, focusing on business owners that are looking at transitioning is kind of a missed opportunity for a lot of these economic development or regional economic development organizations.

00:08:38 NICK LALL
Sure. I think that's a really interesting way of looking at people talk about ETA as, oh, there's this huge opportunity. There are all these baby boomers retiring, but not only is it an economic opportunity for the younger generation to come in and have access to those resources after they acquire a business, it's also often there's not a succession plan and there's not a way for there to be a liquidity event for the owners. And so there's also a huge societal benefit. And that's really cool that you guys see it that way. I guess you've talked about the seller side. How do you help the buyers? And I know your model is kind of focusing on young entrepreneurs and helping set them up for business success. How do you think about that? And what do you do to help the other side of the equation?

00:09:19 ALISON ANDERSON
That's a great question. It's kind of broken down into two parts, but all of it really starts with the sell side in this aspect. We have a very different type of demographic that we're working with because their timelines are a little bit longer. And one of our questions that we look for is, are you willing to stay on and mentor the buyer? And so think of it almost as like an apprenticeship model. Over 90% of our sellers are willing to stay on and mentor that next generation. And I think the aha moment for me is we romanticize startups in society. And the reality is quite the contrast to what you see in Netflix shows and things like that. But it's a struggle and it's a family affair. It's really risky. 10% of startups are still running after five years, while 70% of people who purchase a business are still in the same position after the same period. So that alone is quite substantial. But my personal mission is really to change the way we get people into business. And they step into roles where they've got that mentorship, they've got cash flow, they've got staff, they've got current customer base. It's so much easier to find financing. And so we work alongside them and matching them to opportunities that fit their criteria. And then also the second part of that is we have really strong banking relationships that we can refer off to if they're looking for leverage financing as well in the transition.

00:10:49 NICK LALL
That's amazing. All of that is quite different from a lot of the other offers out there, whether it's the banking relationships or the fact that there's actually mentorship. And BTA starts as de-risking entrepreneurship in a way, but adding those extra factors makes it a lot safer for someone who may or may not be interested in entrepreneurship. So I think that's great.

00:11:08 ALISON ANDERSON
A lot of people don't realize that they have an opportunity to become entrepreneurs. So one of our questions on the sell side is, do you have any family members you could sell this to? Do you have any staff? And oftentimes the business owners are like, oh, I've got this like rockstar employee. They've been around for 15 years. We don't think that they qualify for financing. And so we can help them structure the deal where they would qualify for some of the financing. Oftentimes the seller will do some vendor financing. And so it's really unlocking business ownership to a demographic that either self-identified that it was out of reach or just wasn't in the horizon. So it kind of levels up society through that business ownership as well.

00:11:49 NICK LALL
Totally. Yeah. Even though space is going, there are only so many acquisition entrepreneurs. So you can bring in the employees and they already know the business and they just didn't even think there was the opportunity to have ownership. That's amazing if you can unlock that. And I think that's certainly also creating a big social impact, giving business ownership to a large demographic who may have not even thought that was possible in the past. You've also talked a little bit about an initiative to bring people from conflict zones like Ukraine to the US and work for some of these businesses, especially if they have the hard skills that maybe a low labor supply here right now. If you could talk a little bit more about how you got involved with that program initially and what your goals for it are.

00:12:28 ALISON ANDERSON
Yeah, absolutely. This is the reason why I get out of bed in the morning right now. It's inspiring to see what the collective has been able to do with our project partners on this. This really stems from, I'm not sure if you're familiar, Nick, with the immigration firm called Fragelman. They're the largest immigration firm in the world. And we have a partnership with them and we help international buyers purchase businesses in North America through their programming and have been really successful on that side of things. And so through that, I've been invited to speak at the Conference Board of Canada Summit on international investment attraction through immigration. the Conference Board of Canada Summit on International Investment Attraction Through Immigration. And again, I think my sense of humor is acquired taste and being a policy wonk, I normally start my speech with, you know, I don't have a boss, you have no one to complain to, I'm just going to go left to right and tell you what's wrong with your immigration policy and why it's skewing the market right now. And so we've won some friends and had some interesting conversations from taking that approach. But there's been three provincial governments that we've worked with on doing some substantial changes to their immigration policy for acquisitions. And then we work with the feds on going back and forth on questions. When the conflict broke out in Ukraine in 2022, it was a Saturday, I emailed seven of my contacts and said, hey, I've got this idea. Let's ask the feds to waive the personal net worth verification. Because if you have a commercial property in Ukraine, really, what is that worth right now? They wouldn't take that away. But our project partner, Freigelman said, why don't we bring them in through the economic mobility pathway. So a number of countries, including the US and Canada, UK, Australia, and a few other places have set up this pilot program where an employer can bring in an employee with a job offer, and they can work in the business. But we saw this as an opportunity because a lot of our potential buyers, so we've got a pool of buyers, they've got about 700 million to deploy. And I'll use the example of we had a roll up of 11 HVACs. And the number one reason these buyers said no to this deal was because they didn't know where they were going to find some plumbers for this. deal was because they didn't know where they were going to find some plumbers for this. And so there's a pool of highly skilled individuals, either running businesses, literal trades, rocket scientists that are looking at getting out of the conflict zones. And so there's an organization called Talent Beyond Boundaries that has an inventory of 65,000 of these individuals that have already checked their skills to come over. So we've been screening for people that would be really good in an owner operator role. And the private equity groups that we're working with are purchasing the business, giving a letter of offer to say, displace Ukrainian or someone from a different conflict zone. They come in and they work on the ground in the business, oftentimes bringing skills like we were working on one with Honey Farm. There's a lot of honey in Ukraine. And so years of industry experience. And then the private equity group is opening up a minority share ownership to the individual as a retention technique. And so it's similar to a tech investment. They're investing over a four-year period of time. And so our goal with the program by the end of 2024 is to do 775 of these matches and bring in 775 families at minimum. There's 100 million displaced persons or refugees in the world right now. But this is a really cool way that capitalism can solve a really big problem for a lot of people.

00:16:12 NICK LALL
Totally. Yeah. I think that is so amazing. I mean, a lot of these traditional industries in the US have labor shortages, and then there are a ton of people all around the world that could actually do these jobs and need to get out of wherever they are. So being able to leverage both of those issues to solve this problem is amazing.

00:16:29 ALISON ANDERSON
Yeah. We had one member that I just, I'll remember him for the rest of my life. Tarek was a Syrian refugee. He came to Canada. He ran two very successful restaurants there. He came to Canada and he was working at an art gallery that was on our site. And we asked them, do you have any employees that might be interested? Like, you know, he's new to Canada, doesn't have very thick credit portfolio. I was like, okay, I'm on a mission to find a bank that will step in, in this instance. And he's been so good at helping us design this to really help these individuals that have this very unique skillset and experience feel like they're contributing and getting value as well as they're resettling in North America and in some of the other countries that are participating. So yeah, I'm just, I'm really inspired and grateful that I get to play a small part in this pretty cool project. And Dr. David Crawford, who's the committee chair for the United Nations Displaced Persons, I like to meet up with him and review some of the five, 10-year goals for this type of project. I think it's going to have a massive impact.

00:17:41 NICK LALL
Definitely. Yeah. I am very excited to see how it goes and it seems like it is going to have a huge impact. Definitely. Yeah. I am very excited to see how it goes and it seems like it is going to have a huge impact. So thanks so much for sharing that. So, you know, we connected a few weeks ago and you're also here in New York and you seem to really like it here. I was wondering what made you decide to move to New York out of all places? I mean, you're in Canada and Denver, and I think you even spent some time in South America. So what made you decide that this

00:18:10 ALISON ANDERSON
was the place to be and why is this especially a good place to do business? I'm probably going to get in trouble for this line, but I got to be my authentic self, I guess. Living in Denver, I really found that's where ambition goes to die. And people move there more for the lifestyle than the work. And so when I was looking at making a change in my own personal life, I wanted to go where the energy was. And there's no city like New York in the world. And I'd happily argue that with anyone. Everyone's so interesting, curious, driven, open to do business here. It's just been such a magical experience for the last year. Every Friday, I office with some of my friends. We play this game too long didn't read and we say it out phonetically because we think we're funny. But we walk through who did you meet this week and like a little bit about their story. I'll give you an example. I met someone that does insurance for Premier League players that they think the clubs are going to go insolvent. And it's just like, where on earth could you ask a million questions about how do you predict which teams are going to go insolvent? How do you predict who's going to get traded where? And it's just, you never know who you're going to meet here. And yeah, just mind mapping and tapping into that ecosystem here is just, it's pure magic. It's really refreshing

00:19:28 NICK LALL
to hear that because you hear the stories of New York's not going to ever come back from COVID and everyone's in Miami. And the fact that there's remote work where people can live in cheaper, lower costs, lower tax places. But regardless of whatever issues people may have with the city, I think you can't really replace just the human element of having that amazing network of people just at your doorstep. And I know

00:19:51 ALISON ANDERSON
in some of our private conversations, we've talked about to like the networking opportunities that you can hit all in one night. And so I'm not familiar with another city that's set up where it's realistic to hit three spots in one night. So in Miami, in Los Angeles, if you're going to go to a meeting, it's going to take you two to three hours just to plan for that traffic. But you can literally go to three networking events here in one evening, and it's not a problem. Everything's 20 minute train ride away.

00:20:19 NICK LALL
For sure. Based on all these conversations you've had in New York, are there any macro trends out there that give you the most excitement or cause for concern? Anything going on in the world or the economy that is affecting the way that you approach business right

00:20:35 ALISON ANDERSON
now? That's such a good question. I think it's more reinforced what I'm working on. And so obviously, we focus on sub 20 million in enterprise value. So we're not competing with M&A firms or the accounting firms. Quite frankly, they love referring to us because of some of the ways that we've automated our product. But some of the people that are working on like the massive acquisitions, like I love Lamar from Blue Owl. He's just brilliant to talk to and how they're providing liquidity for NBA team owners. And no matter what scale of business that you're at, everyone's bumping up against this liquidity issue. We might be able to debate SPACs and your thoughts on them. But one of the most inspiring people that I've met recently is individual by the name of Al Hill. And he raised a SPAC two years ago, and they're providing liquidity in one of his projects for farmers in South America, because cost of land acquisition, it makes way more sense for them to find different ways of financing it to grow their operations. And so doesn't matter geographic, everyone's running into this liquidity issue. And so that's just really reinforced that at the lower mid market that we're working in, we're solving for the same thing and facing the same challenges as those individuals. Totally. Yeah.

00:22:02 NICK LALL
I think especially outside the U.S., I mean, it's an issue here, but I think it becomes even more of an issue when you're in some of these more emerging market countries. So for sure. I guess just have a couple more questions, kind of a rapid fire to close things out. First would be, what advice would you have to someone who's looking to buy a business for the first time? What should they do to make sure they're really ready?

00:22:26 ALISON ANDERSON
This is going to be kind of a roundabout way of approaching it. But I have a love-hate relationship with some of the MBA programs that are set up for search funders now. Because everyone that jumps on a call with us is like, what kind of HVAC companies do you have? And so like, so many people are hyper focused on what the textbooks are telling them to focus on. So HVAC companies, greenhouses, car washes, and laundry mats. I have hours worth of content that we could unpack on that. I always tell people like, if your alarm goes at 4am and you have to get out of bed, find something that really interests you and aligns with what you fill yourself up with in your work. So think about all of your past roles. What did you enjoy? What components? And then try to line that up with an industry or a company that speaks to those strengths instead of trying to backfill some of your weaknesses.

00:23:23 NICK LALL
Definitely. Yeah, that's really helpful advice. And it's something I've been trying to focus on myself more as a searcher is that I think people get so excited about ETA as an option, and it is a great option. But at the same time, the same advice should be there for any business you start or run is that one actually suits you as a person and is one that, as you said, gets you excited to get out and work on it, even if, sure, there's wealth potential, but there's the day-to-day of actually operating and dealing with the people and all of that.

00:23:52 ALISON ANDERSON
Well, and I don't know if you have a similar experience coming out of COVID, but I know amongst my friend group, everyone's talking about burnout. And there's a really neat study about the red string theory. So they followed ER physicians and nurses around and figured out why does someone burn out in that setting and why the other person doesn't. And it really comes down to if you're spending more than 18% of your day on tasks that you absolutely hate, then you're going to burn out super quickly. And so I myself and I have my team, we track what we do for two weekweek sprints and 15-minute intervals and we try to hand off tasks that we really really don't like and so I think similar approach make sure you just don't end up in a situation where you're going to have to spend more than 18% of your time not enjoying what you're doing

00:24:41 NICK LALL
totally yes The old advice that willpower can only take you so long, but you really need to put yourself in an environment that sets yourself up for success. So it's a smart way to just measure that and see what is actually working for you and what's not. One final question, which I guess we may have already touched on a little bit, but do you have a why or a guiding philosophy, core beliefs that shape your approach and have led you to make the decisions that you have and keep you going forward?

00:25:06 ALISON ANDERSON
Yeah, absolutely. The one thing that we run everything through internally is, is this fair to the buyer, the seller in the community? And so if you find alignment, especially at these sides of businesses, especially when the seller is going to stay on and mentor over a period of time. You don't want two very competing individuals because it's kind of like a marriage. And so, yeah, just making sure that checks all those balances before it goes through. And that also helps us kind of screen out the people that we don't want to work with or wouldn't find a lot of value in our services. So fair to the buyer, seller, and community is super important to me and what we've built.

00:25:44 NICK LALL
Thanks so much for Where can people find you Amazing. if they want to look So fair joining, to the Allison. and community is super important to me and what we've built. buyer, seller, Thanks so much for Allison. joining, Where can people find you if they want to look up your Succession Matching?

00:25:49 ALISON ANDERSON
I love LinkedIn. So

00:25:55 NICK LALL
please reach out on LinkedIn or come to our website, SuccessionMatching.com. This episode of Search Funded is brought to you by SMBPodcastNetwork.com. The network is a collection of podcasts and shows from around the internet, which focus on bringing you interviews with amazing guests who share actionable advice, ideas, and information for small and medium-sized business owners and entrepreneurs. Visit www.smbpodcastnetwork.com to find more great shows and easily subscribe to be notified of new episodes. It's a great way to discover quality content. it's a great way to discover quality content if you've discovered us today via the network then i hope you're enjoying the show and will consider subscribing directly so you never miss any of our great episodes