DOUBLE Your Business in Mere Months via Acquisitions
so yeah where are we at adam we have about 70 people yeah yeah so we'll give it a couple minutes more and then we'll jump jump right in so uh uh thanks for thanks for being being patient while we uh we let everyone filter in here uh very excited to have you guys here um very very excited um it's a uh it's a really big uh it's a really big time really big time uh for us um you know gosh carl we've been working on this training and in this this uh this whole thing for over a year now we started in uh we started in october of 2019. so it's very exciting yeah for 14 months to put this training together um and 70 plus years of deal-making skills i've gone into what we're going to share today so uh this this is insane we're going to show you how to do deals yeah and we're going to show you how the wall street guys do it so i used to be one and a lot of the science and art of deal making that the pros use this is what we're teaching you today so we've perfected a methodology to plug it into smaller medium businesses so um hopefully you're going to really like what we're going to be sharing with you today well very cool it's 1105. carl or in your case 405 shall we uh shall we get started um uh here in a minute so uh we've got a bit of a presentation here uh again carl and i are very excited to be sharing this with you um and hope you guys enjoy it uh this is great training and uh we really uh we really appreciate you guys being here hey just one quick thing adam just just help me out uh i think all the clicking is my um are all my slack and various messages [Music] go to the upper right you know i'm technologically challenged so i'm clicking the three dots scroll up it says notifications i've clicked on night shift and do not disturb uh that should do it um i hope so all right we'll find out perfect yep okay all right if i keep clicking uh let let me know yeah no problem at all are we ready to roll yeah i think we're ready to roll um so guys uh we're uh we're gonna get started if you can't see us see what our face is you can't see the screen those are settings on your side um hopefully uh uh hopefully hopefully uh that's all worked out um hey adam um michael's asking in the chat um are the slides gonna are we gonna make the slides available yes we'll we'll send those out after uh after the call today okay right so um i'm gonna share my screen yeah absolutely um here we go [Music] i'm on a new mac that i probably should have uh there we go that's that let me just check this you keep talking at him while i just do this you keep talking huh yeah uh all right well pretty simple people coming in i think as well yeah so we're very we're uh we're very excited uh for this again we've been working on this for for well over a year um you know and we are uh we're excited for all of you you know this is this is this is specific to business owners right uh you know this is very much for people who who own uh who own own businesses and want to learn about the growth through acquisitions so uh i'm ready to roll uh okay can you guys can you see the screen sure can sure can you yeah there you go okay right all right guys so really excited about this so we're going to show you some things today to allow you to rapidly grow via acquisitions and we're not just talking about growing your business we're talking about growing your value and your net worth as well so the agenda basically is very very simple we're going to teach you today how to literally double your business and more in a day and that's the day you acquire another business to plug in to your portfolio that could take you a week it could take you three months depending on what else you're doing and because we're all about leveraged buyouts we're going to show you how to do this you know without spending your own money we're going to be using other people's money to acquire these companies that we're going to show you and this is not about you working harder or longer to achieve that scale it's about working smarter and using the power of leverage leveraging other people's money leveraging other people's time so ideally for you to get the maximum benefit out of this you're going to be an existing business owner you either started a business last year 10 years ago or if you're like chad you've acquired a business and instead of growing that business uh naturally organically you want to grow it much faster much easier and much much less risky with buying other businesses and ideally for this to work at the maximum level you want to have a business that's doing at least half a million dollars or pounds to my uk friends in annual revenues and what's really interesting is if you own a business right now that there are there are only really three ways that you can grow a business so let let's say you started a business you got it to half a million dollars in revenues uh and you want to keep growing it you can either grow organically so you can just uh do more marketing generate more leads convert more of those leads into customers etc so let's say you own a supplements company you're selling online and you're half a million dollars and you want to 10x your business you want to get to 5 million dollars in size you can just buy more leads spend more money on google ads or seo or whatever you do that'll get you more leads more conversions more revenues more customers the other way that you can do it is via partnerships so again if you're a supplements company could you go and partner with a chain of gyms could you go and partner with a company that sells athletic apparel um because you're probably going to have a similar customer base and can you partner with that company and then split the revenues and the profits and that's another way to quickly grow but by acquiring another business so growing by our acquisition um you're able to a pay for that business using other people's money but then pocket all of that additional revenue and profit so for us growing by acquisition is the smartest quickest and cheapest way of growing any business and let's be honest this is what the big boys do this is what the pros do if you've been watching the news over the past few weeks salesforce has just paid 27 billion dollars to acquire slack you know through covid and lockdowns slack's become a big you know way of life now for teams to communicate both at an enterprise level and also even small businesses you know we use slack in all of our companies that adam and i own and they've paid 27 billion dollars to slack which is quite interesting because slack's never made any profit but what salesforce are buying they're buying a massive massive customer base of potential new customers that they can sell salesforce's crm software too you know microsoft has been a massive acquire of businesses over the years i've actually done deals with microsoft back in the early 2000s when they were gobbling up software companies uh they recently bought linkedin i think they dropped 15 billion dollars to buy linkedin they bought skype about five six years ago for about a billion dollars so again they're buying customers that they can then sell all of their existing products and services too it's quicker and cheaper for microsoft to do this and effectively give up shares in their own company to get those customers much much faster than going out on organically going to market amazon's the same amazon's become one of the largest companies in the world this year but again they're buying growth when they realized a few years ago that most of their book customers were listening to music they didn't go and invent some um audio type solution they went out and they acquired it they bought audible and guess what they're selling their books and everything else that they sell to those audible customers they wanted to get into the food distribution industry so again they didn't do it themselves they thought let's go buy somebody that's in that space so i think they dropped 13 billion dollars to buy whole foods and then a few years ago they were struggling to penetrate the online shoe industry um i thought well rather than figuring that out and taking loads of time let's just go buy someone that's already done it and then we can cross sell those customers so they went and bought zappos back in the day when i was a corporate deal maker i worked for hp and we did loads and loads of deals i remember the first time i met mark hurd who was the ceo sadly no longer with us he said i want us to become a global player in software and services and we're not going to do this ourselves we're not going to hire all these people and figure it out we're going to buy something that's already done it so we bought eds 13.9 billion dollars i worked on that
deal we bought mercury a software company 4.5 billion dollars i also worked on that deal we bought scale we bought these resources we bought these functionalities even apple's doing deals apple bought dr dre they realized that everyone with an iphone listening to itunes buys really expensive headphones and apple wanted into that market they didn't go and design their own headphones they went and bought the market leader which at the time was uh was beats and um it's not just the tech guys or the online guys that are doing deals you know walmart realized a few years ago that um for it to stay relevant it had to get into online grocery distribution and they didn't know how to do it so they went and bought ijet who had a great platform loads of customers and that they could cross-pollinate and there's cautionary tales in corporate deals as well uh there's been times where companies have passed on deals and it's killed them who remembers blockbuster remember blockbuster video i remember when i was like 1819 going out to the video store with my with my then girlfriend walking around trying to pick a movie um everyone now knows of netflix probably everybody on these calls watch netflix and uh if you've read the book this will never work which i recently reviewed um there's there's an interesting tale where about five years into netflix's journey the two founders flew to texas and went to pitch blockbuster on blockbuster buying them and blockbuster said we don't need you um you know we'll squash you we're 100 times bigger well guess what you know who's now 100 billion company and who went out of business you know blockbuster is no longer around so acquiring businesses can also strengthen your market position and make you less impenetrable to outside market forces so the question i want you all to ask yourselves right now is if the big boys can do it why can't you if big boys can buy to scale add more customers more revenues more cash flow more products and services strengthen their positions get them into new markets if they can do it why can't you so when adam and i joined forces about 18 months ago you know we were having this conversation that why can't we translate what the big guys are doing i used to work for a big boy investment bank and a big corporate why can't we take all of that science and art and deliver it for small and medium business sectors so this is what this training is all about so if you guys want to grow by acquisition for all of the reasons that the big boys do there are two really big questions that you need to ask yourself so the first one is how big do you want to grow your empire so whether whether you're you've got the gardening company whether you've got the the it services business the supplements business a hotel chain doesn't matter what you've got ask yourself you know how big do i want my empire to be and then the other question is what type of deals should i close and we're going to answer those two questions so first of all when we talk about size what's really interesting about evaluation so everyone's always asking about valuation how do you value a business and generally most businesses are valued at a multiple of their profitability it's how the stock market works so if you go to the stock market um apple is worth 24.4 times its profitability it's ebitda or ebitda that's the metric of profit that we use to value businesses the stock market kind of works on a p e ratio um this is a little bit different but apple's value to its operating profit ebitda is 24.4 x when you're doing small deals so when you're doing deals up to five million dollars really the multiples kind of in the two to five range and there are two things that drive the the multiple of profit one is the size so the bigger the profit the bigger the multiple and and that's bridging the gap between a very small two million dollar business and apple uh you know 100 plus billion in revenues big businesses have got um they're highly niched they've got systems and processes and they're high growth they're really high margin and they're really fully optimized and they've got all these kind of barriers to entry but i don't want you to ignore the fact that the bigger the profitability in your business the bigger the multiple it will command in the market what mr market will pay for your business and therefore that's your net worth and what you're going to get paid if and when you decide to sell the business going forward and it's a logarithmic i can't even pronounce it a lot of rhythmic scale so these scales are not uniform uh they're log scales but you can see it's a big hockey stick so the bigger the business the bigger the profitability the bigger the value you're going to generate and there's one other statistic that i just want to kind of give to you which really blew me away when uh it was tony robbins actually that told me this um when i first met him about three years ago what he said to me is i was at business mastery in um in florida he said to me that only two percent of businesses ever get to two and a half million dollars in revenue 98 of businesses in the united states are at two and a half million dollars or less 90 plus percent are less than half a million dollars and and when i asked him you know where did he get that from he basically said oh no somebody told me and mark benny hoff told him that so i actually went out and did all the research and with the fsb census.gov and next.com you know i pulled all this data so my challenge to you guys is being the two percent if if you're at half a million dollars right now in terms of revenue through acquisition you can get into that two percent bracket very very quickly so figure figure out for yourself you know how big do i want to become how big do i want my business empire to be and then you ask the question what type of deals do i want to do and there are four types of deals that you can do so you're in a business right now you want to scale through acquisition what are the four types so the first one is you can buy a competitor so you can buy somebody down the street that's doing exactly what you're doing and just double down on your market share number two you can buy a supplier so look through your income statement where are you spending all of your money in cost of sales and go buy that guy and then increase the margin in your own business um number three you can buy a complimentary business so that was a lot of the examples that i showed you before from from the big guys so if you're a software company and you're selling software to a bunch of customers uh and they all want it services go buy an it services company and then you can cross-sell between those two businesses and then the fourth thing that you can do is you can execute something called a roll-up now a roll-up is you hoovering up lots and lots and lots of very small businesses to create a big group of them and then sell that to a larger player inside of the market we've got loads of case studies around these that we're going to show you going forward so let's look at some now so let's look at a competitor deal so that would be say let's say you own a supplements company right now and then you would then just go out and buy another supplements business just buy that growth and and buy that scale and that's what our student peter valentine has done you know he owned a a 25 or so million dollar business in canada he went and bought a a very large seven-figure supplements business in the us didn't use any reserve money to do that deal and bought that growth bought that much bigger entity um transportation i noticed there's a there's a transportation uh business owner on the call so if you own a a transport or a haulage type business so you're you're ferrying stuff around between places you can grow just by buying another haulage business and and i'll try and pronounce his name that's what our friend john gulcheran did you know he actually bought his first transport business and then as well as trying to grow that organically just thought well there's so many transport businesses for sale i'll just go buy more of them so did his first bolt-on acquisition and then he's about to close his third deal as well he's just gonna keep going keep rinsing and repeating the next opportunity is you can buy a supplier so let's say you own a weight loss clinic and you're making your customers very happy by helping them lose weight then you you're probably going to be spending a lot of money on the nutritional products the supplements that you're giving to your customers to to get them thin um so a weight loss clinic could go and buy that supplements company and again a lot more of that margin into their income statement and that's exactly what chris matthews did so chris very interesting story i don't know if you guys ever remember uh if you're not as old as me you won't but in the 1980s there was a guy called victor kyam he used to be on tv where he bought the remington shaver company he said i like the shaver so much i bought the business so that's what chris matthews did chris used to be a really huge guy like 450 pound guy and uh went to a weight loss clinic to lose a whole bunch of weight and uh what what he did was he loved the process so much he ended up buying the clinic did a leveraged buyout to buy the clinic then he bought five more and i was sat with him about two years ago it's two years ago on christmas eve uh i'm sat with him having a coffee and um we were going through his numbers and was going through his income statement i'm like wow chris you're spending a lot of money on supplements why did you go buy that company so he did he went and acquired that nutritional supplements company and now he's locked all of that margin into his business and now he's the owner of a multi-seven figure very very profitable business um another example of a supplier uh deal is let's say you own an engineering company so you're machining engineering um machines or whatever and you you're spending a lot of money buying in the components that go into your machines when i owned an engineering company and we used to make window frames as i said for airbus we would have to buy in the screws uh which was stupidly expensive from another supplier uh with hindsight i probably should have gone out and bought that supplier and saved myself a lot of money but that's what peter and hanif did so pete cobain and her neef they both joined our dealmaker academy program they partnered up they didn't know each other until they met inside of our academy they they combined pete was the uh the engineering guy used to work for nasa i believe hanif was the marketer and the deal maker they came together they closed their first deal and now they're doing bolts on acquisitions they've just closed deal number four and uh he texted me the other day said five six seven and eight are on the docket for q1 of next year so once you buy one business you learn how to do it you can rinse and repeat and just keep going another example is a complementary deal so let's say you're a publishing business let's say you publish magazines and you find out that all of your publishing customers want to do marketing they want marketing services so then you could go out and buy a marketing agency and that's exactly what our student michael nguyen did you know he published a magazine in texas figured out everyone who wanted marketing went and bought a marketing agency again spent money zone money actually did an sba deal to buy that business uh was a phenomenal deal that he did and um again let's say another story for you you're in the marine safety business and you're making man overboards and alarms for say the merchant uh navy and you want to get into the leisure um safety business be pretty hard for you to engineer and do all that yourself so why not go out and buy a company that does it and that's what lindsay lyon did uh he was the ceo of a large australian um marine safety business there was a company in the uk uh that did what he did but for the leisure industry went out and he bought them and then he kind of figured you know why am i working as a ceo for a corporate uh why don't i just leave and do my own deals and that's what he did he quit a corporate life um then went and bought a really cool company called shark shield uh which against in marine safety and i actually partnered with him uh on that deal i was his co-owner of that business um for a short space of time and um so some amazing deals here that have been done by by our students who are executing these um these deals to radically grow the businesses that they already have and and let's just quickly talk about roll-ups so roll-ups again is where you hoover up lots and lots of small businesses in a particular sector and uh a great example of this would be and say that the hair salon industry you know there's 41 000 hair salons just in the uk alone and our student darren jacobs has bought 18 of them in six months crazy he uh he decided his his daughter who was a herd dresser uh wanted to uh to own a business rather than start one he joined our program went out and bought his first hair salon for and then thought hang on a minute there's all these salons out there why not just go buy them all up so he bought 17 more and adam and i spoke to him last week he's on target to be at a hundred salons by the end of next year and that's going to be a very profitable multi-seven-figure business um another example of a roll-up could be in the the optical industry so you know the optical businesses where you go in get your eyes tested get some glasses and lenses and all that kind of stuff uh we had a student imran hakeem bought his first business and then bought 72 more he owns 73 optical businesses in the uk and was recently awarded entrepreneur of the year so all through rollups all through buying other businesses so so as you've seen from these deals not just the big guys but also ordinary people like you and i are doing these deals there are a lot of benefits to do bolt-ons you can get more customers instantly more products and services to save you going out and creating them yourselves you're buying revenue you're buying cash flow you're buying assets you're buying also channels to market so when pete valentine did the supplements deal not only did they get a ton of extra customers and a ton of extra supplements to sell what he also got was a different channel to market the business he owned originally did all of its marketing via email the business he bought did all of its marketing via direct mail he'd never done direct mail before didn't know how to do it so now he's leveraging that direct mail into his existing business and doing very very well and also with bolt-ons you don't just get all the monetary benefits you get a lot of talent as well so if um if you'll find it really hard to hire and retain you know rockstar employees you know people that could ultimately replace you so that you you can work more on your business not in your business you might find that person in one of the companies that you acquire but those are all i don't think those are benefits i think those are features the real benefits you know what's in it for you is if you do all that stuff it's going to give you a lot more freedom because by building and growing your empire you're going to get more people to help you you don't have to do the day-to-day work anymore and and that's going to give you a much better work-life balance it's going to give you more time to spend with your family or with your hobbies or in your community and doing whatever you're doing and really it's all about leveraging and scale it's it's building a machine that you crank and continues to grow your empire without you having to organically win new customer after new customer you're buying these customers and these products and services in drivers and i got to tell you if you've never done this before this is fun there's a lot of fun in deal making it's not like you're chained to your desk every day and you're answering the phones and you're trying to run your existing business you're out there closing deals talking to people raising capital it's a lot of fun let me tell you and you know we've not talked about money you're going to see some case studies as part of this training just to show you you know how wealthy this can make you as an individual but you know i look at money really as a tool i look at it as what i call an instrument of good you know money's just money it's what can you do with the money you know can you donate it to charity can you just live a much better life you know i always i always say there's there's no foul getting on a plane and turning left and sitting in a big c rather than what i used to do is getting on a plane and turning right you know i never forget you know when i bought my mother a house from just closing one deal i was able to do that and that just made me feel so so phenomenal now the market opportunity we were chatting a little bit about this uh at the start uh while people were coming on to the webinar the training the market is huge there are two over 2.6 million small businesses for sale today in these big four countries so uk us canada and australia where i'm guessing most of you are from and we've done a whole bunch of research and analysis because nobody publishes this data we've built this model ourselves only one in 11 of those businesses are going to sell within the next 12 months and take me all day to take you through the model and all the sources in the algorithm but out of 36.4 million small businesses
in those four countries just under 2.9 of them are for sale right now only one in 13 on average across those four countries are actually going to close a deal within the next year so that takes care of about 258 000 of those deals there's still going to be about 2.6 million businesses for sale this time next year that no one's going to buy so these are great opportunities and a lot of people ask me all the time you know why don't all businesses sell why do only one in 11 or 1 in 13 businesses actually sell and there are a number of reasons you know the first one is um unfortunately there's just not enough buyers out there who know what they're doing they're not following a proven process if you've never bought a business before uh it's all about understanding uh you know how that actually works especially for a bolt-on acquisition buying a bolt-on business is very very different than buying your very very first business the psychology is very very different that's something that that's really interesting to understand and a lot of buyers maybe don't understand leverage they think well i found this business it's going to cost me a million dollars i've got to rock up to the closing table with a million dollar check and you don't you can use other people's money to do deals but sometimes people don't have the access to capital they don't know where to look for the money they don't know what the process is how to get it into their deals and then sometimes some of these businesses that you find they're not adequately groomed for sale that the owners working in the business not on the business and this works guys in any sector whether you're b2b b2c um whether you have an agency you know it hr pr marketing doesn't matter you can do deals you can do deals in the professional services industry if you're a cpa go buy more cpa firms if you own a law firm just go buy more law firms if you're in architecture or structural engineering or mechanical engineering whatever your expertise is you know you can go and buy businesses in that space we've had some examples of of personal services so gyms and hair salons and all those types of deals child care you know coast on somebody that we've not talked about yet you know he's doing a roll up in the child care industry and then there's loads of opportunities for deals and roll-ups you know in the healthcare sector so before i show you how to do this let me just tell you who we are so um if you guys know us then you know this will be 30 seconds you'll your life will never get back but for those who don't know us let's just let me just explain who we are so carl allen and adam markley who was with me at the start um so we've got different backgrounds i'm like the wall street guy i've had all the big corporate institutional training although i have been on my own doing deals since 2008 my last real job i suppose was at hp while i was doing deals and i've done tons of deals over 300 nearly 50 billion dollars in total um and my deals have impacted over a million employees in 17 different countries you know adam's kind of interesting adam's main street you know he was the cfo of agora financial agora bought my old company ninja we then bought it back and now we're partnering in deal maker well society but he's got a wealth of main street knowledge he was at connections academy he was the financial controller of uh with chris and then he's had tons and tons of solid years in the public accounting space with herzbach and kaiter and 14 west so he's coming at this really from the main street perspective and the numbers perspective while i'm the kind of like the wall street guy and what's really interesting is we talked about this at the start um we're not just coaches you know we eat our own cooking we're doing deals all the time adam and i own a private equity fund called prox capital group we were literally just on a call reviewing our portfolio and all of the amazing deals uh that we've got some of them have just gone under loi which we'll talk about what an loi is uh in a short time so that's who we are and we're also mentors to the pros we're not just mentoring um ordinary business owners as amazing as you guys are we're mentoring some um some pros and don't we say adam celebrities like tai lopez who's literally buying up lots and lots of uh distressed retail businesses and taking them online he's bought radio shack p1 imports steinmart medel's and he's got tons of other deals in his pipeline we've spent a lot of time with uh with grant cardone mr 10x um robert kiyosaki was really really proud of this couple of years ago he called me the rich dad of buying businesses and i almost cried when he said that you know kiyosaki the book rich deadpool that's one of my top five business books of all time if you can see behind me i'm in my library uh readers elite readers are leaders i read all the time and um it was great for him to say that and even james altucher who i guess most of you know uh the hedge fund guy he's uh he's doing deals now as well so um so adam let let's do an example of this um why don't we show the guys uh a really really cool example of how this works i'll let you run through this because you're you're you're the clever numbers guy i will um i'll i'll flip through the slides for you yeah great so so the biggest thing is like what how does this actually work right and what is this what does this actually mean for for me so let's say you own a 500 000 per year plumbing business uh and in order to expand you're going to go into not a competitive business you're going to go into a complimentary business so this is if you remember carl talked about four growth strategies through acquisition one of them is a complimentary business right so plumbing carpentry a lot of crossover right you're gonna have similar clients and things like that carl if you wanna flip the slide here you know you've got your current business deployment services you've got all your customers and things like that and what you can do and why would you do this as an acquisition is you can sell your plumbing services to the customers of the carpentry business and then vice versa so you can sell your carpentry services to the customers of the plumbing business but this cross-selling is going to create additional revenue in and above what the existing two businesses are doing your current business and the target business right the benefit of doing this is going to add uh ad revenue while consolidating the cost base right so you're you're going to be able to share your overheads think your bookkeeping costs your accounting costs all those overheads right and then lastly again you're going to be able to grow your top line therefore dropping big profits to the bottom line because you're reducing cost along the way it is actually a very strong way to grow your business do you have one to do a complimentary so so let's look at your business in this hypothetical example you've got a business doing a half a million a year in revenue your costs are 400 000 years you have a margin of 20 that's pretty healthy that's a pretty healthy margin you're making a hundred grand a year on the 500 000 you're an owner operator you're running the business uh and if you were to sell it you could sell for roughly a three times multiple so as of right now you have something that's worth roughly three hundred thousand dollars now let's just skip to the target business now the target business we're going to assume is the exact same size as your company we all know in reality there's no two companies that are the exact same so so in this case you've got another business making a half million of revenue with a 20 profit margin so it's making a hundred thousand uh in profit and when we're using profit here we're we're roughly talking about ebitda right we're talking about the actual earnings of the business not gross margin uh not operating profit we're talking about true earnings of the business um and again that business could be acquired for three times multiple so if you see there right you have something worth 300 000 and you could acquire something that's worth 300 000 but the benefits of cross selling right this is increasing your revenue because you're going to be able to cross-sell to each business you're going to each pick up an extra hundred thousand of revenue so your business gains a hundred thousand of revenue their business grant gains a hundred thousand revenue uh and you're gonna have you're gonna have 160 k worth of cost your margin is still twenty percent here your your impact to profits an extra 40 000 uh worth of uh of profit so same thing's going to happen on the synergy side because you're going to share overheads and things like that you're going to be able to actually save across all nine hundred and sixty thousand dollars worth of cost you're going to be able to save 144 000 worth of cost well that's just adding to your bottom line so what happens you now have a company generating 1.2
million of revenue with a margin of 32 percent so profit of 384 000 and because it's a larger company someone's going to come in and potentially pay four times for it so the equity value the enterprise value of this is 1.5 million dollars so what does that mean for you you started at 300 000 your profit increased by 3.84 times but your equity value your enterprise value of this combined operation has gone up 5.1 times now this is independent of the debt used to acquire the company but the idea is as you can see through acquisition especially using other people's money you can generate a significant amount of increase in wealth in this case 1.2 million in change
just by acquiring one other business thanks adam awesome so that's an example how do you actually do it so let me take you through the process so there's eight steps to do this from start to finish from a blank piece of paper i'm going to walk you through each one so the first one is mindset and you think well what does mindset have to do with with doing deals and really to pull this off you need to go through a bit of an identity shift so there's two things to mindset that are really important the first one is to do this you've got to work on your business not in your business you can't be on the phone milling pieces of equipment doing you know whatever a tactical job is you've got to be working on the business and really as as an empire ceo to build and scale and scale there's really kind of five things that you need to get involved with the first one is you know mergers which is potentially rather buying a business you can just come together with another company obviously acquisitions which is what we're talking about today you know exits which is eventually you selling that business um and cashing out and maybe even retiring you know jv sometimes an acquisition may not work and you might decide to partner with the business on a red share but then it's also about the strategy and the vision it's that high level working on your business that's really going to drive the needle for you so that's the first thing that you've got to do and the second thing that you've got to do is it's all about really understanding what those deeper benefits are because when you think about it you know the end of the day do we really all want to own businesses or is it the is it the benefits of owning businesses that we really crave it's the benefits right it's what what does business ownership give us it you know it's freedom it's work-life balance if you can scale your existing business to a point where you're doing all this fun stuff and you're not having to do the day today and you're exponentially growing your revenues and your cash flow and your net worth and your value by doing these deals then it becomes a lot of fun and you can ultimately spend a lot more time you know quite frankly doing other things so dialing in your why is really really important because once you have that real purpose it gives you a lot of fuel to kind of follow through and get this work done and this is the same actually for anything in life you know if you want to lose weight you know it's all about uh understanding what your why is you know i i've been overweight for years i recently dropped two and a half stone so nearly 40 pounds on a fitness challenge called 75 hard because uh i'm going to become a grandfather in two weeks i wanted to grow up and see my granddaughter graduate from college and i thought well if i carry on eating and drinking at this rate i'll be dead before that happens so i got super fit and healthy she was my why my granddaughter was going to be my wife you've got to develop your own why for building your own business empire what is that actually going to mean for you and the quality of your life and your family and it's all about really dialing that in because once you've got your mindset really dialed in then it's all about deal specification you know what type of business should i buy and why and some of you may have seen this before but we're going to talk about what i call the perfect deal triad so every deal so the lady that owns the transport companies the guy that owns the supplements companies chad with his car repair shop the gardening company you've all got different requirements so a perfect deal for you is going to be very very different to a perfect deal from the next person so the first box you've got to tick is you've got to make sure that the deal is going to add value to what you're already doing it's got to strategically move the needle for you ideally it's got to grow your existing business it's got to give you the customers the products the services and maybe even the talent that you're struggling to find organically and you can get all in one fell swoop by acquiring another business it could be location let's say uh chad with his car ripper shop let's say he's in uh he's in cincinnati ohio and uh he wants to open another location 50 miles away you know is he going to go and spend the money and go through the pain of renting a place and doing that himself no he can just go and acquire one go and acquire one that's already got the revenues and the customers and everything that he needs which he's going to have to work so hard to build organically um and don't forget it's all about giving you that extra revenue that cash flow and those assets those financial weapons to really make your empire scale then once you've figured out exactly what type of business that you want to buy then it's all about finding the right seller and it's what i call a distressed seller of a good business i'll say that again you want to find a distressed seller of a good business not the other way around there's plenty of good sellers of distressed businesses stay away from those guys you want to be buying businesses that are profitable and can really make the needle for you and you want a seller really that that's kind of highly motivated to sell and they're really done with the business the business still a good business but the seller has kind of started to really check out from the business that they've either bought or they started many many years ago and we'll get into that a bit more on on deal origination but um what's really interesting as well is you definitely need a business that's got some financial firepower because we're doing leverage buyouts because we're going to be showing you how to buy these businesses using other people's money then the business needs to have assets cash flows or ideally both which will give you the collateral to be able to raise the capital to be able to close that deal and make the closing payment so then once you've figured out what your deal spec is what that perfect deal is going to look like for you you can then start to build a deal origination funnel and start to go get deals and the size range for this is really between half a million and around 10 million dollars in annual revenues and the sweet spots really in the one to five million range if you go below half a million you know are you buying a business or are you buying a job unless you're doing a roll-up and you can do those deals super super quickly like in hair salons most of those salons are you know one to three hundred thousand dollars in revenues you'd never really just buy one uh because they're so small but if you can buy 18 like darren did or up to 100 then that becomes a really interesting business also when you go above 10 million there's a lot more competition in the marketplace so trade buyers guys that are doing 20 30 50 million dollars in revenues in your market they're not gonna buy one million dollar businesses because it takes them the same amount of time to do a one million deal than it does to do a 10 million deal so there's a massive opportunity for somebody this is why we're doing this to kind of hoover up these smaller businesses create these larger groups then you can go and sell for a five to ten times multiple and really make some serious money so the half a million to ten million revenue range is really where we're going and what's really interesting about doing deals in this space versus what the big guys do and i used to work for one of the big guys it's what i call the 9010 rule when you're doing really large deals and you know i've done deals in the billions those deals are all about numbers they're 90 numbers 10 psychology but when you're buying a small business when you're buying you know a two three five million dollar business it flips it's 10 numbers but then it's 90 psychology it's really understanding what is the seller's motivation what do they actually want it's really really important because think about it let's say you find two businesses you start doing deal origination you find two deals they're exactly the same business they do the same thing same product same services could be in the same town same employees same income statement same balance sheet everything's the same the only difference is the seller seller on the left young guy entrepreneur having a lot of fun doesn't really want to sell not that motivated but as you know every business is for sale right just a question of how much if you have two trillion dollars right now you can go by apple or amazon or facebook or microsoft it's all about how much you're prepared to pay so that person might want a five times multiple to sell his business but more importantly he's going to want most of that cash for closing he's going to want 80 or more of that money at closing yet you want to find the guy in the right the guy that's frustrated could be a baby boomer 10 000 baby boomers retiring every single day in the united states according to the wall street journal tons of them on small businesses some of them they're frustrated they're burnt out they're distressed they could be sick could be sadly dying in some cases and not just them could be their their family members and they're just not happy they're not having any fun they they want to sell they want to leave that seller is prepared to sell probably for a two to three times multiple but then they might only want 10 or 20 percent of the money at closing might even not want any of the money at the closing you could buy that business 100 seller financing so you've got to find the guys on the right not the guys on the left and in terms of deal origination there's tons and tons of different methods we could teach you've only got time just to briefly touch on the big fall so there are four primary methods to find deals uh one is business brokers that's where most people start problem with brokers is some of them tend to overvalue the businesses that they that they list um you know brokers is a good place to really start but where you get the really good deals are where you go off market and what we mean by that is businesses that aren't listed for sale publicly so there's nobody else in the running for those deals you have a clear run at closing that deal and one big opportunity is building a relationship network so if you're a small business owner and you've decided it's time to sell your business there are five people that you tell before you do anything you tell your spouse well we can't get close to the spouse but then you'll tell your wealth manager your cpa your lawyer and then your bank or your financier that's partnered with you in that deal so if you're building a relationship network with those what i call deal intermediaries that is a phenomenal way for you to get deal flow and you're going to need all these guys in your team anyway when you start doing deals you're going to need a wealth manager you're going to obviously make a lot of money by doing this so you're going to need to invest it somewhere so start calling wealth managers and by the way do they have any deals that fit your specification they're going to go out and kill themselves to help you same with a cpa you call a cpa you're going to need a cpa to do some due diligence for you if you buy a business so cpas can be a great source of deal flow because they'll have access to lots of companies that they know are going to be selling same with lawyers the same with finances and banks you need all these people so building these networks is really really important my favorite approach is uh well so let's talk about social media uh first so social media whilst i like social media wasn't around 30 years ago when i was doing deals um you know we didn't have facebook and google and youtube and all these different things so social media is now a phenomenal way to get deal flow just by joining linkedin groups or posting on linkedin that you're actively looking to acquire other businesses you can get incredible deal flow in a very short space of time again it's leveraging that that relationship network piece and then my old favorite is the direct approach um if you know a business that you like uh write to the owner tell him why you want to buy his business why you like his business what you know about him build that relationship build that rapport with that seller and go strike a deal yeah so just to jump in uh just to jump in on that guys you know a lot of this will tie to the business you already have right you know you guys you guys should be business owners here and the thing is if your business is geographically close to uh your customers and depending on proximity then how you are going to approach and find businesses to buy will change whether it's a competitor or something complementary so so a lot of what we're talking about here is is going to be tailored very specifically to exactly what your business is and the kind of acquisition targets you're looking for it's and it's really important to to understand that right um uh just very very important to understand that some of these methods will work better than others based on the type of acquisition you're looking to do um and that's what's really important yeah pat's caught me vaping adam so uh this is what happens when you're on camera carl hey you know i i used to own part of a vape company so um it got me off the old cigarettes uh seven or eight years ago so uh so yeah i'll one more quick vote then we'll crack on once you've so once you've started doing donation and you're getting all these deals into your funnel then it's time to start having meetings and start doing some analysis of these particular deal opportunities and that there's really there's two things that you need to do when you're meeting with with sellers the first thing that you need to do is look for a couple of acronyms with you now klt and tcrs klt is know like and trust tcrs is trust credibility rapport and a safe pair of hands because if you're doing a billion dollar deal it's basically a process of financial engineering when when you're doing a two million dollar deal or a five million dollar deal or a 500 000 deal it's people buying and selling from people so this is a relationship business the stronger the deeper you build buyer seller relationships what i call a willing buy a willing seller relationship the easier this is so the first part of every meeting is build rapport build a relationship don't rock up to the meeting or jump on zoom if you're doing it remotely and after five seconds dive straight into your questions you know build that relationship get to know each other because it will pay absolute dividends throughout the entire deal process because if the deal hits a little bit of a sticky pack sometimes they do you can pull back on that phenomenal seller relationship to get the deal back to where you need it to be and then second you've got to ask questions so there's tons and tons of quiz i see 30 questions you need to ask every seller every business i've only got time to show you the top five so first question you must always ask is why are you selling and the reason for that is you want to get you want to take the psychological temperature you want to understand what the motivations are because that will impact your negotiation and the offer you're going to make to buy that business the second question is you need to ask how does the business grow and what will really surprise you if you've never done this before this will really surprise you 95 of businesses you talk to they'll say hey carl this is what's great about our businesses we don't do any marketing it's all word of mouth and referrals it's all repeat business you know we don't have to do any marketing we sit back we answer the phone we're ticking along we're probably not growing that much but we've got this great stable business i love those deals for two reasons number one you've got a really really solid recurring revenue base and secondly as soon as you start plugging your marketing into that business it's gonna scale over and above the business that it's already generated so really really important question number three ask how does the business work and what you're really looking to solicit there is who can run that business for you if you buy it so you can work on the business not in the business and that number two could step up and run your entire operation and give you all of those benefits that we talked about the freedom and the work-life balance and free you up just to keep doing more deals i always ask about the competition you know i always want to ask um sellers who do they compete with and how do they beat them and you know i i've lost count number of times a company said to me you know we don't have any competition every company has competition it might not be direct competition even if you're the only person in the world that does what you do you have competition you have competition for share of wallet customers whether they're consumers or businesses they only have so much money to spend so you're always competing with other people in other markets so i always ask those questions and then i always want to do a swot analysis what are the strengths of the what the strengths of the businesses the seller will give you loads one of the weaknesses typically doesn't give you any but probe find out what is weak about that business and can your existing business plug that gap what are the opportunities if these are opportunities for this business they're going to be opportunities for you and then again what are the threats in this business that you can mitigate by acquiring it alongside what you already have so once you've done all that you'll you've built the relationship you'll drop out with uh with the numbers you'll leave with all the numbers about the business so then you can go off and do step five which is all about deal structuring and deal structuring is really really simple and you know you don't have to do this if you've got a cpa that advises you and your current business you can give it to them if you have a financial controller or somebody financially in your business that is doing this already you can leverage your entire team you know to do a lot of these things even um contacting business owners and setting these meetings up you have an admin person on your team or a marketing person they can be doing all this work for you you can just be coach of the team you don't have to do a lot of this work yourself but let's talk about deal structuring for a sec let's take the deal that adam walked us through before this was doing a 300 000 acquisition to ultimately build a 1.5 million dollar equity um in the combined business so so let's say you wanted to do that deal obviously before realizing all these incredible benefits you've got to structure and close that 300 000 deal so how would you do it well there's loads of different ways that you can do it one way would be let's say you agree on a three hundred thousand dollar purchase price you're going to put half half the money down so 150 000 could be the closing payment that's what you pay on the day that you take ownership that could come from an investor we'll get into financing a little bit later that could be an investor it could be asset-based financing financing the real estate or the receivables or the fixed assets or the inventory it could be a cash flow loan from a bank or you could go and get an sba 7a loan they'll lend uh typically 80 of the purchase price sometimes up to 90 percent um but let's say we're only putting half the money down and then we're gonna pay the other hundred and fifty thousand dollars in seller financing so seller financing is that's the seller loaning us the money for us to buy the business and we pay that money in the future using the future cash flow that the business generates so to pay 150 000 a year in seller financing let's say we agreed to do that over three years so that's 50 000 per year but this business is going to be making 384 000 in profit after a year when you've combined it with what you're already doing so let's say you paid for the entire business over three years sba you can get a 10-year loan loans are typically longer but let's say did it all in three years and you were just paying a hundred thousand dollars per year back maybe a tad more with a bit of interest you still got a cover ratio of 3.84 the cover ratio or your debt service is the amount of cash flow your business generates per year divided by the amount of debt and service of debt that you need to pay back to continue paying for the business anything north of one and a half uh you're going to be in a really good place with a financier so that's how you would have structured that type of deal and then once you've done that and you've figured out you know here's my deal structure then it's time to start making offers and doing negotiations and what we do adam and i is we've uh we've built a science around this and it's what we call the offer sequencing uh there's a video of me on youtube walking through all that in a lot of detail i'm not going to go through all that now but in essence what a deal structure is an an offer stack it's uh before you go into any deal uh start making offers it's have several offers in your pocket ready to roll out so you're always one or two steps ahead of the seller so so if that was my deal 300 000 you know i'm not going to go in with 300 000 as my opening offer i might go in at 200 000 might be 50 000 closing payment plus 150 000 in seller financing you submit that and you might get a counter and then after a couple of rounds you've got a deal that works for everybody that that way you're always paying the absolute minimum amount to acquire that business without really going into crazily low and insulting the seller and really breaking and damaging that relationship uh that you've built then once you've shook hands on a deal um it's all about you then understanding the financing so back to our our carpentry deal uh let's say we'd close we'd agree to deal at 150 down 150 seller financing we now need 150 000 to close that deal and there are really six ways that you can finance deals you can do seller financing which we talked about is paying for the business over time using the future cash flows that the business will will generate not just that business when it's combined with your business and you've got that exponential cash flow from all of that cross-selling that adam talks about all of those cost synergies that you're saving that's cash flow that can be used to pay sellers when they're selling businesses to you and you can also have earn outs earn outs are where through explosive growth you can pay bonus payments to sellers so if you're looking let's say you wanted to buy that carpentry business you're only prepared to pay 300 the seller wants 500 it's not worth 500 today it might be in 12 months when you've scaled it you might be prepared to pay the seller some extra money in the future if and when the business hits those lofty goal targets outside of that then you can go into the traditional financing market you may have a line of credit inside of your existing business already you might have a bank that's uh that's prepared to lend your business money for you to go off and acquire other businesses that's something that you can use or you might want to partner with an equity investor an angel investor or a a micro-cap private equity firm uh if you go and find a really good deal um hit adam and i we own a private equity firm uh you know we have capital to deploying deals uh we're looking at deals all the time especially from students so uh definitely head us up for that and then there's a lot of cheap debt in the market right now that's probably the cheapest it's been for the last 50 years interest rates are at record lows you can get asset-backed loans so you can borrow against real estate you can borrow against inventory you can borrow against invoices for god's sake it's called accounts receivables financing or or trade debtor financing over here in europe or you can go down the cash flow route so let's say you wanted to buy an econ business or a services business that has no physical assets if it's generating lots of recurring cash flow a bank or the sba through the 7a program or the 504 if it's got real estate as part of the deal you can borrow money and pay it back between 10 and 25 years so really really cool and then once you've got the financing figured out then it's time to get the deal closed and you'd really have to do any of this yourself um you sign an loi get e
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