#031 From Sales Pro to Calculated Risk-Taker: A Journey to Success with Anthony Franklin

Steven Morell: Welcome to our new episode of Speak Revenue. Remember, revenue is not a goal. It's a result! But a result of what? In this show, we turn our eyes from the output towards the input. We speak with sales and revenue leaders and entrepreneurs, and investors about their journey. So join us on our quest to uncover and learn the root causes of success. Let's figure out what works for them. And what didn't today with my guest, Anthony Franklin, welcome to the show.

Anthony Franklin: Great to be here. Thanks. 

Steven Morell: Thanks for joining. Anthony. Real quick, for our audience, who are you? What do you do? Who do you do it for, and what makes you folks so successful?

Anthony Franklin: Thank you. My name's Anthony Franklin. I am running a search fund, and basically it's kind of a form of private equity where we go out and we talk to thousands of business owners. They are considering an exit from their business. And the goal is to find, acquire, and operate that business for the long term. Obviously there's a lot of stages in there, but that's really what it is. So I lead a small team and we talk to business owners about what's their priorities in their exits and hopefully find a great business that we can own over the long term. 

Steven Morell: I'm so happy that you're on our show today because I keep explaining to entrepreneurs who are super excited. I got an email from X, Y, Z, a big investor. I'm on their radar, right? I don't wanna crush your party. But VCs and investors have to maintain a pipeline as well. The bigger the pipeline for an investor they have learned from us salespeople as well. The bigger the sales pipeline, the higher the chances that they will find a good investment. Now, I know that you have a background as a salesperson turned private equity. Tell me more about this. What is your personal story? How do you get from being in sales to being on the side of a private equity investor side? And should more salespeople become entrepreneurs?

Anthony Franklin: Quick answer is yes. So my background is, I've been in sales revenue, for, I don't know, maybe 15 years. And I have this unique career where I started off carrying a bag. I managed a team, then I was a pastor of a church for about 3 years, and then went back into the for-profit world. Funny story there, but. And then, I've been in venture-backed startups probably for the last 7 or 8 years, right? And last three or four have been VP of sales, head of revenue roles. And, one of the things I found, and the reason I went into this kind of space is that when you're in venture-backed startups, even though you've been responsible sometimes for winning tens of million dollars of ARR in the business, right? You actually get, if you're lucky, half a percent, maybe a percent of equity, and it just doesn't seem like what you're building, you're really getting rewarded. And that's not even real equity, that's options. And you know that whole story. So I came across search funds as a way to take these skills that I've developed as a sales leader and manage a go-to market team and funnel that into something that. Hopefully we'll pay off a lot more in the future. Not just in options, but also being rewarded for what I built over time

Steven Morell: So maybe for our audience, real quick, what is it that you guys are doing?

Anthony Franklin: Yeah, so what we're doing is we are reaching out to business owners, entrepreneurs that have built their companies and small companies, but they're looking for an exit. And that could be a lot of reasons. They wanna retire because of health issues. They're running two businesses. They feel like they've capped out. Maybe they don't have the sales. Or go to market expertise, they're more of an engineering type, whatever it is. And having that conversation about what the next sort of era of that business looks like, right? They built something incredible. So what we're doing is we're our small team is reaching out to thousands of businesses, looking for the right business for us to invest our time, our money and purchase. So that's what we're doing at scale. And its private equity is. In some ways when we're talking about deals and how to get more businesses into your funnel, it's very much a sales game. And I think salespeople have that skill set and that's what I'm bringing to the table. 

Steven Morell: It's probably not a sales game. It's a buyer game…

Anthony Franklin: Sure.

Steven Morell: …you're buying companies. But the logic… 

Anthony Franklin: Well, it's it but I, let me say this it's a sales game in the sense that they have to decide to sell me their company. Yes, I'm buying, but there's a bit of a sales that I'm the best buyer for your business. So it is kind of that give and take of sales and buying it. 

Steven Morell: Whoever from our listeners wants to sell their company, what are the entry criteria? 

Anthony Franklin: Yeah, so entry criteria for our search, and then there's others out there, but we're looking for B2B SaaS. We're looking for companies that are between 3 and 15 million in ARR. We're looking for profitable companies. They don't have to be massively profitable, but they need to have some profit. We would love a million dollars in EBITDA. So their profit. And then, we're looking at some interesting industries. We're looking at things like fraud detection software. We're looking at legal software. So they call it e-discovery software.  Then speech and voice recognition software, which is the last full-time role I had. I was just in the head of revenue role, so know a lot about that space as well. 

Steven Morell: What about geographies? US? America only or worldwide?

Anthony Franklin: Yeah. No, we're doing national US. We are, you know, kind of a big decision because my wife and I and our kids are planning on moving to where this business is located. So we're serious about this. It's not a small deal for us. But we're really invested in building this business and taking it to the next era.

Steven Morell: Interesting. Your target group, if we want to call this. Are you calling this ideal customer profile?

Anthony Franklin: Yeah, I would say that ideal customer profile, we don't really use those sorts of terms, but it's essentially the same thing, right? Target acquisition, target owner. But yeah, I would say it's essentially the same thing. 

Steven Morell: It's the same thing, but different vocabulary. So what's your definition of your target company? Target group? 

Anthony Franklin: Well, the definition, so I think there's maybe 4 types of companies that I think are really attractive for a search fund, in particular ours, right? I think number 1 is businesses that have a niche addressable market. So maybe they wouldn't have the same kind of love from venture capital or private equity. We're talking about SaaS for credit unions, right? Maybe a smaller group with a specific tool set. Another one, software plus services. So maybe half of their revenue actually comes from consulting. Half of it comes from recurring revenue software.

Steven Morell: So they don't have to be on the traditional track to be a unicorn?

Anthony Franklin: No. 

Steven Morell: On the track to healthy company?

Anthony Franklin: Yeah I mean there's a combination in today's world, right? So most of the time it's gonna be a bootstrap business. Someone's built it themselves and now they're looking to take some chips off the table and they may stay on in the business, maybe we keep them on and they are the CTO and they wanna keep building, but we just have a controlling interest in the business going forward, and we work together to build this to. Something even greater, right? 

Steven Morell: What's the multiple, what's the range? Say I have a B2B SaaS making 5 million 1.5 million EBITDA. What can I expect as a payout if I sell?

Anthony Franklin: To us or to someone else? It depends on who you sell to, right? So if you're looking for top dollar for your business and you don't really care what happens after you leave, right? Private equity and strategic acquirers probably are the best fit, right? If you want someone like yourself running the business and you wanna pay a fair price, usually search funds. Some private equity would be good options. So some of it's who you are selling to, right? Some of it is how much EBITDA is in the business. Some of it's the type of business. So if we're talking about SaaS, usually that's a revenue multiple. We're looking at anywhere paying between 2 to 5 x revenue, multiple. Right now, public companies are trading around 6 x revenue, multiple SaaS businesses. These are not as big as these businesses. They're actually quite, considerable risk at this stage. But still, I feel pretty good. That's where I've been the last seven years. So it's a risk I'm willing to take on. And then there's other considerations. Is this a predictable revenue business? Where do you have recurring revenue? That is a lot more attractive because you can take debt out against that business and you can predict what's going to happen in the future. I think the size of the business matters, so it's hard to pinpoint, but generally we're seeing public companies trade at 6 X and probably a smallish company at this range. Some points below that.

Steven Morell: How do you reach out to this target group, how do you filter for them? It's easy to get address lists. There's Apollo, there is ZoomInfo and all the others. But what do you filter for?

Anthony Franklin: Yeah, good question. So this is an iterative process, like I think all sales are, but for us it's, more about the industry itself and then it's about the size of the business. So filtering from those places. And then I think about revenue range and then building sort of a list there. And then we have an outreach campaign where we're getting in front of a lot of these business owners. So let me take a step back here. So there's three ways you can find a business, right? There's proprietary search. So that's like what most sales outbound would be thinking. Then you've got a brokered search where maybe they're going to a broker because they don't really know what they're doing, the business owner. So maybe we go to a broker that kind of shops this business around to see what folks are willing to pay for it. And that happens less often, more competitively. And then probably the third way is through your personal network, right? And there's advantage and disadvantages to them. But if we're talking about proprietary search, that's what we're talking about. We're talking about usually a 8 to 9 touch cadence of outreach. We're doing something.

Steven Morell: We are talking cold email?

Anthony Franklin: Yeah, cold email. We're doing a few phone calls. We're doing a direct mailer as well. Just to skip the spam filter if we're hitting that. And then we're also doing some sort of Vidyard and putting our face in front of owners, hopefully. 

Steven Morell: Give us we like to be in this show, always very tactical. Hands-on in the trenches. How many emails are you sending per month?

Anthony Franklin: Per month. We just got started, so you know. How many total emails a month? We're probably looking at

Steven Morell: Ballpark. 

Anthony Franklin: 800 to a 1000 let's say. 

Steven Morell: Okay. That's already solid. If you can share what's your opening, what's your reply rate?

Anthony Franklin: Open rate, I'm not sure off the top of my head what the open rate is, but, I'd have to check. So we, again, we just started the search fund, so we're just starting to outreach. And so we're still on.

Steven Morell: Let's ask in a simple way, how many meetings do you get out of this?

Anthony Franklin: We get a good amount of meetings. So let's say on average 8 to 10 meetings a week through just proprietary search, right? And again, meetings are just defined as someone willing to engage in a real live conversation. There's further qualification criteria, just like any sales process, but 8 to a week. 

Steven Morell: You're setting out 800. You get 40 to 40 meetings a month out. That's, if I'm not mistaken, two and a half to 5%.

Anthony Franklin: Something like that. Yeah, that sounds about right.

Steven Morell: Then you take those meetings and this is essentially a qualification call.

Anthony Franklin: Yep. 

Steven Morell: Who's doing the qualification call? Is there something like an SDR / BDR or ? 

Anthony Franklin: This is a little different. Generally business owners don't want to talk to SDRs. Or interns or any, entry level employee, they want to talk to the person that, and get a sense of who would be buying the business. That's pretty important. This is very personal to them. And something they built for maybe the last, 5 to 10 years at least. Yeah, so usually I'll run that myself and have the qualification criteria. The sort of, I'm looking for at least in that initial call. Rather than try to close on that first call, Usually we'll have a second call just because we'll both have extra questions and there's a bit of a comfort level that I think is different in this space, right? So, if I'm buying a product and I'm using my company's money in B2B, that is an easier decision than selling my life's work for the last five to 10 years or more to this person. So I find that, usually we need to have a second call follow up questions. They have questions for me, and that's totally fine. And then that gets us to the sort of LOI stage and so we're making an offer to buy the business. 

Steven Morell: How long does it take between this first call and you making an offer? And what needs to happen in order for you to be even able to make an offer?

Anthony Franklin: Yeah, that's great. That's a good question. So I think some of it's the criteria I discussed earlier on this. So if they're meeting some of that criteria, there's other criteria as well. Some of this is hard to quantify, but let's say talking to a business owner that's not selling the business for really a valid reason, right? So if you have a younger business owner who is selling, it seems like at the prime of the business it doesn't really compute and they can't really give you a reason why they're selling. That's a red flag, right? Why would you have this? Great business that you're willing to sell. So sometimes it's something like that. Sometimes it's also more of, is this someone that is gonna be easy, like the culture they built? Is that something that I would wanna inherit? So maybe employee retention is fairly poor, or the culture they've built is a culture that doesn't really vibe with, kind of what I would wanna build and what I think.  So sometimes you have to quantify it, but, so let me take a step back. So you have that qualification call. Then you have a second call where you know, you get all the questions out. Then you usually request financials. You sign an NDA, a non-disclosure agreement. Then they send you the financials and you do a bit of analysis, put it into an Excel sheet. And would the numbers work out potentially assuming everything they've told you is true? Would the numbers work out to deliver return to investors, to, all of that pay down debt. And then if that would work, then we'll make an offer. So part of it is the financials, but part of it's also the business they built. Is that something exciting? Is it what they advertise on their website? Sometimes you talk to a business that says it's recurring revenue and you find out it's a team in, you know, a foreign country and it's not really automated, right? It's not really recurring revenue. It's actually some folks saying it's ai, but it's folks in the background actually manually doing it, right? And that's where you have to dig into some of these things.

Steven Morell: At some point you have to do all the due diligence and tech due diligence and finance due diligence. Does the founder usually stay on or do they just cash in and cash out and are gone?

Anthony Franklin: If you're part of the search community there, this is a pretty divided issue, right? Like it, it really depends on the person. How good of a people manager, the purchaser is right. Have they actually even managed a team? And can navigate some of those difficulties. And what the owner wants to do. Some owners want out. I'm going to the Caribbean after this and I don't wanna touch this thing. I haven't taken a break for a long time. That's very different than maybe an owner that, let's say is a series A distressed series A startup that maybe has been building this and they're not gonna raise a series B. They may have venture partners, but they want to get out of this kind of venture game. It's maybe not a venture scale business. They're growing, but just not at that level. That person probably wants to stay on in some way. And we're open to that if they wanna stay on and maybe hold 10, 20% of the equity and continue helping us build this, right? 

Steven Morell: So you come in as a partner then?

Anthony Franklin: Right! They come in as a partner, but generally speaking, most owners, I find they wanna, they want to exit and maybe they'll stay on as advisor or consultant. 

Steven Morell: Who's filling that chair? Where do you find people talented and skilled enough to take over from the founder? Who is not currently crazy busy doing something else?

Anthony Franklin: Search funds, the way they work is the person raising the fund and buying the business is also running it. So in this case, I would be the business and that's part of the allure. There are some people that buy businesses and they don't wanna own it. They wanna own it, but they and they want the cash flows, but they want someone else to run it. And then in those cases, there are always people out on the job market that would be chomping at the bit, I think, for this type of role. And a way to create their own destiny. Some people prefer younger, hungrier, and this is all debatable, okay, but younger, hungrier, maybe an MBA grad that is looking to get into the role and, has some investors, has some advisors that can guide them, mentors.

Steven Morell: Let's talk real quick. We spoke before the show about salespeople becoming entrepreneurs and that we see this, but we both feel we are not seeing this often enough. I'm an entrepreneur, turned salesperson, to be honest. You're a salesperson turned entrepreneur. We spoke about Sam Jacobs, the founder of Revenue Collective, now Pavilion. The GTM funds a lot of salespeople and GTM people funding companies. Why do you think that there are not enough salespeople being entrepreneurs? What do you think is the reason?

Anthony Franklin: So I think there's maybe three reasons. If I'm honest I do think sales is quite, it's really unique, right? There's actually no other job that you can really get where you can pinpoint exactly the metrics you need for success. Any product manager, any engineer, any other person other than the go-to market team, they have a hard time. And I think that measuring success and how easy it is, it actually is quite different when you're an entrepreneur. You can measure sales success, but how do you start measuring these other things? And I think there are measurements for sure. But I do think sales is very important. I think you get used to the pinpoint accuracy, right? And being able to create your own destiny. And I think that's harder as an entrepreneur. I think there's more risk as an entrepreneur. Everybody's heard the stats of how many startups fail, right? And so you have this sure bet if I can go in and make $250,000 or more as an AE in many roles versus I might work out and live out my dreams and be an entrepreneur and CEO. I think that risk is hard for many salespeople to absorb. I think it's easier though for them to absorb it because the 50th percent of their revenue is based on, it's at risk anyway in the first place, right?  But I think that's part of it. I think the third reason too is I just don't think there's enough... If we're talking about entrepreneurship and how to deploy capital. I think what happens is we're individual contributors, we learn how to do a skillset. Then you're a first line manager. Your role is to manage people, but then above that second line, third line managers really need to learn how to deploy capital. And that's not a skillset that we are very good at. And I say this because the tech world is very good at teaching those managers. How do you deploy capital in the right way that's going to return. You're not just doing what all your competitors are doing or what you've done in a previous company, but you have a really thought out process of how you deploy capital. And I think that's essentially what an entrepreneur is. They're deploying capital in a way that's going to have a significant return on that investment, whatever, that they're deploying capital. And I think those are the three reasons. And it's not common. I, again, I'm inspired by some of those folks you mentioned earlier. And they inspire me, and that's one of the reasons I'm doing it. But I do think, when you've worked a job for let's say 15 years and you've been successful at that job, that's really, there's an opportunity cost to go be an entrepreneur now because, you could go back and just make your 250 K pretty easily, right? So I think that's a challenge. But when you think about long-term rewards, right? It pales in comparison to what you can do if you're building your own thing. It's a no brainer for me.

Steven Morell: yeah. Anthony I have a question I ask all my guests. 

Anthony Franklin: Yeah. 

Steven Morell: Suppose I have a time machine that allows me to send a postcard to the five year younger Anthony Franklin, and you can write something on that postcard. Sending a warning to the younger self? To your younger self. What to do, what not to do, what to avoid. What would you write on that postcard? 

Anthony Franklin: It would be a long postcard of number one. So, I think maybe the… 

Steven Morell: Have to write very small?

Anthony Franklin:Yeah, we're very small, right? Yeah. Maybe bullet points but anyway, I think number one is to take calculated risks on a regular basis. I think about what we do a lot of times, and this is something in my career and why I'm getting into it later, I'm almost 40 years old, right? And turning entrepreneur, it's Hey, it's not a move that a lot of people make. But the truth is I wish I would've been spending that time when it wasn't as big of a risk to do that. Right? So I think taking calculator risk is super important in your career. Maybe you don't wanna be an entrepreneur, that's fine. Take calculator risk. Take a job that's gonna give you a skillset that nobody else has. I could tell you the bottom line, when I'm talking to owners. Or interviewing for a job. Nobody has been a former pastor and turn salesperson. Like that's super weird. And they're like, tell me about that. Right? That's the stuff that, that, that helps you grow. I think the second thing is to find a mentor, right? And it doesn't need to be this like official will you be my mentor type thing? I've probably never asked somebody that, but I've shown a lot of admiration taking people out to lunch and said, Hey, I admire what you've done. And I wanna learn. And here I have some questions. I'd like to get some time with you to ask these specific questions. I'll put 'em right here in this message, but can we get some lunch right? And have that on a regular basis. Those are the relationships that I value so much these days, right?

Steven Morell: Speaking of having lunch, if a listener is interested in selling their company or at least discussing it, how do they reach you?

Anthony Franklin: Yeah, you can reach me. I'm on LinkedIn. Anthony Franklin. 

Steven Morell: We'll link you on our website. Go to the episode. If there's a transcript, we'll add a link. 

Anthony Franklin: Yeah. 

Steven Morell: LinkedIn is the way to reach out.

Anthony Franklin: you could also email me at spearheadcapitalllc@gmail.com. 

Steven Morell: Fantastic, Anthony, thank you so much. All right, everyone. That brings us to the end of this episode of Speak Revenue. I want to thank our guest, Anthony Franklin for joining us today and sharing his knowledge. It was the first time that I had a pastor on the show, so it was a great experience. I hope we'll have more men of God here. A huge shout out to our listeners. Your support means the will to us. Remember to check our website: speakrevenue.com for a full transcript and the contact to Anthony. If you enjoyed the show please, please leave us a great review at Apple Podcast, Spotify, Google podcast, or wherever you go for your listening needs. It really helps to get the word out. Also, follow us on LinkedIn, on Instagram, on YouTube, and wherever you can find us. We'll be back soon with another great guest. Until then, stay curious, stay healthy, and talk to you soon. Goodbye.