OpenAI is now developing a search engine, A company wants to buy Neil’s company, and Is remote work hurting Americans' global job edge?

0:00If you're looking to hire additional marketers for your team, there's no better place to look than hiring nearshore, hiring offshore. sure. And we found that we've hired amazing creative people. We've hired amazing people that can help with execution in the marketing side, whatever it is that you're looking for. Exactly. We are helping with that. We have recruiters from our side. All you have to do is go to marketing school.io slash hire. Once again, it's marketing school.io slash hire, fill out the information in terms of what you need. And then we'll have our recruiters reach out to you to help you with the placement.

0:32And it should be great for you at the end of the day, because you're going to save a lot of money and you're going to get the help that you need. So you're going to get help from a cost standpoint and also an execution standpoint as well. So again, marketingschool.io slash hire, and we'll see you inside. You saw OpenAI is developing a search engine now? Yeah, they're going to announce it on Monday. So we don't even know the details as of this recording yet. It's funny. People talk about how Google and search is dead, but yet OpenAI is now building a search engine. Humans, I think as long as humans are curious, we're just going to keep searching for things.

1:04So don't think any search engines are going away, guys. I think they're just going to change. Yeah. And you got to adapt with the times. But funny enough, you know, it's just like we talk about adapting with the times. I was talking with a bank that I use. So I use this bank called CIBC. They're a Canadian bank. Really amazing. They provide our corporate debt. And the guy I work with, his name is Nick. Now, Nick is in charge of like their private equity portfolio and stuff like that. He doesn't tell me anything that's secretive or anything that I shouldn't know, but he'll send me reports of multiples over time, 2023 versus 2024.

1:42He'll tell me about M &A stats. 80 plus percent of the M &A that companies are doing are tuck-ins, private equity firms. 20 % are new platform plays. The numbers are drastically down. He was seeing that numbers in 2024 for the start of the year are lower and worse than 2023. You should explain what a platform is. A platform is like a larger corporation, and then you can tuck in smaller ones into growing them. And I'll give you a great example of this. So let's say I own NP Digital, right? We're a global ad agency where we get headed up by large corporations to do marketing. And let's say we focus on SEO and paid ads and social media marketing and all these kind of different marketing services.

2:30and let's just make up a scenario that we didn't have a service like conversion rate optimization. We do, but let's just imagine we did it. So a private equity company would be like, wait, this company is already large and at scale. We'll buy NP Digital. They'll be our platform. And then we're going to buy a conversion rate optimization company and tuck them in. And to make math simple, let's make up a number. Let's say I do$50 million in revenue and$10 million in profit. and a CRO agency is doing$5 million in revenue and$1 in profit. Combined, in theory, you'd be at$55 in revenue and$2 in 11 in profit.

3:08Private equity company would be like, wait, we can take all of Neil's customers at NP Digital and sell them on CRO and all the customers in the CRO agency and sell them SEO, paid advertising, social media, email marketing, et cetera. And then it ends up becoming, wait, we turned this$55 into$60 million and now we turned it in from 11 million in profit to 12 million. And you get a better multiple. Better multiple. And now we're going to buy Amazon Marketing Agency and do the same thing. And then we're going to end up buying a television advertising company that focuses on connected TV and do the same thing.

3:45And you start adding them in, you're compounding. That's why private equity says one plus one equals three because they're cutting costs and creating growth by cross-selling. Good example of this was Tenuity, yeah? A great example was Tenuity. But funny enough, when we're talking about getting things done in a bad market and being creative, especially with marketing and stuff like that, it comes to show right now when I was talking with Nick from CIBC, people actually aren't doing much M &A. I actually think the big opportunity, you and I have talked about this on previous podcasts, is really to figure out if you want to grow faster, just buy the growth.

4:25And we gave the example earlier of the creative strategy. And dude, you've done M &A deals. I know you personally have money, but when you've had businesses and the businesses are more cash restraint and you didn't want to use your personal money, what are some methods that you use to get these deals over the line? Oh, simple. So one is there's an element of seller financing where you get the seller to carry the note, right? Where, you know, let's say, let's say you owe, you pay 200 ,000, simple round numbers. It's a million dollar deal. You put 200 ,000 down, right? And then the rest of the$800 ,000 might be paid over the next three, four, five years or so.

4:59And then the$200 ,000 is like, well, how do I get the$200 ,000? Well, you can go get debt. You can go to your friends and family, get some money, raise some money. You can use your money on your balance sheet if you have money on your balance sheet. So there's a lot of ways to do this. You can factor your revenue as well if you want to do that. Wait, what's that? So invoice factoring is basically you take your revenue. I like how Neil asked it in a way to get me to explain to everyone. No, no, I honestly don't know what it is. Oh, so factoring is just like, okay, let's say you drive$100 ,000 in revenue each month.

5:31Basically, there's these invoice factoring companies that will give you a certain percentage up to that month's revenue. They'll just charge you interest on it. So they might charge you higher interest at like 10 % to 15 % or so, but you can factor your revenue like that. And they might give you revenue for the next year or so, just looking at your last one, two, three years of revenue. You're talking about like a cap chase? Yeah, it could be a cap chase or a pipe or something like that. Yeah, or like, so like revenue-based financing. Yeah, but it's basically like factoring. So yeah. Got it. So you're just taking your receivables.

6:00Founder Path does that too. They're just giving you the cash in advance. Yeah, yeah, yeah. You just pay a fat interest rate. But there's just so many ways to do this, right? Like earlier, you're like, oh yeah, you give the 2x up front and 3x later. And then like, you know, the rest of it's in stock. It's like, there's so many ways to play this. I think the terms matter more than the price. and what I've found is when you're doing these deals if you get them pregnant like you get them what do you mean by that? so in private equity they say like once they get excited by the deal and you're sending them paperwork and all this you know and then you start beating them up they're more likely to still accept the deal because like they already started thinking about how they're going to spend the money and all this we don't really do that and we also don't do a lot of the creative deal structuring our deals tend to be you know we tend to buy a lot of companies for 5, 6x EBITDA yours is simple Yeah, we're just like, here's your 5X up front.

6:50You get one at the end of year one or year two. And they're like, Neil doesn't try to play around with these shenanigans. Maybe 12 years ago, Neil might have messed around. But now this is mature Neil. He doesn't mess around with these. Good companies don't want to do creative deals. They want clean deals. The bigger the company, the cleaner the deal. Yeah, and we won't play tons of games. If we really love the business, we'll pay 6X up front. We'll pay 7X. We've even paid 8X up front. We're very flexible if we just like the business. 8X was sort of software, no? 8X was a software, but it wasn't a growing software.

7:23So it was expensive, high-churn too. But it worked out. My final multiple on that, when I bought it for 8X, I'm probably at like 2.6X right now. So it went from 8 to making the money back in 2.6 years for what I paid for it. That's not terrible. and on that deal I used 100 % financing. What kind of financing? At the time it was CapChase and then I converted it over to CIBC. Oh, got it. Yeah, yeah, yeah. And my rate is really amazing. It's like 3.25 plus SOFR. SOFR is high right now but in a normal economy I would be paying like 6 % interest only. SOFR is the rate that all these banks go by. I might as well just call it the interest rate.

8:12Yeah, it's interest rate. So SOFR stands for, I had to Google it, secured overnight financing rate. And if I look at SOFR data from the Federal Reserve, today it is 5.3%. So if I'm paying 3.25, it's roughly 8.55 that I'm paying in interest. But it's interest only. So it's not bad. But these days, when we typically do a deal, we mainly use cash or we'll at least try to do like 50%, 60 % cash. So then it just makes the economics much better. And then the rest is debt. You know what we're talking about right now is really just be fearful when others are greedy and be greedy when others are fearful.

8:51And I think certainly in the agency space right now, people are definitely fearful and playing defense a little bit. People are scared. You know, in our little community, which is doing$5 ,000 in MRR now, a lot of people are – don't clap. I mean, it's our community clapping at me. But you did all the work. Yes, I did. Because I know what it takes to start things up for this type of stuff. So I'm good. There's certain situations where I have to play Batman sometimes and then Neil plays Robin. And sometimes I play Robin, he plays Batman. You know who came up with that expression? No. Keaton Shaw.

9:20Either Batman or Robin, Batman or Robin. It just depends, right? In partnerships. But so all that says sentiment's not good right now. And I think now's a good time to start talking to people. just make sure, I'll just experience here here, make sure you do your due diligence. Don't count on the brokers to bail you out because the brokers have their own incentives, right? If I'm a broker, I just want to close the deals as quickly as possible. Spend time doing your due diligence. Make sure you have a lot of great detail-oriented people around you and make sure that it's a culture fit. Make sure that you're meeting with their people, their clients.

9:51If you can meet some of their, you need to meet their leaders, you need to meet some of their clients, hopefully you need to understand how their culture works because at the end of the day, I think of your organization, my organization, at the end of the day, it's all chaos. It just depends on how chaotic it is. All right, everyone, quick message from the Agency Owners Association. So this is the peer group for agency owners that Neil and I both put together. This is for people that are doing six figures, seven figures, eight figures, even nine figures as well. And we're all here to help you grow your agency faster.

10:18In this group, we share leads. We also, we share learnings with each other. It's a community where people can ask questions, their most burning questions, personally, professionally. We'll share templates, reports, things like that. we're constantly adding more value to the group. I will tell you that the price is continuing to increase. The good news is that there's no long-term commitment. So you can just learn more by going to marketingschool.io slash agency. Once again, that's marketingschool.io slash agency to learn more. And we hope to see you inside. All right. So check this out. I won't reveal the company name, but you should actually end up running this strategy.

10:51So I've been on calls with India because some India companies have been trying to buy us. Also, I have to buy you. Yeah, by us. The whole thing. The whole thing. Okay. And I also wake up early because I have to deal with India, Australia, and all the other countries, mainly Europe and India and places in Asia that we're working with. So back in early April, a company hits us up. And you're talking about a really well-funded company that's funded by most of the trillion dollar companies in the public markets. So this company is not worth a billion or two billion. and they're worth multiple, multiple, multiple billions.

11:27They have tons of cash. They raise well over a billion dollars. They can raise more. So the banger hits me up. Banger's like, hey, I got a perfect company for you. These guys want to acquire you. And I was like, he's like, can you send me three-year financials going forward? So you probably know my response. What do you think my response is when I first got that? I feel like you would say yes. I said, it's okay, we'll pass. because I didn't want to do the work. I thought you would say yes and have someone else do the work. I just didn't even care to deal with it. I also didn't want to end up selling to them or merging with them or anything like that.

12:06So then I get a call a week later. Explain why real quick, because we talk about this a lot. I think it's always good to reinforce this. I don't want distractions. I just want to focus on what I see as a long-term vision and just keep going, and everything else is a distraction. Because if you were to sell, you would go back and do the same thing again, so why do it? bingo you got it right it has nothing to do with the money anymore it has everything to do with more so purpose and fulfillment in life yeah and if i sold it i would have to go sign something new to start all over and then i have to figure out some purpose and fulfillment in my life and it's not just about doing a business that makes money i like the challenge but it's about doing something you truly love and that is i think that's hard to find yeah well you just like for me i just want to get better and better and better right and to me like how well you do in business is actually your level of personal growth.

12:53And so why not just keep playing? That's right. So then I tell them, no. I get a call less than a week later, and the guy's like, the founders want to talk to you. And I'm like, well, I don't want to talk to them. He's like, you should talk to them. I was like, all right. So he sets up the call for Monday morning. And they're just like... For your 3 a.m. That call was 4.30. I've had calls with them many times over the week. So then they start talking, and their analogy did not make sense, but really nice guys. I won't mention the company name. And they were just like, you know, when a pretty person marries a pretty person, you have pretty kids and this is a beautiful marriage and everyone prospers.

13:31I think what they were trying to say, I'm not trying to poke fun at them. There's cultural differences. I think what they were trying to say is when you have a good marriage, the couple brings each other up, right? And they both perform even better. When you have a terrible marriage, it results in a divorce. I'm assuming that's what they were trying to say in the analogy. Either way, smart guys, even though their analogy may not make sense to me, their company is way bigger than mine and they're much more successful, right? So you can't knock them for it. And we're going through it and they're just like, look, you shouldn't sell the private equity.

14:04You shouldn't sell anyone. We think you have a beautiful company. We have a beautiful company. We think this is going to be an amazing marriage. And to clarify, they're an agency? They're not an agency. They're a conglomerate? they're a massive social slash media company okay right so they control a lot of the eyeballs just purely in india um and they're all funded by mainly american money so then when when you look at this company and when i say funded by american i'm talking about like the big publicly traded uh organization plus our companies so when you look at them i was like look this is cool and all.

14:45And they're just like, we want to buy 51%. I was like, dude, I don't see how this is going to be. Cause even if you raise over a billion dollars, you spent a lot of that money. And I was like, one, I don't think you guys have the cash, which, you know, at the end they did it. And then they ended up proposing something that was really interesting. Cause I was just waiting for them to propose whatever they wanted. I didn't want to do all the diligence and everything. I was like, look, you know, if you're really interested, something I'll discuss with my team and we go from there. I actually enjoyed this process.

15:18The reason I enjoyed this process was because of the deal they sent me. And I was like, huh. Oh, you got a new structure. I won't use this structure, but I think this would work really well for you. Okay. So the structure that they ended up sending me is crazy multiple. Two times your cash upfront, your EBITDA. So if your EBITDA is a million, they would give you $2 million upfront, you would get five times total cash of EBITDA upfront, the rest in rollover equity. So 75. So let's say if they value a 20 times profit, they would give you five times in cash, two times upfront, three times, one X each year for three years.

16:00Okay. So I didn't hit milestones? No. So you're pretty much giving them their own profits. Okay. Right. Yeah. So you've pretty much bought the company for two times profit upfront. Yeah. Three X over three years, you're giving them their own money so it's not like you're paying much because there's depreciation and stuff when you're buying these businesses and then they're giving you 75 % in stock at whatever valuation so you can manufacture really crazy really they're giving you 2x and I knew it wasn't going to work in the first place because I'm like you guys did not raise just because someone raises a billion dollars doesn't mean you have a billion dollars sitting on your balance sheet and they raised more than a billion dollars but still you knew that you you raise it in rounds and you use the money over time and my response to him was like this won't work thank you you know like take care and have a good one pretty much right i was trying to be nice uh but i already knew i didn't care to get on the phone or deal with it i was like this is just not going to work let's just cut it here yeah and i'm happy i didn't really do any work for this because i didn't care to do a transaction it was like if you want to do something do whatever you want and then if my team and I want to perform or proceed forward, we'll give you everything or we'll give you the rest of information.

17:10But the reason I like this experience is if you're trying to do M &A and you don't have tons of cash on your balance sheet, that doesn't mean you're not rich. A lot of people have used their money for other things or it's earmarked for operations or expansion or whatever it may be. You can do a deal where you're giving people equity, but you're giving some of their cash back to them so they're maintaining that. but then they're getting equity in your overall company. So it's just like, let's say Nick Schockerford's agency, right? Like, hey, dude, you're going to run this anyways for the next five years.

17:45Our agency's bigger. I'm making it up. I don't know the size of his agent, but let's say your agency's bigger. You're just like, I'm going to give you a 20 % of my agency. We cross out, we grow each other, we cut out, streamline. You can keep the profit for the next five years in your agency and you're getting share in this overall holding company. And then at the end, we merge it. You start doing that with quite a few players. Sure, you can still be the majority owner, but after five years, you have all this cash flow coming from all these other agencies, and you've got a much bigger piece of the pie.

18:14I like, so you know why I like this? So by the way, everyone, so Neil obviously doesn't accept this deal because it's not a very good deal for Neil at the end of the day, right? But this works for other people, like nor do you need the cash too, right? But there's actually a lot of agencies right now that are, or there's a lot of businesses that are struggling right now where if you present a deal to them like this, there's a good chance that they might take it, right? So the structure of the deal matters quite a bit. And even this situation where Neil got the 2x up front and 3x profits, and then he tied it over.

18:46So he took that strategy, and then he changed that strategy up a little bit. It's like, oh, you can actually apply this to multiple agencies that you're looking to tuck in and then just give them those profits, right? That's actually pretty smart too. And then you're keeping yours, even though you're diluting them percentage-wise. you're saying, hey, I'm going to keep my, you know, you're keeping your distributions, they're keeping theirs, but over time you're taking over their distributions and you're giving them a percentage in the overall company. I think that is a great way because then you have the cross-selling and the synergies and you can make a killing doing this strategy.

19:19You know, there's some agencies that we know in the LA area that will go unnamed right now that were literally, they just did a lot of deals similar to this. They probably structured it similar to this too. I think that's interesting, which brings up another interesting dynamic here. This tweet is from Mike Beckham. He says, interesting dynamic. American workers advocate strongly for remote work. Because you're talking about global company, right? So American workers advocate strongly for remote work, but it undermines their key competitive advantage compared to international workers. Over time, I think most American workers will push for in-person work environments to protect jobs from outsourcing.

19:57I thought that was an interesting take because we have a mutual friend. Do you need to sneeze or something? So we have a mutual friend. I mean, you know, he invested into this, this one company where they help a lot with offshoring and nearshoring. And we're seeing a lot more of these. Right. And, um, you know, all the people, again, all the people that advocate for remote work, it's like, well, you know, guess what? If you're going to advocate for remote work, we're going to hire from other countries and other nearby countries where the costs are cheaper. Right. And that mutual friend of ours, um, we actually a couple of mutual friends are just like, oh yeah, not only do we not hire from California, Colorado, and New York anymore, we don't hire from the U S anymore.

20:35Wow. Yeah. But there's so many amazing people in the United States. I would hire the core strategic thinkers and leaders in the United States for sure. For sure. Yeah, and then you can outsource a lot of the other stuff. Yeah. When I first started my business, the overwhelm was real. I didn't have the tools to help me scale. If only I had Shopify from the start to handle all the behind the scenes work. Shopify is the platform behind millions of businesses globally from huge names like Mattel and Gymshark to the smallest brands just getting started. The best part about it, it has everything you could need.

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22:50That's framer.com, promo code MS. Framer.com, promo code MS. Rules and restrictions may apply. We're finding amazing talent everywhere, But what we find is whether they're in India or whether they're in Brazil or the US or Hungary, they're still expensive. Just good people aren't cheap. I mean, look, Google has started to lay off US employees and hired the same roles in Mexico. Really? Here, let me read this one to you. This one's from Unusual Wales. I follow a lot of random Twitter accounts. So, breaking, Google has started to lay off hundreds of quote-unquote core employees and has started hiring the same roles in cheaper countries like India and Mexico per CNBC.

23:26Alphabet has been slashing headcounts since early last year when the company announced plans to eliminate about 12 ,000 jobs or 6 % of its workforce. And then you know Alex Becker, right? So Alex Becker responds in here. He's like, American tech employees are wildly overplay and do very little actual work. Surprised they didn't do this sooner. So it is what it is, man. All right, so that is it for today. Please don't forget to rate, review, subscribe. Go to marketingschool.io slash agency if you want to grow your agency faster. And yeah, do one of those. Oh, make sure you go there. Next time you do a call, let me know.

23:56I'll join the call. There you go. Join it. Once we get to around 50-ish paying members or so, we're going to do the call with Neil. And yeah, it's going to be a good time. We're pretty close to that already, right? We're at 39. Yeah, so join. We'd love to do it. And I can break down all the stuff that we're doing to grow. And we're growing fast. To give you an idea, we'll go from start of this year, 750 employees. My guess is we'll end the year with 1 ,200. And we're going to keep, guys, we're continuing to jack up the price too. So it was$149 a month. Now it's$1.99 a month and it's going to keep going up depending on the value that we add to it.