9 months post acquisition - lesson learned - verifying the sale funnel

I feel bad, been absent from the community here, which to be honest was highly highly valuable to me as a self-funded searcher. I'm apologetic but not sorry. I successfully acquired a company in September of last year and have been heads down for the past 9 months.

I want to write about verifying not only recurring / repeatable revenue but also a repeatable sales. For context: I bought a $4mm Digital Agency in September 2023 named Sure Oak (sureoak.com) using an SBA loan. We do all things helping companies get found by google--plug over. Here is how I approached ensuring Sure Oak would continue to grow post acquisition.

I will first assume a QofE is done, this is a perfect jumping off point. I used Cayne Crossing, couldn't recommend them highly enough.

Working Backwards:
1. Current Client organic growth / cross sells and upsells - harder than I thought, this is an exercise of verifying clients in the CRM and historical revenue in QB. Client by client which ones grew and which shrank, see if there any trends and if this a business where you can land and expand.


2. SQL's and Close Rate - What is the key event, meeting, or call the company has with the lead where you say, "this is a sales qualified lead (SQL) that I would like to have as a customer". For SaaS it's typically a demo for a marketing agency like Sure Oak it was an "Insights Call". You will want to ensure consistent SQL meetings every month. SQL x Avg Contract Value x Close %. This is your guiding number and the punchline that you must know.

3. MQL's and Attribution - You will want to know where the SQLs come from. There's a great book called Traction by Gabriel Weinberg (not the Wickman management book) where he describes 19 sales and marketing channels, they include conferences, website submissions, paid advertising, outbound, you get it. You will want to understand the top 3 channels the company invests in to get an Marketing Qualified Leads (MQL) to SQL ratio. I bought a digital agency, so it made sense Sure Oak was really good at SEO / organic search. That channel alone produced 60 web leads a month for them. They had other smaller channels such as client referrals, partners, and paid ads. This will guide where you will need to put your marketing dollars post acquisition.


Those are the key numbers you need to know, and there's a lot of work behind those 3 bullet points. Other items I considered important when evaluating sales and marketing were:

- Founder led sales: Post acquisition if the founder was the lead seller, you're going to have a hard time replicating that revenue.
- Web Leads: If the company depends on web leads, sign up for a free SEMRush account and look at historical website traffic, what keywords they rank for and any noticeable changes over the past 24 months.
-If Outbound is a major channel, you need to look at the tech stack and dive into this process further, cold emails and cold calling can still work, but it's very challenging given the massive amount of spam out there
- Break out sales close % by the different product lines, this will give you another data point on where to focus product development and marketing spend
- Break out the marketing budget in detail and see if you can ascertain any ROI, which channels can be attributed to which customers, very very difficult typically unless the target has great record keeping
- CAC - Client acquisition cost = Total Bookings / Marketing Spend and Payroll + Sales Spend and Payroll, you want a super high multiple
- Churn - what is the average length of a client and how many do they lose per month, you will never outsell a bad churn number

I'm sure there's a ton I missed please feel free to add to the comments, this was just my process.