Whale Sharks And All About Small Businesses

The Whale Shark has emerged and is taking over the SMB acquisitions world. A new breed of Business Buyer.

Definition: A “Whale Shark” is any individual or small group executing a strategy to purchase and own multiple SMBs long-term.

A hybrid Investor/Entrepreneur.

There are three distinct kinds of them, but they all share certain attributes.

First, why “Whale Shark”? This is a little weird, but… When setting up my business brokerage almost a decade ago I created a short-hand language of tags for people in my CRM.

Buyers/Investors = “Whales” | Sellers/Owners = “Sharks”.

It made sense. People with lots of money are often called “Whales” in finance. (I sorted them by investable $; the more you had, the bigger the whale tag you got – Blue, Grey, etc.. down to a dolphin) Tagging someone as a “Humpback” was faster than “Buyer with up to $2M.”

In the same way, entrepreneurs are widely referred to as “Sharks” due to the popularity of Shark Tank. It made sense. They’re loners, aggressive, and not afraid to get bloody. I followed the same pattern. The biggest biz owners by revenue were “Great Whites” than Tiger, Mako etc.

Easy Peasy. Now I just needed to match Buyers with the right kind of Money (whales) with Sellers with the right size business (sharks). Except I started encountering people that weren’t really one or the other… they were BOTH. They owned businesses but also wanted to buy more.

Honestly, I was not prepared for how common this would be. I grew up with a small biz owning single mom who worked seven days a week for months and could barely keep up with running just one SMB. Meeting people that owned 10 SMBs kind of fried my brain at first. How?!?! ????

I knew this happened up-market, with Private Equity Groups buying portfolios of Lower Middle Market businesses etc. But I was shocked to find a brilliant subspecies of Main Street multi-SMB owners. I was fascinated by them. I wanted to be them. I studied them!

A Whale Shark in SMB and Nature has the DNA of a shark, it IS a shark, but it BEHAVES a lot like a whale… it’s chill, filter feeds, nonviolent, yet can grow to sizes many times larger than their sharp-toothed cousins. By emulating them, you too can go BIG with small businesses.

What do they all have in common? They all have high-level skills of both the Whale Investor and the Shark Entrepreneur and use them harmoniously with their chosen strategy.

Whale Attributes: – a keen ability to understand business finances – deal structuring skills, master of the cap table – how to use debt/leverage responsibly in acquisitions.

Paired with Shark Attributes: – solid operations chops – not afraid to jump into any role – a good leader

Some remarkable individuals are indeed phenomenal at both skillsets by themselves. Other Whale Sharks are small groups of friends that form up because the Shark-y friend needs the Whale-y friend and vice versa to pull off one of these three strategies.

THREE WHALE SHARK STRATEGIES: Platform Builder- Builds one big integrated company by integrating acquisitions. Duplicator- Buys, owns, and operates a network of similar or identical SMBs. Archangel- Partners with and mentors Operators as their “money and deal partner”.

THE PLATFORM BUILDER: – the sharkiest of the Whale Sharks – achieves scale with vertical acquisitions as well as horizontal – loves synergies – becomes magnetic and absorbs/assimilates – can become dominant in an industry/geography – usually exits to Private Equity, platform sale.

THE DUPLICATOR: – wash/rinse/repeat – builds a network of similar or identical SMBs – thrives in franchise systems, but not all are – value multiple increases w/size of a network – margins over time w/purchasing power and shared expenses – simplest strategy to execute/understand

THE ARCHANGEL: – the whaliest of the Whale Sharks – like an Angel Investor but a lot more control (& cash flow) – isn’t usually an Operator, but hires or partners w/them – Mentor and Advisor – diversifies by masterminding plays in different industries – CFO ???? “money & deal partner.”

Another way to remember them is by thinking of famous public counterparts:

  • Bezos/Amazon take over the world as a giant Platform
  • Ray Kroc/McDonald’s by Duplicating a giant network
  • Buffett/Berkshire, by Buying & Backing, owns diversified companies but doesn’t operate them.

I’ve used “Whale Shark” in my vocabulary for years, but I hope to start to coin this into the SMB vernacular. “HoldCo” is a great term, but not all Whale Sharks have holding companies or find forming them necessary. Yet, they are systematically buying multiple SMBs.

I believe the Whale Shark answers the Silver Tsunami, the Boomer stereotype 1-biz-owner with no employee capable of filling their shoes. Whale Sharks are pros and can inhale 10 of them. They’re sophisticated. They’re tech-savvy. They are financially savvy. They can operate.

They’re the solution; how the tsunami will be contained when there are not enough Millennial Buyers with the skills/means to buy the $10 Trillion of SMBs from Boomers. The emerging school of Whale Sharks will pick up the slack and become the SMB Elite, the giants of SMB.

This concept leads to a series of interviews and a book. I would like to write a book where the 1st half teaches the skills and strategies of Whale Sharks and how to become one, and the 2nd half is interviews with the best Whale Sharks.

Lastly, Bison Business, the PAGD Newsletter, and everything I’ve been building as a provider in this space has been with Whale Sharks on my mind.

I hope our team becomes “Whale Shark Whisperers” and helps many grow to enormous sizes as repeat customers as they Search, Buy, & Sell.

Please chime in. Expand on these thoughts. Ask questions. Tell me what kind of Whale Shark you want to be. Let’s grow together. Let’s build wealth while saving jobs, preserving legacies, modernizing small businesses, and strengthening the backbone of our economy.

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