The Wise Exit

Edin Basic - Episode 60 | CASHING OUT M&A PODCAST

00:00:00:21 - 00:00:20:03
Edin Basic
I decided that I don’t look back, because you can always have more. It's always difficult to decide when to sell. You know, I mean, I think it's a common for businesses. Like if I stay longer, I can get more. Well, how much is there is the risk of doing that..

00:00:20:05 - 00:00:58:16
Todd Sullivan
Welcome to the Cashing Out podcast, where our fellow founders share real stories and offer honest advice around selling their companies to some of the top acquirers in the world. My name is Todd Sullivan, CEO of Exitwise, where we help business owners create the exits they deserve. Today, my guest is Edin Basic, the founder of Firezza, a London based pizza franchise focused on delivery, which he sold to his largest competitor, Pizza Express, and was a refugee from war torn Bosnia and had to leave school before his final exams to escape to London with nothing in his pocket and not being able to speak English and picked up odd jobs to make ends meet until eventually

00:00:58:16 - 00:01:21:10
Todd Sullivan
launching his first pizza delivery business, which turned into more than 30 locations and his eventual sale of the business making him a multi-millionaire. In our conversation, Edin shares understanding market trends to know when to invest and when to sell. You need to know your exit strategy to make the right decisions while you're building your business and how to be ready when your buyers come knocking.

00:01:21:12 - 00:01:49:23
Todd Sullivan
I hope you enjoyed my conversation with Edin Basic. Edin, thank you so much for being here today. I know you're in the U.K., so I appreciate you managing the time zones for us. I've been really excited to talk to you because, you know, we talk about an entrepreneurial journey and you have an incredible journey from Bosnia to the U.K. not speaking the language and somehow the entrepreneurial spirit pouring out of you.

00:01:50:00 - 00:02:10:06
Todd Sullivan
You're able to build an amazing business in a relatively short period of time and then have an exit and go on to build more businesses and consult with founders and, you know, help people through their entrepreneurial journeys. So I feel very similar mission to what we were doing here at Exitwise trying to help and educate. Just really excited to hear your story.

00:02:10:06 - 00:02:22:15
Todd Sullivan
I know you got some amazing learnings for all of us. And just so you know, Mark Cuban had this spot and when you were available, when we were able to book you, I just immediately bumped him. So thank you for being here.

00:02:22:17 - 00:02:25:20
Edin Basic
Thank you for having me Todd. I'm really happy to do this.

00:02:25:22 - 00:02:45:13
Todd Sullivan
And I think the best place to start, I think, in your journey was maybe quickly you can tell me what life was like in Bosnia, what your plans were. I know you were in school and then the world changes, right? And you've got to pull an audible and get yourself out of there. Can you give us that background?

00:02:45:15 - 00:03:09:19
Edin Basic
Yeah, of course. I have a rather unusual story to say. I grew up in Mostar. I don't know if you know the place is the town with the bridge and the famous bridge which was destroyed and it was rebuilt afterwards. I studied civil engineering and my town. I had a girlfriend. I was not planning to go anywhere. I had, you know, it was it was good life.

00:03:10:01 - 00:03:42:02
Edin Basic
My family. I was on the last exam of my civil engineering when the war happened. And I left. You know, I was very eclectic and, you know, it's very nice. I came to London with a girlfriend. That was in May 1992. And yeah, it was a very traumatic experience, you know, I mean, I was catapulted from one life to another in the country where I didn't particularly want to go and they didn't want to go anywhere.

00:03:42:02 - 00:04:08:14
Edin Basic
But yeah, I thought it would be six months. I didn't speak English when I came here. I thought in six months everything will be sorted, You know, I would go back to normal. Well, 30 years later, I'm still here. I'm married with a Sicilian woman and two children. And I live in London. Yeah, that's very unusual story about, you know what doesn't kill you make you stronger, I guess.

00:04:08:16 - 00:04:26:21
Todd Sullivan
But you came to London really not speaking the language. Really? Nothing, right? Eh, No money as a refugee. And can you take us from kind of that moment to what jobs did you have and how did you decide? Like, I got to be an entrepreneur. I got to change my life this way.

00:04:26:23 - 00:04:50:16
Edin Basic
Yeah, absolutely. I came here and I was you know, I spoke French when I came here. That was the language we learned. And that girlfriend of mine, she left me with one of my best friends was here. So I literally stayed by myself in the middle of the big city. Yeah. So at first, my first job was washing the dishes in the Italian.

00:04:50:21 - 00:05:20:11
Edin Basic
Huge restaurants and two floors with no dishwasher, you know, working morning, evening. And yeah, from there, I the job was kind of almost like an escape from the reality of what was happening during the war and, you know, lots of things. And as a result, I progressed and became head chef. Yeah, I went to be a manager, area manager, operations manager for Starbucks.

00:05:20:11 - 00:05:53:01
Edin Basic
Actually, I went to Starbucks in kind of corporate. And then I always had this. Looking back now, I didn't know that at that time. I had this entrepreneurial mind, so I just feel that everything can be improved and done differently. You know, literally, I remember I had lots of ideas with a friend of mine. One of my ideas was to start when you have taxis coming in to pick you up and, you know, and driving it back home, if you have your company card, it was somewhere.

00:05:53:03 - 00:06:10:12
Edin Basic
You leave your card, you had few drinks. You can’t drive back the next day after going to pick up the card. I was thinking, why not let the motorbike somebody carry the motorbike? Foldable. They call them there for them. I want to bike in the boot of the car and drive you back home. And it's so easy, you know, your own car.

00:06:10:14 - 00:06:35:14
Edin Basic
And I was sitting in, in a terrace of his restaurants and this little motorbike passed and I said, Look, this is my idea. So I had lots of it's how my mind operates, you know, I see opportunity is everywhere. So I think my journey from doing different jobs was mainly to to gain the experience, to understand how how does who want to start a business here?

00:06:35:14 - 00:07:15:11
Edin Basic
What was it, you know, what do I need? How do I raise funds? How do I go from the idea to, you know, to to launch? And yeah, so, you know, when this opportunity came, we started a pizza company essentially in which we realized that, you know, there was at that time in London was the markets pizza delivery markets especially was absolutely huge, you know, and it was dominated by these big corporate players like Domino's and Pizza Hut and so on, which, you know, they were doing a great job, what they were doing.

00:07:15:13 - 00:07:49:09
Edin Basic
But I felt it can be done differently. You know, that this definitely can be improved, especially when it comes to the food quality. So with my co-founder, we we kind of played with this idea, how can we improve where where are the opportunities, what can be done better? So and the list was getting bigger and bigger, you know, so we went to we wanted to start a neopolitan pizza by the meter, like a pizza on Metro, which is very traditional.

00:07:49:11 - 00:08:09:20
Edin Basic
Yeah, it's very traditional in Naples, you know, for the big families. And now we found a piece of chef from Naples. We didn't have enough. We didn't have lots of funds to invest, you know, we could kind of see what we have ourselves and, you know, some friends and family and friend of ours was he's a graphic designer.

00:08:09:20 - 00:08:30:21
Edin Basic
We you know, he did the logo and and the name. Another friend was an architect, you know, So the colors and the design. Yeah, we just started and it was just crazy busy, you know, Everybody loved it. Everybody was writing about it. It was like a big deal, which we we didn't realize really what it was.

00:08:30:23 - 00:08:52:19
Todd Sullivan
So really, the the jobs that you had coming here, right? Managing Starbucks, running a restaurant, being a chef, you know, down to the dishwashing. You really learn kind of the food and beverage industry within within the London market and saw this opportunity. So you jump and it's it's bizarre. Is that how you say the name of the the business?

00:08:52:19 - 00:08:57:18
Edin Basic
Yeah. Yeah. It's a lot identity So Sophie.

00:08:57:20 - 00:09:11:18
Todd Sullivan
Firezza so okay so you build this company up essentially funding it sounds like you've funded yourself then friends and family. You took on some institutional investment at some point. Can you tell me a little bit about that and the decision to do that?

00:09:12:00 - 00:09:33:23
Edin Basic
Yeah, it was a set of kind of coincidences which really happened. The first site was exceptionally well done. We went for the second site, we ran out of some cashflow problems and one of our customers who is a music producer, so he, he allowed us the money to help. I mean, it's just kind of crazy things as a startup.

00:09:33:23 - 00:09:58:04
Edin Basic
I guess a lot of people go through the similar stuff and then we met somebody who introduced us to accountant who was raising money for the businesses like ours, and he liked what we were doing and, you know, introduced us to a VC who loved the idea of everything we are doing and really like us as a team as well.

00:09:58:06 - 00:10:08:09
Edin Basic
So the investment that was the first time, the first round of investments allow us to, you know, to open more size and to grow to grow the company.

00:10:08:11 - 00:10:12:17
Todd Sullivan
Ultimately, how many restaurants did you open?

00:10:12:19 - 00:10:15:11
Edin Basic
So at the end we had 17.

00:10:15:13 - 00:10:35:23
Todd Sullivan
Okay. So you're growing, right? You're profitable. You've got investors. You know, you're going to have to have an exit at some point. What I love about your story is there was a time where you decided maybe we should take this to market and and hired a like a corporate finance group to explore what those options were like.

00:10:35:23 - 00:10:48:14
Todd Sullivan
Can you can you tell me a little bit about that and maybe just up to that stage, what made you think that, hey, maybe this is a good time to to consider a liquidity event?

00:10:48:16 - 00:11:08:02
Edin Basic
Well, I think my partner and I, we knew what we wanted to get out of this business. So we we always had the vision to exit. You know, it was lots of lots of everything else. But essentially it is a business and we wanted to build up to it to the certain size where we could we could get out.

00:11:08:02 - 00:11:40:21
Edin Basic
What was for us was enough. It was our targets. Okay? So when we were at that stage, we, you know, obviously we knew our numbers and maybe time what the multiples are at the time when a businesses like ours. Well, we decided to, you know, to go through the sales process and it was completely something which I, you know, I never experienced, never experienced before.

00:11:40:21 - 00:12:12:12
Edin Basic
Nothing prepared me to to actually to go through the sales process means. It's always the first time. So yeah it's very how can I put it's unique experience for for us at least I believe for most of the founders it is something with you experience, you know, once hopefully, and every experience, every sales process is different, every deal is different, and everything is is unique.

00:12:12:14 - 00:12:45:20
Edin Basic
So we didn't succeed. The first time with corporate finance, unfortunately for many different reasons. I think I felt there was a disconnect in in how much they actually knew and the market and you know the what would then I just feel the the matching the the real potential buyer with us was mismatched in a way you know it's it didn't it didn't work out.

00:12:45:21 - 00:12:57:01
Edin Basic
You know we had two people from Australia and one person had two or three businesses inquiring and completely it just wast of time, you know, Most of the time.

00:12:57:03 - 00:13:16:04
Todd Sullivan
Yeah. Yeah. Can I talk a little bit about that first? I think it's, it's great that you had your number in mind, right? You're thinking about building a business with an exit. You get alignment with your partner. What is the number that we're looking for? And then you're talking about EBITDA, right? You understand that that is going to be the driver, right?

00:13:16:06 - 00:13:49:01
Todd Sullivan
Of of an exit or evaluation. And you understand the multiples in the food and beverage space, maybe particularly in in pizza places. So right there, you know more about this than than this corporate finance group, which essentially would be an investment bank here in the US. You know more about your industry than they do. And I think that that is the biggest mistake that entrepreneurs make when they think about or go to sell a business is they're just hiring a big name, a big name institution that doesn't know anything, really anything about the space.

00:13:49:01 - 00:14:16:02
Todd Sullivan
They don't know the buyers intimately. And so you get exactly what you just got, which was some person from some other country that has some money and owns a couple of businesses and may be interested in a sale. Those just rarely work out. So having very industry specific investment bankers who understand your business, not just your industry, but what makes your business special and to whom that business is going to be really, really valuable.

00:14:16:04 - 00:14:30:14
Todd Sullivan
That's what creates the best outcomes. So I appreciate you sharing that. That experience was ultimately three years before you actually sold the business. So what happened? You guys go back to the drawing board and what happens over the next three years?

00:14:30:16 - 00:14:59:22
Edin Basic
Well, what happened over the next three years was that our fund we invested in the VC who invested in us. They typically had like I think $500,000 for each investment. And so they had a very big portfolio. We they need to it was coming to an end so they needed to exit. So as a result, they're either selling their portfolio to other investment companies and so on.

00:14:59:22 - 00:15:30:04
Edin Basic
And so we saw the opportunity to buy them out. The valuation was good and we the way we organized this is by getting a group of angels who was represented by one guy, you know, And yeah, there was completed we bought them out. So we were, you know, that was a different chapter, different vibe, you know, different dynamics in the company having business agents as opposed to corporate finance.

00:15:30:06 - 00:15:54:11
Edin Basic
Sorry, as opposed to the institutional investors. There were more. Not so much. Not involved, but there are more on the wall. You know, they knew they knew the numbers and they were more more demanding in a way, but also more supportive. So we we had the plan we wanted to double the size of the company and then exit.

00:15:54:12 - 00:16:19:14
Edin Basic
So we're talking they wanted to go around 30, 35 site. Yeah. So in order to do this, we as you know, you know the journey of every company and then the profitability and every time goes up and down, depending which stage you are. So we need to invest and into the structure in order to grow. So we didn't really look at the numbers in terms of profit.

00:16:19:14 - 00:16:34:12
Edin Basic
All we wanted to send the solid base from which we can introduce processes, procedures and then roll out quite aggressive rollout. But it didn't work out that way.

00:16:34:14 - 00:16:37:06
Todd Sullivan
The timing was a little different.

00:16:37:08 - 00:17:01:01
Edin Basic
It never does. Yeah, so that's the so what happened in that time? We had less of the market. This changed. I'm not going to go into specifics on this particular market. Well, we had an aggregate, for example, coming in and it was too many moving parts which we we just didn't know what was going to happen. You know, it's going to be well, is stand alone.

00:17:01:01 - 00:17:25:03
Edin Basic
It's a place. Can we actually survive and it was too many unknowns. And at the same time, we had lots of lots of inquiries, you know, directly to to buy the company or to invest. You should always say no. But in this particular time, we just felt it was it was unusual that, you know, big players are being interested to buy our company.

00:17:25:05 - 00:17:37:23
Edin Basic
So I think we are in this position where we start almost like a crossroads misalignment of what we wanted to do, our strategy and what the market conditions were. Well.

00:17:38:00 - 00:17:59:21
Todd Sullivan
That's really interesting. Let me step back and ask a couple of questions. So so your first investor, a venture firm, their fund has reached a kind of it's its portfolio length. Maybe it's seven, ten years and they want to return capital to their investors. So they're really looking for an exit. But your business is not ready to exit.

00:18:00:02 - 00:18:23:22
Todd Sullivan
So you're bringing in another investor to buy out your position essentially with that venture capital firm, Right? You didn't buy the whole venture portfolio, you just bought yourself out. Yeah. Okay. All right. So now you've got a different type of investor, more hands on somebody who really understands the business. And together you're deciding that you're going to go from 17 locations to 35.

00:18:24:00 - 00:18:44:15
Todd Sullivan
Did you and your partner have the conversation around what that would mean for you, what the difference you project in outcome would be that return on investment because you're going to spend a lot of time, right? And you going to take on more risk, open up these locations. So I'm assuming you want higher numbers. Did you have that discussion?

00:18:44:17 - 00:19:20:09
Edin Basic
Yeah. Did you see this? Is this kind of strategic decisions when it comes to timing and the exits affects everybody differently on the board, especially founders, co-founders, everybody. A situation is different. Everybody's expectations are different. So I'm a big, big changes in strategies can cause in our case, for example, because lots of disagreements. Hmm. Well, I think you need to from my my experience what I always look at the risk and the return.

00:19:20:11 - 00:19:45:14
Edin Basic
What is the risk of doing ‘a’ and going for this over the 3 year period or the something, you know, something on a shorter period and the risk to rates even with a bigger return. So if we say, for example, we could stay another two or three years, have a much bigger return. So what are the risks between now and these things?

00:19:45:14 - 00:20:10:19
Edin Basic
It's, you know, is and this is the balance which you really need to you need to judge for yourself and see what is it worth doing or not, because now you have a certainty. This is a step right now and in three years time you have something which is double or triple but is uncertain. Are you ready to take that risk after X amount of years running and building?

00:20:10:19 - 00:20:35:22
Edin Basic
Get up to the stage where you are. So those are the questions which every business will have and every founder will need to decide for themselves. I decided this and I don't look back, you know, because you can always have more. It's always difficult to to decide when to sell, you know, I mean, I think it's a common for every business is like if I stay longer, I can get more.

00:20:36:00 - 00:20:39:16
Edin Basic
Well, how much is the risk by doing that?

00:20:39:16 - 00:21:00:13
Todd Sullivan
It's such a interesting conversation. And really what I'm thinking about is when you brought on that other investor right to buy out the venture firm. Now they have expectations for growth, right? They're investing at a certain level. You probably had a very fair valuation because you went through a process with the corporate development group and they want growth.

00:21:00:15 - 00:21:21:14
Todd Sullivan
So you and your partner have to be really aligned. Well, okay, We're now we're going to sink in all of this time effort. And like you've said, take on more risk because we got a financial partner that's helping drive that strategy. And that's a that's an interesting spot for entrepreneurs to be in. But I can hear that you guys were asking yourselves all the right questions.

00:21:21:14 - 00:21:43:12
Todd Sullivan
Is the risk, is the reward worth the additional risk? And you don't look back, right? You made your decision. And over three years, you put a growth strategy together that is going to impact EBITDA, right? You're going to give up profitability, potentially distributions in order to grow the business and have an outcome later. But it doesn't quite work out that way in your case.

00:21:43:12 - 00:21:59:01
Todd Sullivan
Right. The market changes and you've got inbound interest. And so talk to me about the decision of like, okay, maybe this didn't fit the playbook exactly, but now is the time to sell. Walk me through that decision.

00:21:59:03 - 00:22:33:00
Edin Basic
Well, I think that in this particular industry where I mean, that there is that exponential changes, so you had to lots of the technology influenced the change. For example, you had, you know, big aggregates like Deliveroo and Uber Eats coming in and you know, it was taking away it was challenging the existing habits of our customers, you know, So instead of going one place that it's like an aggregate, the watershed itself gives you more choice as a consumer.

00:22:33:00 - 00:23:00:09
Edin Basic
So it was too many movements in on the markets which were outside our control at the time. It was very difficult to to predict which way this those changes are going to how they’ll affect our current model? So that's one thing. The other thing was that there were all races like bigger big groups, restaurant groups were not doing delivery.

00:23:00:11 - 00:23:34:02
Edin Basic
There was FOMO, fear of missing out. So there everybody wants to Deliveroo and everybody wanted to have entrance to the market to somehow to get to this, you know, their own piece of cake of this huge pie, which was, you know, it was one big delivery. Everybody. Yeah, the changes are happening exponentially fast. And that's why we had lots of approaches from, you know, from the big dogs to use it as a to enter the markets and to develop their own delivery arm potentially.

00:23:34:04 - 00:24:01:19
Edin Basic
So you know, you've got the negative side of, of market changes and this which is unpredictability. How it's going to affect our client models. On the other side was this big demand which was driving the price up for the exit. Yeah. So I think when you when you weigh the risks of staying and, you know, being unpredictable against demand, somebody wants to buy your company, it's just a decision.

00:24:01:19 - 00:24:33:16
Edin Basic
Time to decide yes or no. But as I said, it's not. And it's probably the most difficult decision of mine, the entrepreneurial journey, to decide or sell because because you know, is you know. And the other team I want to mention here is that going from 0 to 10 or 10 to 20 and then from 15 to 35 sides, it requires a different set of skills from the founders.

00:24:33:16 - 00:25:00:21
Edin Basic
You know, it's a fast scale up. You're talking about two or three or four sides a year potentially, which is, you know, that's that's when when the corporate side and processes procedures and then in the structure you need to build in order to grow, you know, to have sustainable growth. And then the set of skills is completely different than from your, you know, early stage startup and the founder.

00:25:00:21 - 00:25:15:12
Edin Basic
So there was another risk which I, I had in my mind is how do we actually, as the current team, are we able to execute this properly? Is a huge question mark.

00:25:15:14 - 00:25:41:04
Todd Sullivan
Edin that's fantastic. That idea of skill set at different stages of the entrepreneurial journey to me really, really hits home. I knew I was very good at the product market fit and getting unit economics right and getting kind of to that first 25 people. But that scale, that kind of delivering kind of institutional controls in a business was not where my skill set was.

00:25:41:06 - 00:26:03:08
Todd Sullivan
And that was largely what drove the assets that I had. And it's not that you can't go out and solve that and hire the right people, but just the knowledge that the and the awareness that it requires a different skill set I think is impressive to understand. So you have market conditions, you had opportunity because you had an infrastructure and a knowledge base that other the incumbents really wanted, right?

00:26:03:08 - 00:26:28:15
Todd Sullivan
The other large pizza places too, in order to compete with the Deliveroos and the Uber eats, and then the awareness of like how big can we get? Does it match our skill set in all all to drive this decision of an exit? And you saying that's the hardest decision that you had to make as an entrepreneur or somebody coming as a refugee from war to eventually start a company, a company in a country where you didn't speak the language, that is something to be said.

00:26:28:17 - 00:26:51:04
Todd Sullivan
All right. So you go into this process, you've got inbound interest, and this time you don't hire help. You don't hire an investment bank or a corporate finance group to walk you through this. But you've got presumably more sophisticated investors on your side that maybe understand some of this sale process. Talk me through what happens next.

00:26:51:06 - 00:27:22:18
Edin Basic
Yes. That's correct. We had our team was small, but it was really, really well connected, especially from the business angels, the group that they bought. We see there was a person who was on board and he was part of the team and this guy was really, really switched on in terms of running the businesses, exiting the businesses and having the right connections in the in our, you know, industry.

00:27:22:20 - 00:27:57:09
Edin Basic
Yeah. So we we just felt after the first experience with corporate finance, we kind of knew we don't really need this, you know, we know what will happen the last time and how the how the process is run and you know, the group of buyers and the three year deals. So we just went for it ourselves. We had quite good accountancy firm, We had a good lawyer, corporate lawyer, a good finance team within the company, you know, a financial director clearly divided responsibilities who is doing what.

00:27:57:09 - 00:28:12:12
Edin Basic
And yeah, and it was just a question of getting the deal done. And that was John, this person I'm talking about, that was his expertise. He knew how to talk the language. He knew how to make a deal.

00:28:12:14 - 00:28:17:22
Todd Sullivan
So, Edin, John, is he an employee at your company or is he on the investor side?

00:28:18:00 - 00:28:29:00
Edin Basic
He had both. It was representative of this Business Angels. So they you know, they came on board to work with us and to basically keep them informed.

00:28:29:02 - 00:28:47:02
Todd Sullivan
Okay, that's great. So you have somebody that has M&A experience. And then what I also heard is you have a financial director, right? Because that person is going to be leaned on incredibly hard to get the right data, the correct data right to your buyer. How did you choose the buyer? It sounded like you had multiple interested parties.

00:28:47:02 - 00:28:51:11
Todd Sullivan
How did you select ultimately, Pizza Express? Is that correct.

00:28:51:12 - 00:29:16:02
Edin Basic
Yes. It's difficult to say how we decided this. I think we obviously comes to understand that a buyer needs to submit the offer. Then you go through your ahead of time and then it goes from there. So, you know, there is so many different variables in this process from the price, for example, to the structure of the deal.

00:29:16:04 - 00:29:44:01
Edin Basic
You know, is it is there are now or there isn't an out, is there, you know, how much is upfront, what is deferred supply, what happens with the convertible loans. You know. So one you have to measure all of this kind of offers when you receive and and make your decision. And you know, it's always good to have one or two over at the same time and to compete.

00:29:44:03 - 00:29:52:09
Edin Basic
So we had that's going to be decided to go exclusively, you know, to the to accept the and go to the due diligence stage.

00:29:52:09 - 00:30:16:16
Todd Sullivan
I just want to touch on that process for our listeners. The idea at the beginning of a process to know what you're really looking for. Are you looking for a full cash out? I don't want to work for the acquirer. I just want to walk away. Or do I want to sell, you know, majority control of my business, but stay invested and be part of the management team and grow for a future exit you like.

00:30:16:16 - 00:30:51:21
Todd Sullivan
Are there deferred payments? Are there earn outs, all of those things really need to be thought about ahead of time and you need to tell whoever is representing you, whether it's John and yourselves, what is the goal, Right? And be aligned around that. And then it is the job of your representatives, your investment bankers, to go out and get what we call Indications of Interest (“IOI”), which will say, hey, we're interested in this price range and we can accommodate a full cash offer or rolled equity, taking your equity and investing it back into the business.

00:30:51:23 - 00:31:12:00
Todd Sullivan
Or we want the full team, we don't want the full team. And then you get to look at these indications of interest which are not exclusive, and your investment banker negotiates each one of them trying to get everything that you want, including purchase price up to exactly where you need to be to to be really comfortable with your decision.

00:31:12:02 - 00:31:35:03
Todd Sullivan
And then ultimately you go with a single party into a letter of intent. You negotiate that letter of intent to where everybody is comfortable in your signing. And that is the essential document that is used to create a purchase agreement which has all the terms in it. Right. And and while you're getting that document together, you're doing due diligence, right, with a single buyer.

00:31:35:05 - 00:31:53:08
Todd Sullivan
So now you're at that stage. So can you talk to me about that due diligence process? Because I know you talk about it as it is a second full time job and nothing can prepare you for this. I think there's lessons here, and we've heard this countless times from from our guests. But please, I'd love to hear your story.

00:31:53:10 - 00:32:31:23
Edin Basic
Yeah. I think the first thing was we had very unusual offer from this particular company. It wasn't earnout. It was hundred percent, you know, by all upfront and yeah, it was very you know, for us it was very easy to decide to go for this stage where we were right now, the due diligence was six months and we when you agree on the price price, our valuation was based on EBIDTA, but there is adjusted or not adjusted, but this is a number we wish to deliver.

00:32:32:01 - 00:32:47:17
Edin Basic
So the longer due diligence goes on, the longer they are chances to, you know, something can go wrong or something can go in your favor. But normally if things go in your favor, you don't really get to increase the price.

00:32:47:18 - 00:32:48:04
Todd Sullivan
Correct?

00:32:48:09 - 00:33:11:07
Edin Basic
Correct. Correct. If you yeah. If you mess up and you miss the numbers, then they're just waiting to slash the price. This is the same over again. But what is quite challenging in this time was you have to keep perform, you have to keep performance anyway. But particularly in this period, you know, you must not drop the ball.

00:33:11:07 - 00:33:32:23
Edin Basic
It has to be everything has to be right by the same time. And diligence is not an easy thing to run. You know, we had the list of items to to deliver, which is, you know, it's almost like a full time job itself without having more resources in a companies to do this. So we just everybody has to do more.

00:33:33:01 - 00:34:09:14
Edin Basic
Okay. So going from property, from compliance, for example, to compliance was a big thing because the big companies, when they buy the smaller companies, the fine if something goes wrong in compliance is based on turnover. So if your have your business premises, you know, 1 billion turnover, the fine is going to be X percentage of that. While many are small, the fine of our turnover obviously proportionally is much smaller, so it is for the right reasons.

00:34:09:14 - 00:34:40:01
Edin Basic
They really need to go deep into into checking every single from, you know, from the employment and his only cases or the property or, you know, food and hygiene, health and safety number. So I think the numbers are the easiest part actually. And all the rest was really a really substantial amount of work. So I have the two jobs to do and you have to do the right well that you and closer to getting to this kind of completion, the pressure grows.

00:34:40:03 - 00:35:03:23
Todd Sullivan
I see it over and over and over. I think what's maybe unusual that jumps out at me is six months due diligence. I would tell you if you have an investment bank, 90 days is what they're going to allow, right? You're not going to pick a buyer that is extending beyond that. I mean, we're running a deal right now that is 30 days and you want that as a tighter window as you can.

00:35:03:23 - 00:35:25:12
Todd Sullivan
And obviously you're running, like you said, doing two jobs. But the changes in your numbers is it's less likely to happen in a short period of time. Right. And you're just introducing risk the longer this goes out. And you're absolutely right, they are looking for reasons to reduce the purchase price or put kind of some onerous term back in to the agreement.

00:35:25:12 - 00:35:42:00
Todd Sullivan
If you missed your numbers. So important to continue to grow your business, we tell our clients you got to run your business as if you're not selling because it could it could fall apart. Right? So you kind of said that you got to grow it anyway, but now you've got this extra load of due diligence on top of you.

00:35:42:00 - 00:36:00:07
Todd Sullivan
It makes it incredibly difficult. So you were able to to hold the numbers. You knew it was based on EBITDA and but you had invested in the business. So EBIT was probably not maxed out the way you could have if you knew you were selling the business at the time. But anyway, you're getting down to the goal line here, right?

00:36:00:10 - 00:36:05:02
Todd Sullivan
Incredibly stressful. What else? How did it finish?

00:36:05:04 - 00:36:37:17
Edin Basic
Well, that was it. I was always told that is going to be you know, it's not going to be easy process. And something I really didn't understand in my experience, it was I was thinking what was the was going to happen. We are you know, we have all departments, we have all the files. Everything is there. You know, the numbers, the employees fives huge, the hygiene, the data from the already started a long time ago, which was a good thing actually start preparing for this.

00:36:37:19 - 00:37:06:23
Edin Basic
But I think the deal itself is, you know, is changing all the time. We had the situation, so we walked out. We said, okay, well, this is not happening. You want to you know, that was to reduce the price and walk out and then, you know, we can bang and then walk out a few times. And I think part of the reason was that even as as as a big player, you know, it doesn't mean you have a lot of experience in buying and, you know, dealing and selling different companies.

00:37:07:01 - 00:37:28:01
Edin Basic
And also for us was the first time. So there was this clash of almost an experience in the mergers and acquisitions (M&A). Yeah. So even we had a small team which was very tight. We were in the city and in the office. Every time there is a question or email coming in, you're thinking, Oh, what now you know what is next?

00:37:28:03 - 00:37:48:05
Edin Basic
So it was like a backwards and forwards and, and I think it was February in London, which is kind of cold and gray Friday night. But those things always happen on Friday night is not it is not a Thursday sunny afternoon when you come out and all your friends are waiting and you're kind of buy drinks for everyone.

00:37:48:05 - 00:38:11:08
Edin Basic
It was nothing like this at all. So after days and, you know, sleepless nights and hours and hours and hours in the office and answering my first phone was, I just thought, this is not going to happen. And, you know, it was kind of afternoon raining and I'm in town for work and I kind of get up. I just thought, well, this is too much.

00:38:11:08 - 00:38:35:04
Edin Basic
It's just like it is too many times it happens so many problems. And and then I was called for signing. I was it was just they this went to their big office with, you know, like long tables and lots of different papers. We signed. And that was it. It was Friday night in the city, which is in the financial District of London.

00:38:35:04 - 00:38:58:14
Edin Basic
It is not the busiest time People go home, you know, early those days either Friday finished, showed us it was completely empty. There was a 9:00 in the evening time. Maybe there was nobody. My wife was in Italy with my kids. I was completely exhausted. I was just really, really, really tired. And it's like I need to call somebody.

00:38:58:16 - 00:39:20:00
Edin Basic
Yeah. Yeah. You know, it was somebody to call, you know? It was like it was actually kind of 11. One was close to midnight and there was only the last trains going home. I just came back from Waltham, but so I had a glass of wine, so well done. And I'm spirit.

00:39:20:02 - 00:39:21:22
Todd Sullivan
Good for you.

00:39:22:00 - 00:39:25:22
Edin Basic
Yeah. It wasn't it wasn't a big party at all that came afterwards.

00:39:26:00 - 00:39:46:15
Todd Sullivan
And let me jump back a little bit. So what's interesting right, is all the emotions you're getting down to the goal line. The deal fails ten times before it goes through and that happens on every. So listeners should understand if you go to sell your business, it is going to feel like this thing is going to end and not going to happen many, many times.

00:39:46:17 - 00:40:06:20
Todd Sullivan
And you know, a great investment bank or a great M&A team helps you manage through that. They get those little negotiations, they get buyers back to the table, they bring you back to recognizing where value has changed. Right. You said six months. The market can change so much in that period of time. But managing those emotions at that is really tough.

00:40:06:22 - 00:40:29:01
Todd Sullivan
And then everyone says something very similar is the actual signing. Whether you thought it was going to happen or not, it's fairly anticlimactic. So we like to ask the question, who did you call? Because you need to celebrate this moment with someone, not just your, you know, your partner that might be sitting next to you signing and so you had nobody to call you open a bottle of wine.

00:40:29:01 - 00:40:46:10
Todd Sullivan
That's great. And then that you clearly celebrate later. But I think the point is that these are fairly anticlimactic moments compared today to that due diligence period that really, really beats you up. So I really appreciate you sharing that story. What did you ultimately do to to celebrate?

00:40:46:12 - 00:41:24:23
Edin Basic
Oh, we had we had had a few celebrations with the family and friends, and I think we had the Soho House in one of this places here in West London. I you know what? I was just like looking back now, you know, I feel like it's like a high moment of syndrome. I read recently where you really try, you know, you just think, if only I can get that, you know, to kind of grab that thinking, I'm building up to this company, the Old Testament startups scaling to get to the due diligence process that you get it through.

00:41:24:23 - 00:41:50:04
Edin Basic
Finally, again, that and I remember thinking, is that it? I did. I started to put a downer on this, but it wasn't. It was. I just remember thinking, So what's next? You know what I'm going to do next? It wasn't is not the end of the journey. You know, you kind of get something and then it's like, yeah, there is.

00:41:50:05 - 00:42:15:19
Edin Basic
There is life after that. There is lots of things which you mention which to play. So I do happen to me quite quickly actually, you know, this euphoria of exiting, you know, and especially building up through the process and completion is really something you have to experience to understand how much pressure there are to to, you know, to kind of get this over the line.

00:42:15:21 - 00:42:36:17
Edin Basic
And yeah, very quickly to me came to the feeling of, okay, now, you know, I actually didn't think what to do next. What is the wow, what am I going to work on first of all in the money, You know, it's also the question, what are you going to do with this money? Not do something after invest. You know?

00:42:36:19 - 00:42:44:09
Edin Basic
Yeah. Then it created another another kind of whole world of new challenges, if you like.

00:42:44:11 - 00:43:12:04
Todd Sullivan
And I appreciate you sharing that. You know, we often talk to our founders, our clients, about what is next post-acquisition, right? Are you going to have a going to be working with the company for a little while? Do you want to buy a business? What were the goals financially and what are you going to do professionally? And I think having a sense of what your life, who you'll be after the transaction makes that transitionary period easier, but it clearly like it hit you.

00:43:12:06 - 00:43:29:02
Todd Sullivan
I was racing to the mountaintop. I got I planted the flag. Now what? Right. And that's a really tough moment for all of us. And people can say, Oh, yeah, but you got all this money. Well, exactly like what? What are you going to still do next? You're not going to just sit in a rocking chair and count your dollars, right?

00:43:29:02 - 00:43:41:05
Todd Sullivan
That's not what we're about as entrepreneurs. So I appreciate you sharing that. Can you tell me what you guys are doing now? Because because you've gone on to create other businesses and and consulting.

00:43:41:07 - 00:44:10:20
Edin Basic
I mean, did this journey after after the exit three, they asked me to stay by myself in a company to essentially to run my company within the big company. Sure. I said yes, So stay actually longer than I would. And I learned a lot. Know it's completely different, the company culture and it was really big learning. The learning curve for me and I went to I'm traveling and you know what to do next.

00:44:10:20 - 00:44:41:01
Edin Basic
I was the public speaking, supporting refugee entrepreneurs around Europe, mainly in Berlin and in this country, specifically refugee entrepreneurs. And yeah, I was I had a lot of kind of approaches from different things to do. And one of those approaches was company from a group of guys from Norway, really smart people. They recognize there is know opportunity for not being the market for what you are doing.

00:44:41:01 - 00:45:05:12
Edin Basic
And I got involved with this is called mono and we have we have six sites now we have four sites and it's growing quite successfully. We had some ups and downs after the COVID, obviously. But yeah, it's very one of the market leaders in Norway and how smart and the way that they do business, it really is incredible.

00:45:05:14 - 00:45:32:16
Edin Basic
I have a two or three projects myself here with different brands, but now what's I the latest we are doing is we are running the accelerator or the venture builder for food and drink businesses and food technology, which is called life. So we go from the idea to exits and the three partners. One is a marketing lady who heads foreign agency for a number of years.

00:45:32:16 - 00:46:04:10
Edin Basic
Another guy friend of mine, he's specialized in funding, so he's got his own platform and is global network of different investors. And I'm I'm more into strategy and operations and ideas. So we go from the idea to exits out being entrepreneurs to kind of sharpen up the ideas to find the story, the brand, the place in the market, the offering, the pitch, the fundraising launch, scaling up and and selling.

00:46:04:12 - 00:46:24:13
Todd Sullivan
I love the idea. Yeah, I love the idea of an industry specific incubator, right? Bringing the experience of people that have gone through your your exact journey. Right. That brings so much experience and insight. I'm sure that's incredibly rewarding too, to help those entrepreneurs.

00:46:24:15 - 00:47:00:22
Edin Basic
It is. I think I opened probably about 40 restaurants in my life and I feel like this is the right thing to do now. You know, is it is about money, of course, is business. But it's also, I think having looking back now, what I could have done better is hiring somebody to not to make less mistakes and having somebody to hold my hand and to kind of confirm the decision making and the strategy, especially when it comes to strategy, I would probably have shortened up my my journey from idea to exit by by half at least.

00:47:01:00 - 00:47:07:18
Edin Basic
So I feel like I can do this now for you know, for people like when I was 20 years ago.

00:47:07:19 - 00:47:26:12
Todd Sullivan
That's great. And I want to be respectful of your time this is been fantastic. I learned something on this for sure. I know our listeners will have gotten a lot out of this, so thank you. Are you have any kind of last words of wisdom, things that you learned through your entrepreneurial journey that you want to share?

00:47:26:14 - 00:47:34:12
Edin Basic
Yeah, I think our many of one of them is that, you know, you are never had a business ready. You just go for it and learn along the way.

00:47:34:14 - 00:47:38:11
Todd Sullivan
That's great. That's great, Ed, And thank you.

00:47:38:13 - 00:47:41:09
Edin Basic
Thank you. Thanks for having me.

00:47:41:11 - 00:48:03:14
Todd Sullivan
Thanks again for listening to the Cashing Out podcast. For more founder exit stories, please subscribe to the Cashing Out podcast on Apple, iTunes, Spotify, or wherever you listen to your favorite podcasts. And please remember exit wise dot com and the Cashing Out podcast are for entertainment purposes only. This not be relied upon as the basis for investment decisions.