A $6M Cashflow Business Built in 18 Months

0:00Hello, everyone. Welcome back to another episode of Acquisitions Anonymous. My name is Bill D 'Alessandro, and today we have the full compliment, all four hosts, myself, Mill Snell, Michael Girdley, and Heather Anderson, and we talked about a wild business. It is a membership organization with$6 million of EBITDA. They are in 30-plus cities around the country, and members pay$10 ,000 a year to be part of this networking organization. And it has rocketed to 6 million bucks at EBITDA in under two years. So this is a pretty cool one. Obviously, we don't know the name, but this is reminiscent of a YPO or a Vistage or an EO.

0:41We think things like that. So if that interests you or you're a business owner or you're even part of a group like that, I think you're really going to like this episode of Acquisitions Anonymous. We'll set Acquisitions Anonymous. Hello, another episode of Acquisitions Anonymous. We don't have 100 % ears anymore. And thumbs downing on just the plus inventory alone. Hey, everyone. I just want to tell you that this episode is brought to you by VeriVend, which is the only platform purpose-built for independent sponsors and private market investors who want to move faster and eliminate friction. VeriVend is cool because it combines investment management and secure instant payments into one platform.

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1:59Acquisitions Anonymous:All right. So I have a listener submitted deal. This is a deal that came in from Rand Larson who bought ScalePath from us. This is in his space, which is it is a prestigious networking platform designed exclusively for high net worth executives, entrepreneurs, and business owners. the platform has enjoyed skyrocketing growth as its client enjoyed their unique combination of business growth networking opportunities luxury experiences and philanthropy you know it did just strike me that i hadn't considered that maybe he's sending me the listing for the business i just sold him like he he's flipping it and wants you to buy it back or something hey what do you think about this what's the sale price let's let's verify a couple things well if you look at the numbers and I'll tell you real quick.

2:44Okay.

2:45Acquisitions Anonymous:This innovative platform continues to grow as it fosters a holistic environment, giving elite leaders the ability to thrive personally and professionally. And now operating 34 chapters across the United States, this company has ambitious plans to expand to 100 cities domestically and internationally. Their impressive financial performance has included explosive revenue growth in 2023, 2024, and the trail in 12 months. And the business is on pace to grow 6X by the end of 2025. Their high margin model is bolstered by zero cost of goods sold and an optimized operating expense ratio, resulting in a net margin of 62.6 % year to date.

3:21Acquisitions Anonymous:Whoa. So, Heather, what is this business? Do we understand what this business does yet, like at its core? Is this like an EO Vistage type thing? Yeah, it's something along those lines, obviously, but multi-city. And they don't tell us what kind of network it is. I guess just high net worth executives, entrepreneurs. It's some kind of business network, but usually you need some kind of niche within that. It doesn't tell us exactly what it is or we'd probably be able to figure it out, but who it is. But I think that's what it is, right? That's what it sounds like to me. They do have a picture here of two African-American professionals, which may be a clue or it may be a stark photo.

4:00Acquisitions Anonymous:So I don't know. It's true. Bill, do you have a read on what this one is since you just joined the podcast? I'm four minutes late and you guys on time today. Yeah. I mean, is this an amazing business, right? Like they facilitate networking groups for executives and the annual membership fee is $10 ,000 and the lifetime value is 25 to$30 ,000, which means people stick around for several years. Yeah. And that's not that crazy. I mean, Vistage now is 15 or 18 ,000. I don't know what YPO is, Bill. Is it kind of the same level or is it cheaper? It's about the same level. You have chapter and national dues in YPO, so they stack.

4:38But yeah, it comes out to roughly the same.

4:40Acquisitions Anonymous:Yeah, and then EO is$6 ,000 or$7 ,000, I think, now. When I was in EO 10 years ago, it was$4 ,000, so I assume it's a lot more expensive now. But not out of line. I mean, we need to keep reading this because some of this is a little bit outlandish, like the launch of their health and wellness course. Yeah. Keep reading. There's a lot here. Okay. Okay. I mean, I think for full disclosure, this is on website closers.com. So. Yes. So you're saying what? It might be a little bit embellished? I mean, this is not Goldman Sachs presenting that. Let's just say it that way. Memberships are tiered into three categories, which generate annual pricing ranging from$37.50 to$30 ,000 a year.

5:27Acquisitions Anonymous:The average annual membership fee is$10 ,000, while the platform's lifetime customer value is considerably higher at$25 ,000 to$30 ,000 per member. The company prides itself on a diversified revenue model with no single member or sponsor contributing more than 15 % of total revenue. The company is poised for continued growth. A new owner could take advantage of the company's solid foundation to scale this platform through global expansion, monetization of a forthcoming mobile app, and the launch of an$8 ,000 health and wellness course. Additional growth avenues include corporate sponsorships, partnerships with luxury brands, and content monetization through a virtual library and the launch of new courses.

6:04Acquisitions Anonymous:They have a, man, this thing gets long, so I'm going to just kind of take and choose. The one thing that comes out at me is members enjoy exclusive high-end experiences and events, including opportunities to enjoy yacht excursions, supercar racing, and wellness retreats. Sign me up. Yeah. Operational efficiency is achieved thanks to the company's team of chapter directors who operate on commission, which has minimized the need for high payroll expenses. Efficient marketing strategies have enabled the brand to achieve a low customer acquisition cost of$500 per member and maintain strong cash flow with an average monthly new membership sales of around$200 ,000 and growing with every passing month.

6:43Acquisitions Anonymous:The brand maintains its exclusivity through strict membership criteria, personal introductions, and high-profile events. Philanthropy and community involvement further enhance its reputation as a socially responsible network. Their strategic partnerships with reputable firms provide financial support and bolster brand credibility. The broker says that there is explosive growth potential, a great high margin model, and exclusive community and experiences. And it's quickly emerged as a premier destination for high net worth business owners looking to enhance their personal and professional lives.

7:13Acquisitions Anonymous:They've already established a significant presence with 34 chapters across the United States. All right, so numbers-wise, they are asking$25 million for this. It cash flows$6.4 million on$8.9 million in gross income. It was established in 2023 and has four employees. Okay, does this business give you guys the ick? Everybody's kind of looking at each other on camera now to see who's going to be the first one not to talk. It depends. It depends. I mean, if this is EO, no. I mean, it could also be highly scammy. The thing that if I were, this is judgmental, but if I were reading this on a broker that is not website closers, I have significant less ick.

7:58But the fact that this thing has$6 million of EBITDA,$6.4 million of EBITDA, and they did not hire an investment bank, and they hired website closers just gives me a lot of pause. I'm thinking about listings like this where the teaser is kind of trying to be all things to all people. And the fact that they're throwing out things like, yeah, you got to talk about your growth prospects, but lumping in stuff like, oh yeah, we're going to launch a health and wellness course and get$8 ,000. I don't know. I mean, the core membership business model needs to be around reducing churn, signing people up and reducing churn.

8:41And you do that through, you know, sticky relationships. Maybe a lot of this is in person. My impression of these types of things is unless you're like a world-class organization at doing it like EO or YPO, it's just really hard to get this type of clientele face-to-face regularly. There's just a lot of friction around it. And so, I don't know. I just, I get a little bit leery when the business model drift

9:09Acquisitions Anonymous:is happening in the teaser. It's interesting. I mean, their whole business model is kind of fascinating, right? They go find these independent chapter market president type folks. They focus with them as 1099s and then those people go out and sell memberships. So that's kind of the way Vistage works. I don't know if IPO works that way, but yeah, it's almost quasi-franchise. Yeah. They're like independent affiliate type things. The people who are Vistage shares, they are 1099s as well, right? They're not employees. They're franchisees, right? I mean, it's almost as simple as that. They're 1099 franchisees.

9:48In practice, yes, but I think legally they're not. Yes. Yes. I'm concerned about lifetime customer value. You know, they're touting 25 to 30 ,000 per member, and this has only been around two years. Wait a minute. I totally missed that. This has been around for two years and they have six million in cash flow. Yeah. Okay. I'm much more skeptical now. But Bill, you could race supercars and go on yachts. And who are the women members? I know there's none. Zero.

10:24That's a growth opportunity, Heather. It's a growth opportunity. Okay. Okay. I mean, membership businesses are, they can be fantastic businesses. And this hits on, it's super high margin. I'm shocked at how quickly it grew, but they use the distributed Salesforce and they're finding a guy in major metros or a gal in major metros who's leveraging their network and signing these folks up. There's a lot to like about the financial dynamics of the business, but you could put, let's just say arguably, obviously Heather, there's no SBA, you know, financing for this just because of the size, but let's say you put$10 million into this thing and you borrow$15 million.

11:09This business could evaporate overnight. Like you could have one really bad, you know, group trip and there's, you know, a sexual harassment claim or something. And like the business, I could just see a lot of risk factors. There's nothing tangible. There's nothing durable. The other thing about this is a community, right? Like it's a community and a brand. And if this sticks is because people make friends inside the community and they fear canceling because they lose access to their friends. Right. So if you can get it to stick, It's great, but you have to build a real community. Owning this business is community management in a big way.

11:48And a lot of these businesses I've seen sometimes are built around a personality, a celebrity, a guru, somebody that has a certain philosophy. You might see one of these built around boggleheads, like value investors, or Warren Buffett acolytes, or things like that. People have a unifying philosophy. The problem would be is if the founder of the philosophy is also the seller in this case, and he divests the network to you, you're going to have churn like crazy. Right. And I'm skeptical that for this to be bootstrapped so fast to go from zero to six million of EBITDA in two years, it needed to have some sort of distribution advantage.

12:34Right. Some some sort of celebrity influencer philosophy, whatever it might be that it's organized around. And I would worry that it's that makes it unsellable.

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13:14Acquisitions Anonymous:they're passionate about helping entrepreneurs like you take the next big step so don't wait to make your business ownership dream a reality visit acquisitionlab.com today to learn more and schedule your free consultation and when you do be sure to tell them the acquisitions anonymous podcast sent you what if it's ryan reynolds or something like that i'm if it's truly like celebrity driven i mean he's got to stay involved then yeah right but those are risky too i mean you see what's going on with the Blake Lively stuff, right? Like there's risk there. Like it's just, you know, what if it was Megan Markle?

13:50Acquisitions Anonymous:Would you be more excited then? Yeah. They haven't said anything here about it having a specific niche, but like Bill, you know, you and I've talked in the past and I think you've talked about it on the podcast. One of these that's e-commerce related that you've really derived a lot of value from and, and has been like a major, you know, major influence for you. If this is like super niche in some way, I like it more. I don't think because of how quickly it's grown and kind of how large it is, I can't imagine it being any specific niche and they don't mention it. But I also would like it better if there was a niche.

14:24Me as well. You can see that they got some kind of big excitement to get to 6 million EBITDA in two years. Something very exciting happened to get that many people signing up, but they haven't gotten them to stick around for very long. It's just hasn't been enough time to know if they would. Why would you sell now when you have a 6x growth opportunity in 25? You know, there's just something about this that doesn't make any sense. Yeah. I mean, I would just say nobody should buy a business that's been around for 18 to 24 months, especially one that has ramped this fast that someone wants to sell.

15:00I mean, there's just red flags all over the place. This business is too young and growing too fast and it's too exciting if it truly is, why would you be selling this? So this means one of our listeners should definitely get the SIM and then DM us and

15:14Acquisitions Anonymous:tell us all about this. I'm just dying to know at this point, the mystery is just so cool. I mean, this CEO peer group space, it's a bloodbath. Like they're, you know, Vistage, all these different C12, all of these different folks, Hampton, they are all putting chairs out into the marketplaces and they're all picking over the same 150, 250 small business folks. And they're all dealing with massive levels of churn in an economy that's not doing that great. Like it is very, very difficult. I mean, like, you know, one of these networks that I know really well puts out, puts out these kind of like independents like this who are supposed to build local chapters is a 15 % success rate of the people that go through training.

15:57Acquisitions Anonymous:And they're proud of that because it's up from 10. Wow. I wonder what Vistage is like. Vistage has always been so weird to me because Vistage seems to not care at all if your neighbor also starts a Vistage group in your exact same neighborhood and tries to recruit the same CEOs. It is wild to me that they will spin up so many Vistage groups in the same geography. It's owned by PE, and they are running it like PE would. It's all about the dollars. they don't yeah i think this is grab this used to have a brand that was really good and i talked to other members and they're like yeah it feels like a cash grab yeah i i also i have one or two people that i know friends that have started like exited their business and then sort of were like you know they have a lot of entrepreneur friends and they're like geez it would be great to get together oh i could start a visit group and like facilitate and maybe make a little bit of money and I just like, oh, I lose, they lose so much credibility as soon as like, they're like, I'm starting a vision group.

16:58And I'm like, why you don't need the money? Like, why would you associate with that brand? And it kind of shows you how far the Vistage brand has fallen. Yeah.

17:06Acquisitions Anonymous:10 years ago. I mean, I'm no longer a member anymore, but 10 years ago, it, it was like a step up. It was like where YPO is, right? It was one where you're just like, okay, this is, this is YPO. And then we haven't talked about Tiger 21, but like, it was something where people were like, yeah, I'm a badass if I'm in this. And So, you know, a couple of years ago, I stopped telling people I was interested. Well, hence, I haven't joined a group. I'm a consumer of these kind of groups, and I haven't joined one because of all the things you just said. I feel like I don't know which one I would join.

17:37I don't know which one would actually be good, worth the money, worth my time, and would have the right mix of people for me. So, yeah. Yeah.

17:47Acquisitions Anonymous:I mean, there is one specifically for women called Chief. Have you ever heard of that one? Well, and I don't want a just woman's one either. Jeez, Michael. I don't want that either. No, I didn't mean. Come on, Mills. No, no, but it's anyway. I was just bringing it up because there's ability. I actually would avoid a just woman's one. Isn't that terrible to say? But yes, I want it mixed. Why is that, Heather? I don't know. Oh, what can I say? I don't think just having an all-woman business peer group is a good idea. I just never have. I think that it can get a little catty. I just hate to say that, but it can.

18:32And a mixed group, much, much better. Always much better. Oh, I think it shows diversity in all ways is good, right? It is, yeah. To have men and women and lots of different viewpoints creates the best discussions. Exactly. Yeah.

18:45Acquisitions Anonymous:My group that I love was a third women and it made a huge difference. Huge difference. A mix of people. Yeah. A lot of these groups have like non-solicitation kind of as a core premise of, you know, hey, we're not there to just generate business. But it's, I think, a natural byproduct. And so if in the back of your mind, a piece of it is some business development, not just like personal enrichment, like growth and leadership and things like that, then you kind of do want to get as broad of a sample size as possible. Multiple industries, multiple age ranges, multiple different sectors, all those kind of things.

19:22Absolutely. Yeah. All right.

19:24Acquisitions Anonymous:So where are we on this one? Here's my vote. I am so sus on this, but I'm dying for somebody in the audience to get the sip and tell us about it. I am fascinated by it, but there's just, it cannot be 18 months old and this big and they can't wait to get rid of it. There's something going on. I think there's got to be some celebrity focused or some trend focused or something that they're really, really worried about their long-term retention. I'm going to steal Mills' word, ick. I think that this is a great, it's very prototypical of what we've seen on website closers. Really, really great business to have started, really tough business to buy.

20:10And these people, kudos to them. If they're making$6 million a year in free cash flow, they should just put this thing on autopilot as much as possible and nurse it till the end. And yeah, maybe somebody will come pay you five times, but I just would be shocked. I just don't understand why they're selling at mills, right? Like if you can manage to start this business, it's an awesome, awesome business. But there's just a lot of risks, transition risks. They don't anticipate four years worth of free cash flow at this level. Clearly they don't, right? Yeah. But like these businesses can be sold.

20:43I mean, obviously Vistage was sold. Like there's another one called World 50, which has been private equity owned for a long time. there's plenty of these membership orgs that do transfer and maintain enterprise value, etc. But I think the ones that do have been around for a long, long time and the Lindy effect is real with these types of organizations. The longer it's around, the longer it's going to be around.