Discover more from Aaron Kardell's Blog
Choosing a Banker, Property Manager, or Agent
Hello! This Sunday newsletter explores startups, short-term rentals, or whatever random thing has entered my mind this last week. I pick one topic weekly to go deep on and have some disparate quick hits at the end.
Do you ever wake up with a random thought in the middle of the night that probably wasn’t worth waking up for? Just me? Cool. Anyway…
Last night I realized that the process I have used for choosing an investment banker, a property manager, and a real estate agent is similar. Work backward from the results, interview the individuals with repeated success, and pick one.
I’ll walk you through how I chose an investment banker when we sold HomeSpotter and a property manager for our short-term rental in Puerto Rico.
Choosing an Investment Banker
I occasionally get asked how we found our investment bankers.
But before I dive in, let me briefly discuss when you shouldn’t engage an investment banker. For those new to this, investment bankers help you raise money or sell your company.
Some examples of when you shouldn’t hire an investment banker include:
You are raising venture capital or angel capital. It’s such a negative signal to this class of investors to hire a banker that it’s not a good use of anyone’s time. Instead, founders need to wholly own their venture/angel fundraising journey. Need help? Seek out been-there-done-that founders who are often willing to give advice to the next batch of founders.
You are looking to sell as a SaaS startup and are doing less than $10 million in annual recurring revenue and don’t have a path to get there in the next year. While some small shops specialize in this space (e.g., FE International), most investment bankers are just not interested below this threshold. If you want to sell without having reached this threshold, consider a more DIY approach by listing on a site like MicroAcquire, which has taken off over the last few years.
Assuming the above exclusions don’t apply, it’s still important to know that bankers often only operate in specific bands corresponding to the enterprise value of the company they represent. You may want Goldman Sachs to represent you. But they will not return your call unless you’re IPO’ing or raising $1+ billion in growth capital. You’re more likely to run into issues like the following. “Banker A” only represents companies with $250+ million in enterprise value, so they will not be interested in your $25-75 million transaction. But the good news is that you’re still often able to get such parties on the phone for a call and get advice, especially if they are deep in your space.
Here’s the process I followed to find an investment banker:
Track down every company similar to yours that raised a growth round or was acquired in the last 3-5 years.
Figure out who those companies’ advisors (bankers) were on their transactions. If you’re lucky, joint press releases exist that state this information. Often they don’t, though. Instead, track down someone in your network (likely an investor) who has access to Pitchbook and can look up information on all the companies you identified in step #1. Note: it’s essential to look at specific individual advisors on transactions – not just the company advising.
Reach out to all those advisors and say you’d like to talk. You don’t need an intro, and it’s likely not that hard to find their contact info… They want to have conversations with companies that match their profile. They’re in a services business ready to take your money.
Treat every conversation with an advisor as an opportunity to learn about the M&A / investment market you’re in. Advisors’ currency is information. I learned a ton from advisors we ultimately didn’t work with, including some that wouldn’t work with us because we were too small for them. Also, be prepared to give up some high-level information for initial conversations. You’re both mutually assessing fit. Things like annual revenue, EBITDA, and growth rates shouldn’t be considered overly proprietary for these conversations.
Choose a handful you want to assess further. You’ll want to sign an NDA, give more extensive financials, etc. In return, the advisor will put together a pitch deck walking through how they see a transaction happening for you, the likely targets, and what a probable valuation will be. There’s so much to learn here.
Finally, pick one. Evaluate everything, including prior results, how well you think they understand your business, how you get along with the lead partner, and their fees. Also, the terms of your engagement together matter. Most things are negotiable, including initial fees, success fees (including minimums), and tail period.
Ultimately, I was pleased with the choice we made.
Choosing a STR Property Manager
My process for finding a property manager for our vacation property in Puerto Rico was similar to how I chose an investment banker.
There were ~250 listings on Airbnb in our specific community.
I looked at Every Single One. There were ~20 property managers with 4 or more listings and many more property managers with only one listing.
I searched out those ~20 property managers’ presence on the web. Airbnb intentionally makes it hard to reach out directly because they want all communication about properties to go straight through them. However, a good property manager wants to be found.
I had specific criteria I was looking for, which narrowed the list of 20 potentials into about 5:
Fees of 20% or less.
Showed interest in how to stage and remodel the property for maximum rent and personal enjoyment.
Willing to work with me on a smart lock for the entrance.
Would at least entertain a co-hosting arrangement on Airbnb.
From there, I met with all in person and chose the one I was most comfortable with. Easy.
I know many people that opt for a DIY approach to short-term rentals. The smart ones use creative ways to train outsourced labor to respond to all their renter inquiries. All I can say for now is – not for me. Maybe someday. I’m thrilled with who we chose for our property manager.
Finally, the above processes are analogous to how you should choose a real estate agent. Who’s had repeated success selling in your current neighborhood or buying in the area you want to move to? Interview those who have. Choose one.
I’m now 7 weeks into my weekly Sunday blogging cadence. I’m curious to get your feedback. What have I done so far that you like most? What candid feedback can you give me to improve these moving forward?
I recently checked out the Taco Bell Defy concept store that opened this year in Brooklyn Park, Minnesota. Order on your app ahead of time, scan a QR code on arrival, and have your food 30 seconds later without leaving your car? Sold. (Minus, maybe, the Taco Bell part.) Contrast this with the poor ordering ahead experiences for coffee – especially considering backed-up drive-thrus and walk-in orders that often aren’t ready when you arrive. I’ve been spending way too much time thinking about this. Why hasn’t this evolved further faster? Have you seen other quick-serve concepts that nail the ordering ahead experience that dramatically reduce wait times? Genuinely curious. Send me a note.
I wrote today’s post after my weekly ritual of making french toast for my family every Sunday morning. What daily or weekly traditions have you adopted with your family?
Reply to this email with any feedback. I’d love to hear from you!
Thanks for reading Aaron Kardell's Blog! Subscribe for free to receive new posts and support my work.