Our Billion Dollar Strategy For Acquisition.com | Ep 805

0:28Sometimes you don't want to signal to the marketplace that you're killing it. last time 90 days prior to that the podcast more than any other source of information has kind of my documented thoughts along the way and so i have made an attempt to return to that baseline of documenting what's going on and so these are my end of 2024 um basically strategic plans so some companies keep these as a as a big secret um i will just share them with you how is acquisition.com going to become a billion dollar company. And I think in talking about this, you can still apply the thinking process to your business because it's my belief that any company can get to a hundred million plus, at least.

1:12Billion is a little harder, depends on the opportunity vehicle. Any business can morph into a hundred million dollar plus business. When I say a hundred million, I mean a hundred million dollars in enterprise value. So think, you know, 10 to$15 million in profit for a company. Now, if you have a single brick and mortar, whatever, However, sure, that can't, but if you own a bunch of them, it can. It's really thinking about the more scaled version of your business. Now, if you're online, then still, you'd probably be able to do that as well. You'd probably have to go international. There's things like that, but there's still always a way, right?

1:42I will walk you through kind of my acquisition.com flywheel as it currently sits today. It starts with the inputs. And so the inputs for us are actually media, right? And I think all businesses start that way, which is you have to begin with getting attention, If you have no attention, no one knows you exist. If no one knows you exist, no one can transact with you in any way. And so it actually started with the media. So that was why I wrote the first book and the second book. And obviously the third book is just coming out next year. And I make the content and I write emails and I make these podcasts, things like that.

2:14So that's the media. So with the flywheel, the idea is, okay, how can I get this thing going and it can self-propel? So I wouldn't say that this is exactly at that point yet. So this is me just being transparent. But this is kind of the logical sequence that it flows in. If we create a lot of media for business owners, then that will get more business owners to find out about our stuff and potentially want to do deals with us. And so that then gets them into our ecosystem. If we have a lot of business owners that want to do deals with us, we will probably be able to do a few deals with select business owners that are on good terms, right?

2:49And at a good price, fair price, whatever. From there, some of those companies will perform or outperform the market by a wide margin. Those companies that are performed by a wide margin will eventually have some sort of liquidity event, whether that's going public or getting acquired, like we'll sell, you know, we'll resell it three, five years down the line. And then we will be able to document those stories, which will reinforce the brand and then allow us to make more media from an even higher level of credibility. This is kind of the, this is the flywheel. At least this is the strategy. Now, part of this is there's a parallel strategy that Layla is kind of on the four, on the spearhead on, which you might not know this, but the reason Layla's content's a little bit different than mine, one is because her day-to-day is different, so she thinks about different stuff.

3:32But a big part of it is also because she attracts top-level talent. And so if we look at the people who follow Layla, for example, on LinkedIn, where we can see people's job titles, a huge percentage of people who follow Layla are people who are executives. So they are people who run large teams. And that's exactly who we need to attract to build these companies from low mid-market or mid-market into a bigger sized organization. Now, let me tell you the flaw in my plan. The flaw in my plan is that it takes time. It takes time to attract companies. It takes time to do deals. It takes time for once you do a deal for a deal to grow.

4:13And unfortunately, the internet measures in seconds, not in decades. An investor who doesn't have like a 10-year track record, it's like, it's very hard to know if they're good or not because it just takes a long time for things to come to fruition. And so this has been one of my larger frustrations where because of the nature of the deals we do, we are in a minority position in all but two of our companies. Our average position is right around 40%. And if you're like, why isn't it an exact number? It's because we have like options and performance triggers and things like that sometimes in the deals.

4:46And so it can affect kind of the average, but it's right around, it's between 38 and 40 % is the, is the, is the average that we're at. And so we have material chunks of the companies that we have, but we're not always in a majority position. Cause honestly, a lot of people come from, from our content or know my stuff, like they want help growing. They're not actually looking for that big exit from us. They're looking to help us create the monster exit with them. And we've been able to do that. The problem is that unless I'm associating publicly with a brand like school, for example, The rest of our deals, we're under NDA.

5:19And the reason we do that is twofold. So one is that it looks like I'm the only reason the company grew, and I don't think that's fair to the founders. And so I think on one level it protects them and their personal brands of what they want to have happen later, which I totally understand. And on the flip side, if I associate with all the companies that I acquire publicly, then I become key man risk for everything I buy, which then means I get worse deal terms than everyone else does at the point of sale, which sucks. And so I don't want that. Because of that, we separate brand from work very clearly in the deals that we do.

5:54And obviously capital, right? When we approach these deals, I kind of have these wheels on my head. So I've got like brand and traffic and endorsement, things like that. And then I've got cash, right? And then I've got expertise, right? These are the things that we can bring to the table. And so it's a combination of those things that ultimately creates the deal that works for everyone or doesn't work, right? But the big flaw that I have in the plan is that it would be like, I have to whitewash the numbers. And even then, sometimes I get a little bit of pushback from the founders being like, hey man, I don't want our numbers out there.

6:25And so I try and be as vanilla as I can. Sometimes I don't even talk about what industry a company's in. I just say, hey, this is a consumer business or this is a business business or this is a local chain or whatever. But still, it's honest, I'm just being honest, it's tough, it's tough because I would love to flex some of the companies that we have. It would benefit me tremendously to do that. But I basically have to wait until we have big final outcomes. So like even if you have a company that raises at a high valuation, for example, like because we have software companies and you show a monster improvement, sometimes you don't want to signal to the marketplace that you're killing it, right?

7:03Because then you just invite more competitors, more people in the space. And it's like you want to expand almost like in silence and then overnight some everyone realizes how big you are and then they're like oh shit i can't i can't compete with that so um which is tough uh you know for me but i will always act in the best interest of the businesses even if it hurts me publicly like i'll never i'll never sacrifice because that's to be honest that's the main thing right on a long enough time horizon so it's like if you think about the internet in the short term it's like warren buffett talks about this with stocks in the short term uh the stock market is a is a voting system and in the long term it's a weighing system, right?

7:39So voting system is what's popular. Weighing system is what's valuable. How much mass has this thing grown over a longer period of time? And so I kind of see reputation the same way, which is in the short term, you can have hits that go viral. You can have big things. You can have a book launch. There's stuff, right? But the only thing that has sticking power is what is accomplished, what actually happens long term. And that is always going to be the thing that I'm indexing towards rather than the short-term popularity contest of the internet, which as we all know is a seven-day news cycle. By and large, that is the acquisition.com flywheel.

8:18Now, something that we started this year, which I'm super proud of, is ACQ Ventures. We brought in Zach Choi as a managing director on that side. And these are true ventures. So we have operated as a private equity firm in terms of how we operated with the exception that we don't have LPs, so limited partners. So we don't take on upside capital. It's just lay a nice money that we got from gym launch first, from the sale, and obviously from the distributions we took before exiting the company. And then now, obviously, we have a lot of distributions that come from the portfolio companies we have.

8:51We have large companies that send big checks. And so that's basically the capital that we use to continue to reinvest. And so I preferred the conglomerate holding company structure of Berkshire to the PE kind of flipping style. On the flip side, prefer the kind of work value add of a hands-on or operational private equity firm compared to a holding company. And so that's where we kind of differ because to be fair, I'm not as good as Warren Buffett. I'm not, I'm not, I'm not Charlie Munger, right? That's not my strength, but I probably know marketing and sales. I might, you know, they're old. They might know better than me.

9:25I don't know, but like, I feel like I'm pretty decent at it. And so I lean heavy into the things I have, right? Every company strategy, every investment strategy is a reflection of the outsized or unfair advantages of the person who's making the investments. For us, transitioning back to ACQ Ventures, the reason we did ACQ Ventures is because there are many deals that don't fall within that structure of private equity, like big partner, big work, big growth, and instead are more traditional venture checks. So venture checks are usually like smaller checks by percentage of company, not necessarily by size of check, but by percentage of company ownership.

10:09And typically, the way that we're structuring these are these are these are much more hands off, light work, but not like heavy implementation. And so we're able to do significantly more of those also because it turns out we have a whole bunch of interest in that, which is like, hey, it'd be cool if I could touch base with the team a few times a year and make sure things are going well. and use this capital to continue to grow more aggressively. I think in December, we'll have done our first three deals in ACQ Ventures. And you'll be like, wow, three deals. So the thing is, is venture checks, again, it's more of a volume game there.

10:39Whereas the private equity or family office side, it's way more about like doubling down on winners. I guess VC is that way too, but it's more of a spray and pray. Of course, they would never say that, but the risk per deal is significantly higher, but the aggregate risk is lower by increasing the end. So increasing the number of deals you do. Whereas in private equity, the per deal risk is significantly lower, but typically the work in the check size and things like that percentage ownership is much larger. And so it's just thinking about fewer, more concentrated bets or more disparate bets. And so that's why given the flow of deals that we have, there was just this massive amount of deals to be done where founders didn't want a full or even partial exit.

11:18They just wanted to have some access to the team and have capital to grow more aggressively. And so that's why we spun this up and it's actually been a big success. We're very happy about it. But that's more or less like the plan. That's what we're going to do. And we will continue to bring companies in, take a look, see what we can do to help. And when we see a big swing, we're going to take it. I'm leaning more into fewer, better deals with larger check sizes, or equal opposite, many deals with smaller check sizes, but basically kind of getting out of the middle. And that's kind of where we started.

11:54And so this is me just sharing what we're actually doing. Hopefully you like these slightly higher level business stuff. I've kind of shied away from this because I was like, I don't know how relevant this is going to be for people. But part of the reason I've tried to, the reason I started making the podcast is because I wanted to document my thinking process from zero all the way to a billion. Because I thought, how cool would it be if Jeff Bezos or Elon had had a vlog or something that had documented this whole thing? And so that's been the work. Love you guys. I appreciate you guys a tremendous amount.

12:23Now, I do have an interesting thing for you. If you listen to this podcast and haven't read either of the books, read them. They're the best, most concentrated value that I've created. They're free. I mean, if you want, I think 579 is the first one in this podcast that has the books. If you're like, I can't afford$30, that's fine. You can just listen to the episode. It's just my recommendation, especially because the third book's going to come out next year. And I would recommend having those two read for that one. It will be the one that makes people the most money. I wrote the book three first and then realized I had to write book one and two in order to set the stage for book three.

13:01Book three is my cookbook for making money. And I'm so excited for you guys to have it. But, you know, just get excited for 2025. It's gonna be a big year. So appreciate you all and rock and roll.