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I'll say this, is that the founders who are willing to have hard conversations are the

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ones that unlock the hard to get to growth, because most of the growth in every business

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sits on the other side of two or three hard conversations.

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The wealthiest people in the world see business as a game.

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This podcast, the game, is my attempt at documenting the lessons I've learned on my way to build

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a acquisition.com into a billion dollar portfolio.

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My hope is that you use the lessons to grow your business and maybe someday soon partner

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with us to get to $100 million in beyond.

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I hope you share and enjoy.

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The three beliefs I'm about to share with you are ones that I have leaned even more

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on.

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So I believe at the beginning and now I'd say they're core pillars of how we make investment

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decisions.

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So number one is being founder friendly.

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And so the idea that we wanted with acquisition.com, because I've gone through several transactions

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with institutional buyers, meaning like people who have lots of money, is I didn't enjoy

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those transactions.

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I didn't enjoy necessarily what happened afterwards.

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And this is no like, they're all great people.

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I just, I think that the way that the process was approached could be better.

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That's more what I'm saying.

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And so we wanted to create something different.

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We wanted something to be founder friendly.

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And rather than basically taking out the founder entirely, which is the vast majority of

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the investment world with the exception of like VC, who is super, super tiny fractions,

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it's, is there a way that we can marry the idea of, hey, we're going to buy in a discount?

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We both know that.

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That's because we're going to be investing a ton of resources that does have hard costs

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for me.

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But your slice of the pie will be worth 10 times more than it is today, even if the shape

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of the pie is different.

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And so this is one of my big like visuals for you, is that you can have a round shape

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of pie.

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But the round shape of pie can be like this.

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Or you can have a triangle shape of a pie that looks like this.

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And to give you a bit of a proof point on this of, you know, the, if you want to go fast

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go alone, if you want to go far go together.

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The average IPO, and most people would consider founders who IPO other companies pretty successful

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by, by traditional standards.

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I mean, you have to have at least a hundred million dollars in revenue or basically you

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have a hundred million dollar coming to your heart, just broad brushstrokes.

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Those founders on average IPO at 12%.

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And so the idea here, and again, that that's the minimum.

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So some of them are doing billion dollar IPO is in 12% yeah, 12.

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So they're 12% owners, those founders still have 12% ownership.

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So you think about the slice of the pie, it's like this, right?

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It's an eighth of the company.

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And so that's okay, because maybe the alternative to that was them owning 100% of a business that's

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worth 10 million dollars versus owning 12% of a, of a company worth a billion dollars.

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And so making that shift as a founder is important.

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And it was one that took me too long to understand was that the more people I get aligned to my

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ultimate goal, the bigger the pie ultimately gets.

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You don't lose by getting more people involved.

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And so here's a quick laundry list of reasons that I think traditional P sucks.

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Now, this is no, like I love the partner to who bought in the companies that I've sold.

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Like this is no big disclaimer, they're awesome people.

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They generally are awesome people, but I think it's more of a model thing.

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So one is the process is incredibly long and incredibly painful for really all parties.

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Second, it's incredibly litigious, meaning lawyers are paid through the ass to be as painful

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as seemingly possible.

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And you're constantly asking, playing banana phone between lawyers to translate things back

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and forth, negotiating on phrases of sentences and wording, it's terrible.

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The entire private equity model is, the vast majority of them are based on not actually

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growing the business.

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They're based on financial arbitrage, which basically means this company, we can put

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a ton of debt on it and then use that to buy other companies and not actually grow the

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business in general.

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Now, I'm not against debt to be clear, but I do love growing businesses organically because

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it's, in my opinion, one of the easiest ways to grow a business, but that's because that's

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in our skill set.

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Most private equity people in general don't come from the world of actually founding and

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growing businesses.

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They come from MBAs who learned spreadsheets, who learned how to raise debt, who then deploy

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that debt.

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Like that's how it works.

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All right.

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And again, different skill sets, not saying it's bad, just different.

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Then the entire diligence and deal process as a whole is feels like a root canal.

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Basically, there, you know, I remember during our diligence process, this is 2021.

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They were asking about an $8,000 order from 2017.

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And we were like, why are we doing this?

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And it's because everyone is following checklists and doesn't want to get fired for making

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a mistake.

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And it's because their incentive system internally is basically zero reward, only punishment

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for messing up.

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And so everyone, like my CFO answered that one question that she didn't have the receipt

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from this $8,000 purchase nine times.

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She showed me the emails of every time they continued to ask the question.

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She said, I don't know how to say this differently.

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Don't have the receipt.

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Not going to be able to find it.

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The company we did that thing through is out of business now.

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And they're not responding my emails.

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I don't know what you want me to do.

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It was five years ago, whatever it was four years ago.

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And so it is a really, really tough experience.

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Like if you don't have audited financials, you don't have them built out a data room that

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has access to all your data in real time, like a full deck, a set, like there's a lot

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of steps.

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I actually made a video about it about like every single step in that process.

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A big part of this from a negotiating perspective is that the longer a deal takes the

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more it's in the favor of the buyer.

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The shorter a deal takes the more it's in favor of the seller, meaning the founder or

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the business owner is more advantage advantaged to a shorter process.

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Why is that?

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Because they always have the gift of knowledge.

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The person who's selling the company always knows more than the person who's buying the

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company, right?

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That's the idea.

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So like the investor knows less about the company than the guy who started it.

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And so the longer it takes, the more the person who buys will know.

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So the more wore down, the founder will be.

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And that is part of the psychological process of this is that they will get typically a founder

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to say yes to a price to get you to go exclusive with them.

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And then they will start this root canal with you.

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And then they will slowly chip away your valuation and tell you all the reasons why your

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business sucks.

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And then they will produce a smaller offer at the end, but you've already gone through

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six fucking months.

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And so you're like, you know what?

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I can't, I don't want to do this again, like fine.

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And so that is how they get the vast majority of founders to do that.

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So given all the pain associated with that, we wanted to create something different.

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And so for us, we went from a terribly litigious process to having plain English contracts.

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We try to jointly involve the attorneys and say this is a friendly transaction.

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We try to have all negotiation or conversations between us, not the lawyers, so that we can

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come to agreements, which I'll give you an example of a deal we just closed.

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We made a minority investment in a company, and the lawyers were coming back on their

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lawyers were coming back on a non-compete clause, all right?

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And they said we want the non-compete to be a 50 mile geographic area and for only 24

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months post-transaction, all right?

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And so we were like, no, why are we going to invest in a business of in 24 months, the

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founders are going to go and compete with the business that we just invested in that makes

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no sense?

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So non-compete just means you can't compete with the business.

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So like if I own five gyms and I sell you my five gyms, that I can't tomorrow, after

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selling you this asset, email all my clients and say, fuck that gym, come to my gym, it's

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literally across the street.

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Just cancel with them, sign up for me and see the exact same business.

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If you don't have a non-compete, the founder could do that.

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And to be fair, the founders that we do business with would never do that.

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But people are shitty, especially when big amounts of money are on the line.

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So the non-compete, the lawyer came back with, was 24 months.

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And so we hopped on the phone with the founder and we're like, are you planning on competing

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with the company in the next two years that we own, that you own majority of?

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And he was like, well, no.

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And I was like, well, your lawyer is making that case.

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He's like, oh, well, that's ridiculous.

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And I was like, yeah.

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And so for that reason, we have the conversation face to face and we resolve things in seconds

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that in my deal, because everybody has to be solitized with their lawyers and have teams

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of lawyers on every call.

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And it would take three weeks to get that one clause out when it shouldn't even have been

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there to begin with, right?

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So planning those contracts face to face, us talking through, it's really a conversation

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not in negotiations, probably easiest way to say it.

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We try and target our process to end to end to end to be 60 days, meaning the actual

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L.O.I. to close is like 30, which is unbelievable compared to, you know, he will say it'll take

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six months.

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It's going to take a year in terms of like, from when they start talking to you when

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the deal actually close.

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I mean, for us, he was actually two years.

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So like, very painful.

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And so we're looking at all of these things.

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It's like, how do we make this more founder-friendly?

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And on top of that, any enterprise value that we're going to unlock, they're participating

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basically 50, 50 and ish rather than being a 10% owner and the thing that we then tenix.

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And for us, the founder always stays on unless there's some sort of explicit thing, but we

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want the founder there.

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And I'll tell you, the reason that we're able to do deals faster is because the founder

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is still there.

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So we don't have a material change in leadership.

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So this is part of our model overall.

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Not to say that if we did have majority, so like we just did, we did a 51% deal as

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referencing earlier, the founder still chose to stay on, but we had some other things that

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we included in the deal that made it make sense for the founder to do that.

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And so they're still going to unlock a ton of value and we already have unlocked a ton

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of value in that business and they're participating and their 49 is still worth way more than

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their 100% was worth prior and they still got compensated for selling the 51.

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By contrast, a lot of private equity firms entire playbook circles around going in, buying

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the assets, firing everyone and then putting those assets in another company.

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That is 100% of playbook.

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And so that is not our playbook.

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And so again, this is not to say P's evil, it's not to say that they're bad people.

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It's just that they're different business models.

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And I believe, I mean, it's a capital market, so you can do whatever you want.

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But the way we wanted to approach it was simple legal, conversations, not negotiation,

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keeping the founders involved after the transaction, allowing them to participate meaningfully

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in all the upside that we're going to create and not materially changing the business

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or only doing that if it's a last resort and not our intention.

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And this segues perfectly into the second belief that I have doubled down on.

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I mean, this might even be the biggest one, which is jockey over horse.

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And the reason for that is because the private equity world almost exclusively values the

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business and not at all the founders.

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And that's because they immediately remove the founders as soon as they get in and take

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control.

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The VC world almost exclusively values the founders, not really the business at all because

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they're pre-product market fits.

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So they know they have to change a bunch of things anyway.

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So the business model doesn't really matter what they care more is how do these people

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interact, what types of people are these, how dedicated are these to the mission, are

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they mission oriented, do they have strong beliefs loosely held, right?

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And so for us, we are kind of this interesting blend between the two because we still have

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the founding teams and leadership in place when we buy into a business, but we're buying

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into bigger businesses than VCs do, right?

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Because most of the people come to us don't actually want money, they want help.

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And so they actually want to unlock what it's like to go for a million a month to five

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million a month.

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They want to go along for that ride, not get kicked out, and then have the ride gone

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on without them, right?

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And so since founders are so key to our long term success within our strategy, we actually

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weigh more heavily vet, and we just literally, month after month after month, we just get

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better and better and better at vetting founders to the degree that now 80% of what we look

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for is the founder because we've had a couple of times where we've had to change the business

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model materially.

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And so the thing that we bought into isn't even the thing that we ultimately ended up

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doing, but we believe in the founders and their ability to manage change, manage growth,

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and honestly just manage their own egos.

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And so I'm working on this because I want to have this really cool chart, but basically

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show compliance against growth.

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What I mean by that is, hey, we think you should do this.

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And then the founder says, great, that is what I will do, matching the people who do that

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grow the most the fastest.

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And the reason is the Salmon paradox.

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We have a lot more context, and we also have way lower emotional tie-in.

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And so like we have way more data and way less emotion.

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That makes a very dangerous combination of better decision making and better strategy,

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which is ultimately why a lot of people come into our world.

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Let me give you an example of half-followed advice.

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And so it's a lot like diet advice where I say, hey, I'm going to give you this diet.

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And so six days a week, you're going to follow it.

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And then on Saturdays, you're going to do a cheat day.

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The reason for the cheat days is it's going to refill all your carbohydrates stores, boost

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your metabolism, et cetera.

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And so a month later, you talk to the person, you say, hey, so how's that diet going?

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I'm like, oh, it's awesome.

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I love the advice.

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I love the cheat days.

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Not doing as well on the other half of the diet, but the cheat days I'm crushing.

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And they're like, yeah, but it's not really working because I'm actually gaining weight.

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And so you can't have follow advice.

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You have to wholly follow advice.

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So I'll give you a business example.

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So we had a company that clearly needed an operator.

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They had promoted somebody from frontline all the way to basically giving a director of

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operations title to somebody who really should have been, and this is not a slight to

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the role, but somebody who came in at like a $7, $8 an hour role and just really became

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that person's assistant.

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And they were paying this person way more than they should have been paying them.

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And that person had absolutely no experience and was completely had a chokehold on the

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business and didn't let anyone else in because the less control they had, the less influence

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they felt they had over the founder, right?

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And so we said, listen, you need an experienced operator to get this business from, you know,

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5 million in profit to 25 million profit.

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And so because this person was so entrenched in the founder's life, they refused to let

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that person go.

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And so they then hired another operator.

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And so we had two operators in the exact same business with basically the exact same title

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and responsibilities.

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And so what do you think happened?

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Who's in charge or what?

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And then you have two bosses giving two sets of directions, absolutely complete confusion

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in chaos, finger pointing, blaming, and ultimately a very terrible situation.

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Just not fun.

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And so the big lesson in again, we learn these things.

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Like we've learned this is that you can't have listened to advice.

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And so we need founders who we have a certain level of trust with.

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And it's not even trust because I would say that even that founder knew that they should

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do that.

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But they, they for whatever reason, same reason people know they should follow a diet

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and don't.

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They couldn't take the jump.

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And I'll say this is that the founders who are willing to have hard conversations are

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the ones that unlock the hard to get too rough.

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Because most of the growth in every business sits on the other side of two or three hard

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conversations, you know you should have, but haven't had yet.

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And that's where having some from the outside be like, you know this is a problem.

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And they're like, I know, but she's my sister, I know, but she's been there since the

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beginning.

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Or I know he's a dick, but he's my top sales guy, right?

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Like everyone has that story.

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But I can tell you that when you make the call, the entire team goes up.

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And that is just a micro example of being willing to put the business above your own personal

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and emotional needs.

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And that's tough for a lot of people, which is also why most people don't grow.

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And so for us, the three values that we have at Acquisition.com, sincere candor, unappeachable

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character and competitive greatness are the three things that we look at every single

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founder, but like really look at them.

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And I would say that at this point, when I started this, Layla and I were completely

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diametrically opposed in terms of our expertise.

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Like I was all the hard stuff.

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So like quant numbers, conversion percentages, CTRs, like all of that.

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And Layla was all the quotes, soft stuff.

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And I was like, yeah, yeah, but like this is the stuff that matters.

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And over time, Layla's influenced me a lot and probably five years in it became, you

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need to have the heart and the soft.

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And I would say that I have now actually swung even more in her direction, which is I

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used to think this is the only thing that matters.

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And then I thought this matters plus culture.

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And then now I just feel like culture is strategy.

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And so a company that has superior culture will beat the one that has superior strategy

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every day of the week.

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And I'll tell you two stories.

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So we actually made two investments and we actually kicked the companies off in two days

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back to back.

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So it was a ton of work for our team.

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But it was one of these crazy like tale of two businesses.

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And so we had two completely different businesses.

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One was a really cool platform that we were really excited about in terms of the actual

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business opportunity.

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The other was a business that was kind of boring from an opportunity perspective, but

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like such engaged and enthusiastic founders.

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And so we went back to back.

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And what was crazy is that my portfolio operating partner who basically runs the strategy for

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the implementation teams that help grow the businesses was it was actually his first

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00:16:31.880 --> 00:16:35.320
day when we on board of these two companies, not with not in business, but just starting

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with us.

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And he made his own internal bet of like which of these companies do I think we'll do

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more or do better.

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And he bet on the company that had the much more exciting opportunity.

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And fast forward a year later, that company has floundered.

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And the company that had the dynamic founders, the full of energy, enthusiastic about the

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mission they were going after even those kind of boring opportunity have crushed it and become

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a really rising star within our portfolio.

325
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They've already tripled in less like a little less than a year.

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And so the lesson that we have all taken from that is that we now put founders above everything.

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Because if they execute what we already know works, then like we've already de-risked

328
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the implementation or rather we've already de-risked the strategy.

329
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We know that this playbook works to get from here to here.

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And so it really comes down to degree of execution of the founders and their enthusiasm around

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it.

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And a lot of that comes down to humility and saying like, okay, you've taken more companies

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00:17:36.480 --> 00:17:40.240
from a minimum to many, many millions a month than I have.

334
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So I'll just use your playbook.

335
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If they can say that, they'll crush it.

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But it's still hard for a lot of founders because here's the thing that if you're watching

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this or listening to this that you might not get, is that somebody who's doing a million

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dollars a month might feel like they're the coolest, richest person they know.

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And this kind of goes to a different statement that I have, which is like, if you feel really

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good about yourself, you just need to get into a different room.

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Is that you need to try harder stuff.

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And so like, I've said this before, but like one of my neighbors took home like $935

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00:18:10.480 --> 00:18:15.120
million in income last year, income, not revenue, income, a company that he wholly owns

344
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100% so 45 years in the making and does 3.7 billion in top line revenue.

345
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And paid, I'm pretty sure no income tax on it because he has a massive real estate portfolio

346
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that he depreciates against it.

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And so when I walk into that room, the air is sucked out of it or the other way, when

348
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he walks into a room, the air is sucked out of it, and so is my ego because he's much

349
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better at it than I am, right?

350
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And so like, and this is half note to founders is that like, there's always a bigger fish.

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And so just a piece of advice there is that like, you don't, you stand a lot more to gain

352
00:18:51.880 --> 00:18:54.200
from listening than talking.

353
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So the third belief that I've doubled down on is the theory of constraint.

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And so if you're familiar with the, there's a book called The Goal by Eli Goldblatt, I think,

355
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I think that's his name.

356
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Anyways, I haven't read the whole book.

357
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I've read part of the book.

358
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Enough to, I think I actually learned about the theory of constraint before I read the

359
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book.

360
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It doesn't matter.

361
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Anyways, point is that every single system has a single point of constraint.

362
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And if you probably identify the constraint and then relieve the constraint, the business

363
00:19:19.640 --> 00:19:23.400
will grow until it's next constraint, which is why sometimes you see businesses go from

364
00:19:23.400 --> 00:19:28.680
like 300,000 a month to 3 million a month, just straight line and then they hit a wall.

365
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And that wall is the next constraint.

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And right now, if you're not moving as fast as you want or you've been the same exact

367
00:19:34.320 --> 00:19:38.120
line of revenue for a year, it means that you're doing the wrong stuff.

368
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You're focusing in the wrong area or probably more realistically, you're focusing in

369
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too many areas and none of them are the ones that matter.

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And so we have really ingrained the theory of constraint into our operating model as a

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hold co in terms of how we prioritize what companies do.

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And so if you think about strategy, it's just a fancy word for priorities, right?

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And so strategy is how you choose to allocate limited resources against unlimited options.

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There's technically anything that you could do, but the question is what should you do

375
00:20:06.480 --> 00:20:12.200
that will get you the most bang for your buck, the most return on your energy time money?

376
00:20:12.200 --> 00:20:17.720
So to give you a tactical realization of this, we used to have a six week diagnostic process

377
00:20:17.720 --> 00:20:21.360
where we do a huge deep dive into every single department of the company.

378
00:20:21.360 --> 00:20:26.320
And then we'd have 100 plus different things that we thought were wrong with the business.

379
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And then we'd say, okay, here's 100 things that are wrong with the business.

380
00:20:30.120 --> 00:20:32.600
And let's start at the top and start checking them off.

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00:20:32.600 --> 00:20:37.440
What ended up happening was that founders became a incredibly overwhelmed and b, they felt

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00:20:37.440 --> 00:20:43.300
really bad about themselves and c, wherever they started, sometimes that would change

383
00:20:43.300 --> 00:20:47.800
things down the line on the other items that we had snapshot identified as problems.

384
00:20:47.800 --> 00:20:52.800
So for example, if you change the branding of a company which does take longer, you might

385
00:20:52.800 --> 00:20:55.920
all of a sudden attract better customers who are less likely to churn.

386
00:20:55.920 --> 00:20:59.760
And so churn might have been an issue that we wanted to resolve with tactical and better

387
00:20:59.760 --> 00:21:04.080
onboarding process, better explanation, better activation points, leading indicator metrics,

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00:21:04.080 --> 00:21:07.880
et cetera, et cetera, that we do on the decreasing churn side.

389
00:21:07.880 --> 00:21:11.880
But if we fix the brand issue, then all of a sudden the churn issue might disappear.

390
00:21:11.880 --> 00:21:16.720
And so some of our, the identification of all these problems might actually be moot by

391
00:21:16.720 --> 00:21:19.560
the time we would get to that issue in the future.

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And so we've radically changed our approach to the businesses and just said, we will look

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00:21:24.440 --> 00:21:29.600
at everything in a much shorter period of time and just say, what are the three things

394
00:21:29.600 --> 00:21:32.760
that they should absolutely work on and in what order?

395
00:21:32.760 --> 00:21:37.080
And if we have three things, it would usually be because there are things that could be worked

396
00:21:37.080 --> 00:21:39.600
on concurrently that do not affect one another.

397
00:21:39.600 --> 00:21:43.280
If there were things that had to be done in sequence, then it might just be the one thing

398
00:21:43.280 --> 00:21:44.560
that matters most.

399
00:21:44.560 --> 00:21:48.200
And so for example, if we had a company that was, I don't know, stuck in a million bucks

400
00:21:48.200 --> 00:21:52.560
a month and all the metrics were okay and they're outbound, I might say, okay, you've

401
00:21:52.560 --> 00:21:54.960
got 20 sales guys, let's get to 40.

402
00:21:54.960 --> 00:21:55.960
That's the constraint.

403
00:21:55.960 --> 00:22:00.440
And so I'd be like founder, anything that you talk to me about that is not how we're hiring

404
00:22:00.440 --> 00:22:03.640
onboarding and training new sales reps, I do not care about.

405
00:22:03.640 --> 00:22:04.640
That is it.

406
00:22:04.640 --> 00:22:08.600
Massive focus on the constraint and then the business doubles, right?

407
00:22:08.600 --> 00:22:11.720
And then when we do that, we look at it again and say, what is the biggest constraint?

408
00:22:11.720 --> 00:22:14.280
It could still be going from 40 to 60 sales guys.

409
00:22:14.280 --> 00:22:17.280
And that might yet again be the biggest constraint we do it again, right?

410
00:22:17.280 --> 00:22:20.720
And so we look at this on a quarterly basis thing, what is the one thing that is limiting

411
00:22:20.720 --> 00:22:22.240
this business's growth?

412
00:22:22.240 --> 00:22:28.040
And by simply laser focusing on that, we achieve higher growth rates and way less stressed

413
00:22:28.040 --> 00:22:29.560
outbounders.

414
00:22:29.560 --> 00:22:34.520
And I think the beauty of that is that they actually grow faster by doing less, which

415
00:22:34.520 --> 00:22:39.240
is beautifully elegant, which is everything we're about, which is doing high leverage activity.

416
00:22:39.240 --> 00:22:41.520
So if you didn't know anything, I'll give you a little side quest here.

417
00:22:41.520 --> 00:22:45.160
The acquisition is not come logo, it's comprised of three separate ideas that have been

418
00:22:45.160 --> 00:22:47.400
combined together, which is why I like to logo so much.

419
00:22:47.400 --> 00:22:51.480
One is that there's something called a three term contingency, which is that many frameworks

420
00:22:51.480 --> 00:22:54.200
are based on before, during, after.

421
00:22:54.200 --> 00:22:58.440
And so oftentimes frameworks are triangles, because they account for all three of those

422
00:22:58.440 --> 00:23:02.480
things, just called a three term contingency, which is why triangles are cool for me.

423
00:23:02.480 --> 00:23:05.520
The second thing is that this is a full-crum for leverage, right?

424
00:23:05.520 --> 00:23:10.280
So if I had to stick here, I could pull this and I could lift the world, our comedies.

425
00:23:10.280 --> 00:23:14.040
The third is that I believe the single governing law above all else in business is supply

426
00:23:14.040 --> 00:23:17.360
and demand, is that the end of the day, many people overcomplicated.

427
00:23:17.360 --> 00:23:20.600
And what's interesting is that if you read some of the autobiographies from some of

428
00:23:20.600 --> 00:23:24.280
the wealthiest people in the entire world, at the end of this, it's kind of like the full

429
00:23:24.280 --> 00:23:28.800
circle of like, you just got to have something that a lot more people want than you have

430
00:23:28.800 --> 00:23:29.880
supply of.

431
00:23:29.880 --> 00:23:35.560
And then you learn all these terms and CPLs and CPMs and KPIs and metrics and IT and leadership

432
00:23:35.560 --> 00:23:36.560
and recruiting and all this stuff.

433
00:23:36.560 --> 00:23:40.520
And then at the end of your career, you say like at the end of the day, you just need

434
00:23:40.520 --> 00:23:43.240
something that a lot of people want, right?

435
00:23:43.240 --> 00:23:47.400
That more people want than other people can supply for, right?

436
00:23:47.400 --> 00:23:51.320
And so this is true in real estate markets, it's true in stock markets, it's true on the

437
00:23:51.320 --> 00:23:55.440
micro level of actually transacting in business, all of those things are true.

438
00:23:55.440 --> 00:23:58.600
And so I believe that's why we have this logo.

439
00:23:58.600 --> 00:24:03.880
And so when we focus with the theory of constraints, we focus on what thing will give us the absolute

440
00:24:03.880 --> 00:24:08.480
most leverage on the resources that we deploy in the business.

441
00:24:08.480 --> 00:24:14.720
Because if you really zoom out, I said strategy was prioritization and it's because every

442
00:24:14.720 --> 00:24:18.640
business has limitations, we have time, money, energy, et cetera.

443
00:24:18.640 --> 00:24:23.880
And so the best founders, the ones that move the fastest are actually efficient allocators

444
00:24:23.880 --> 00:24:25.360
of resources.

445
00:24:25.360 --> 00:24:28.240
And so in the beginning, you have to learn all these micro skills.

446
00:24:28.240 --> 00:24:32.640
But once you get your first real level of leadership and I'm talking executive leadership,

447
00:24:32.640 --> 00:24:36.920
then you're zooming out and saying, okay, we have all of these people, we can only really

448
00:24:36.920 --> 00:24:41.920
pick one or two big things, which of these things will get us the closest to our ultimate

449
00:24:41.920 --> 00:24:47.560
goal over the next 12 years, to say 12 years, 12 months, five years, 10 years.

450
00:24:47.560 --> 00:24:50.000
And then you take that one big bet.

451
00:24:50.000 --> 00:24:54.160
And that's ultimately what we're trying to get to with all of the portfolio companies.

452
00:24:54.160 --> 00:24:56.560
So let me give you a simple example of theory constraints.

453
00:24:56.560 --> 00:25:02.080
So let's say that you are a deadlifter and you can deadlift 500 pounds is your current

454
00:25:02.080 --> 00:25:04.360
best lift, okay?

455
00:25:05.080 --> 00:25:11.360
Let's say that your back, your legs, your quads, everything can handle a 700 pound deadlift,

456
00:25:11.360 --> 00:25:14.920
but your grip can only handle 500 pounds.

457
00:25:14.920 --> 00:25:19.680
If you go do more lat work and more hamstring work and more quad work to get all those muscles

458
00:25:19.680 --> 00:25:22.240
stronger, what have you actually done?

459
00:25:22.240 --> 00:25:25.640
You've added potential to the system, but not more throughput.

460
00:25:25.640 --> 00:25:30.160
And so you might have gone from a 700 potential max with every other muscle to an 800 potential

461
00:25:30.160 --> 00:25:33.240
max with every other muscle, but your grip is still limited by 500.

462
00:25:33.240 --> 00:25:37.320
So six months later, when you do all that strength and you expend all that energy, allocate

463
00:25:37.320 --> 00:25:40.480
all those resources, ate all that food, what's your deadlift?

464
00:25:40.480 --> 00:25:41.800
It's still 500.

465
00:25:41.800 --> 00:25:43.600
And this is where a lot of businesses stay stock.

466
00:25:43.600 --> 00:25:46.280
Now you could say 500 pounds, you could say 500,000 a month.

467
00:25:46.280 --> 00:25:47.760
It still works the same way.

468
00:25:47.760 --> 00:25:51.720
And so instead of doing that and then all of a sudden somebody comes in and says, dude,

469
00:25:51.720 --> 00:25:54.760
let's just do grip work and put everything else on maintenance.

470
00:25:54.760 --> 00:25:58.920
And then all of a sudden they go 50 pounds every month in growth because their grip gets

471
00:25:58.920 --> 00:26:02.560
so much stronger that they can get all of a sudden to an 800 pound deadlift.

472
00:26:02.560 --> 00:26:07.560
And they go from 500,000 a month to 800,000 a month in a very short period of time.

473
00:26:07.560 --> 00:26:12.480
And it's because the actual constraint of the business was identified and properly deconstrained.

474
00:26:12.480 --> 00:26:14.160
And then the business just grows on its own.

475
00:26:14.160 --> 00:26:18.040
And that's the crazy part about this that I have no learned is that once you deconstrain

476
00:26:18.040 --> 00:26:21.720
a business, it will just continue to grow until it hits the next constraint.

477
00:26:21.720 --> 00:26:24.800
If we're investing in a business, it's usually because we see somebody who's deadlifting

478
00:26:24.800 --> 00:26:30.040
200 pounds that has a thousand pound back and just needs 800 pounds of grip work.

479
00:26:30.040 --> 00:26:34.720
And we can just see that we just fix that one thing and then they go from 200,000 a month

480
00:26:34.720 --> 00:26:38.000
or two million a month to 10 million a month from that one change.

481
00:26:38.000 --> 00:26:41.240
And those are the huge leverage gains that we try and pick and find.

482
00:26:41.240 --> 00:26:46.360
And a big picture here is that like we prefer across everything to find businesses where

483
00:26:46.360 --> 00:26:49.560
it's about more better, whereas how can we do more what we're currently doing?

484
00:26:49.560 --> 00:26:50.840
How can we do it better?

485
00:26:50.840 --> 00:26:52.400
Because oftentimes that is the constraint.

486
00:26:52.400 --> 00:26:56.120
And it's just not nearly as sexy as most entrepreneurs will think it is because they get distracted

487
00:26:56.120 --> 00:27:00.480
by something new, something exciting, but the business doesn't exist to satisfy your

488
00:27:00.480 --> 00:27:01.680
personal needs.

489
00:27:01.680 --> 00:27:05.080
The business exists to satisfy the market's needs and the market may need you to just keep

490
00:27:05.080 --> 00:27:07.560
doing more of what you're doing and keep doing it better.

491
00:27:07.560 --> 00:27:11.600
From a mathematical perspective, and I talk about this in my book, $100 million leads,

492
00:27:11.600 --> 00:27:15.960
you can actually identify what the constraint of the business is by fixing an absolute improvement

493
00:27:15.960 --> 00:27:19.360
across every function of the business and seeing which of them one multiplied together

494
00:27:19.360 --> 00:27:21.200
gives you the most increase.

495
00:27:21.200 --> 00:27:25.440
So let's say we in a micro example of just a sales setting.

496
00:27:25.440 --> 00:27:31.320
We had 50% of people were scheduling, 10% of people were showing, and then 50% of people

497
00:27:31.320 --> 00:27:33.200
who showed for their appointment closed.

498
00:27:33.200 --> 00:27:34.600
That's current state.

499
00:27:34.600 --> 00:27:37.520
To identify the constraint, if you're like, wow, this is an obvious example, that is the

500
00:27:37.520 --> 00:27:41.560
point, but I'm going to show you how math wise you can prove it, is that if I take a fixed

501
00:27:41.560 --> 00:27:42.560
amount of improvement.

502
00:27:42.560 --> 00:27:46.760
So I say 50% schedule rate goes to 60% what's my improvement?

503
00:27:46.760 --> 00:27:49.480
I get a 20% improvement across the board, right?

504
00:27:49.480 --> 00:27:54.440
So if I multiply it to 3.6 times 0.1 times 0.5, you'd be at 1.2 of whatever the original

505
00:27:54.440 --> 00:27:57.280
number was, all right, so be 20% improvement.

506
00:27:57.280 --> 00:28:02.280
If I do a 10% improvement on the closed rate, so going from 50 to 60, I again would have

507
00:28:02.280 --> 00:28:05.200
the same multiplication through and I have a 20% improvement.

508
00:28:05.200 --> 00:28:11.160
But if I go from 10% show rate to 20% show rate, then what would happen?

509
00:28:11.160 --> 00:28:13.400
I would double my throughput.

510
00:28:13.400 --> 00:28:19.200
And so the area where you get the largest increase in throughput from the same fixed increment

511
00:28:19.200 --> 00:28:22.440
of improvement is what the constraint of the business is.

512
00:28:22.440 --> 00:28:26.480
Now sometimes we look at companies like that come to us like this and I'm like, do we

513
00:28:26.480 --> 00:28:31.600
can take the show rate from 10% to 50% and just like that, we 5x the business.

514
00:28:31.600 --> 00:28:35.120
And they're like, but we've got all these, it's like, I don't want to talk about anything

515
00:28:35.120 --> 00:28:36.120
that isn't show rate.

516
00:28:36.120 --> 00:28:37.120
I don't want to talk about anything.

517
00:28:37.120 --> 00:28:39.880
It's not show rate, I can't hear you.

518
00:28:39.880 --> 00:28:43.000
And having that kind of ruthless discipline is what will ultimately grow a business.

519
00:28:43.000 --> 00:28:48.480
And the beauty of finding these big value unlocks is that it's so much less work that all

520
00:28:48.560 --> 00:28:52.600
of the brute force that they're usually pushing through the market.

521
00:28:52.600 --> 00:28:57.040
The last set of beliefs are the beliefs that I was wrong about and have since rewritten

522
00:28:57.040 --> 00:28:59.800
and taken a new view on.

523
00:28:59.800 --> 00:29:01.760
And so there are five of them.

524
00:29:01.760 --> 00:29:03.760
So this will be the media's one of our buckets.

525
00:29:03.760 --> 00:29:05.560
So number one is disruptability by AI.

526
00:29:05.560 --> 00:29:09.200
So obviously the world's changed in the last, I mean, 36 months the world's changed.

527
00:29:09.200 --> 00:29:13.360
The access to AI, the knowledge about AI and some industries are beginning to get

528
00:29:13.360 --> 00:29:15.520
disrupted and I don't think that's going to stop.

529
00:29:15.520 --> 00:29:19.560
And so now one of our big criteria is how likely do we think that AI will have a huge

530
00:29:19.560 --> 00:29:21.320
disruption on this industry, right?

531
00:29:21.320 --> 00:29:25.360
You know, if we have a mechanic shop, it might be less likely to get disrupted compared

532
00:29:25.360 --> 00:29:29.640
to a design shop, right, that does graphic design, right?

533
00:29:29.640 --> 00:29:33.320
And so that would be like, that's how we'll start weeding companies because again, a lot

534
00:29:33.320 --> 00:29:36.080
of it, remember the thing that risk factor of enterprise value?

535
00:29:36.080 --> 00:29:38.600
Well, what's the likelihood that this company is going to continue on?

536
00:29:38.600 --> 00:29:42.960
Well, if there's a massive likelihood of disruption from an AI, it's not to say that they're

537
00:29:42.960 --> 00:29:45.600
going to go out of business, but we're going to have to basically risk product market

538
00:29:45.600 --> 00:29:49.560
fit, fix again, it's basically starting over in the future.

539
00:29:49.560 --> 00:29:52.480
Now, that's where having amazing founders is really important.

540
00:29:52.480 --> 00:29:56.040
But is that a risk that if I can't avoid it, I can.

541
00:29:56.040 --> 00:29:57.280
So I do.

542
00:29:57.280 --> 00:29:59.240
So that's bucket number one.

543
00:29:59.240 --> 00:30:01.800
So belief number two is bigger chunks of bigger companies.

544
00:30:01.800 --> 00:30:06.960
And so this is actually a pretty, pretty typical investor path.

545
00:30:06.960 --> 00:30:10.120
And in the beginning, we were investing in smaller chunks.

546
00:30:10.120 --> 00:30:13.040
And I think part of that was because I was getting into it.

547
00:30:13.040 --> 00:30:16.800
And so I didn't want to, you know, I don't want to make as big of bets with companies.

548
00:30:16.800 --> 00:30:18.080
That's partially me.

549
00:30:18.080 --> 00:30:21.280
The other part of it is like, we've gotten better and better at it in terms of like the

550
00:30:21.280 --> 00:30:24.520
value ad, which is like clear, like we're just tighter and tighter and tighter at what

551
00:30:24.520 --> 00:30:25.680
we do.

552
00:30:25.680 --> 00:30:28.440
And like I said earlier, it's not a quantity game.

553
00:30:28.440 --> 00:30:31.360
And so like if you find one Facebook, you don't need to really invest in anything else.

554
00:30:31.360 --> 00:30:34.120
I mean, you can look at Berkshire Hathaway right now, like over half of their portfolio

555
00:30:34.120 --> 00:30:35.600
is just Apple.

556
00:30:35.600 --> 00:30:36.600
And they're huge.

557
00:30:36.600 --> 00:30:37.600
You know what I mean?

558
00:30:38.240 --> 00:30:40.840
But their largest holding by a mile is Apple today.

559
00:30:40.840 --> 00:30:43.000
So there's the best investors in the world.

560
00:30:43.000 --> 00:30:46.960
I think last time I checked Warren Buffett has already made $90 billion on the trade he

561
00:30:46.960 --> 00:30:47.960
made for Apple.

562
00:30:47.960 --> 00:30:53.360
And so yeah, like Warren's G and the fact that he's still getting the returns he is with

563
00:30:53.360 --> 00:30:56.120
so much capital allocate is mind blowing.

564
00:30:56.120 --> 00:31:01.440
For us, not buying Apple, just the idea of having, taking, you know, like buying bigger chunks

565
00:31:01.440 --> 00:31:04.920
of bigger companies forces us to be even more disciplined in which opportunities we really

566
00:31:04.920 --> 00:31:10.080
want to pursue that we think we can both drive meaningful value, but also have tailwinds

567
00:31:10.080 --> 00:31:13.840
and grips that need to be strengthened that we can easily unlock huge value.

568
00:31:13.840 --> 00:31:17.760
And a big part of that is that like you can have a smaller chunks of many pieces of

569
00:31:17.760 --> 00:31:20.720
pie strategy if you're not doing a lot of value at.

570
00:31:20.720 --> 00:31:24.440
And so if you're a passive investor, if you're buying and trading stocks, you can have

571
00:31:24.440 --> 00:31:25.440
100 stocks in your portfolio.

572
00:31:25.440 --> 00:31:26.440
It doesn't really matter.

573
00:31:26.440 --> 00:31:27.440
Like you're not doing anything.

574
00:31:27.440 --> 00:31:28.440
You just buy them.

575
00:31:28.440 --> 00:31:29.440
That's it.

576
00:31:29.440 --> 00:31:33.760
But for us, because our value at is active, we have to be like prioritization, right?

577
00:31:33.760 --> 00:31:35.040
Credit resources unlimited options.

578
00:31:35.040 --> 00:31:38.960
We have a lot of options to invest our time and money into, but which are the buckets

579
00:31:38.960 --> 00:31:40.520
that we think we're going to get the highest return on?

580
00:31:40.520 --> 00:31:44.320
And so that is what we choose to allocate our time and energy towards, which is meaning

581
00:31:44.320 --> 00:31:47.880
if I'm going to allocate this, I should take a bigger bet on it.

582
00:31:47.880 --> 00:31:52.120
And so for context here, when we're thinking about like opportunity size, we're looking

583
00:31:52.120 --> 00:31:57.000
at companies that really at minimum, we think we can get to a $50 million plus exit, but

584
00:31:57.000 --> 00:31:59.720
ideally, a hundred million plus.

585
00:31:59.720 --> 00:32:04.120
And part of the benefit of the founders that come into acquisition.com is they get to

586
00:32:04.120 --> 00:32:08.200
work off of my scale of what's meaningful.

587
00:32:08.200 --> 00:32:12.240
And so one of the things is like, if you hang around with a lot of poor people, you'll

588
00:32:12.240 --> 00:32:15.640
adopt a poor ruler stick, right?

589
00:32:15.640 --> 00:32:20.160
And so for a poor person, and again, you can tell how wealthy someone is by the increments

590
00:32:20.160 --> 00:32:21.760
of money in time they talk about.

591
00:32:21.760 --> 00:32:25.560
So the wealthier someone is, the longer the time rise than they talk about and the bigger

592
00:32:25.560 --> 00:32:26.920
the money stick is.

593
00:32:27.360 --> 00:32:31.520
They talk about increments in millions, like literally on Wall Street, in terms of stick.

594
00:32:31.520 --> 00:32:34.200
They even have a shorthand for what a million dollars is.

595
00:32:34.200 --> 00:32:36.600
It's like two sticks, five sticks, right?

596
00:32:36.600 --> 00:32:38.520
Because that's literally a measurement unit.

597
00:32:38.520 --> 00:32:42.120
When I was really poor, a Chipotle Brito was a measurement unit of how much money I made.

598
00:32:42.120 --> 00:32:44.960
I knew that this paycheck would buy me this many Chipotle Brito.

599
00:32:44.960 --> 00:32:47.200
So I was like, wow, I got 200 Chipotle to Brito's, right?

600
00:32:47.200 --> 00:32:50.400
I knew how many meals it would literally buy me, right?

601
00:32:50.400 --> 00:32:54.360
And so as you level up, your ruler changes.

602
00:32:54.360 --> 00:32:57.960
And so one of the benefits of just like when you work out with someone who's way stronger

603
00:32:57.960 --> 00:33:01.920
than you, if you hang out with someone who's way richer than you, you start to adopt

604
00:33:01.920 --> 00:33:05.680
their time horizons and their money measuring sticks.

605
00:33:05.680 --> 00:33:09.720
And so if it's going to be meaningful for me, I typically have a higher net worth than

606
00:33:09.720 --> 00:33:12.400
most of the founders of the companies that I invested, because most of the times they're

607
00:33:12.400 --> 00:33:14.280
first or second time founders.

608
00:33:14.280 --> 00:33:19.360
And so if I think it's meaningful for us to have a, I think we can get this to 250 million,

609
00:33:19.360 --> 00:33:20.920
it's usually meaningful for them.

610
00:33:20.920 --> 00:33:26.640
But somebody else who might be broke or might think, well, I'll take a $20 million

611
00:33:26.640 --> 00:33:27.640
like it.

612
00:33:27.640 --> 00:33:31.040
To me, it's just not as, it's just, it's not going to change my life at all.

613
00:33:31.040 --> 00:33:34.600
And so for me, I want to allocate my time with things that like any one of them could change

614
00:33:34.600 --> 00:33:36.120
my life in a meaningful way.

615
00:33:36.120 --> 00:33:40.280
And the whole underlying principle around this is actually a phrase I heard from Shoron

616
00:33:40.280 --> 00:33:44.720
Savatsu who's the president of real, that publicly traded real real estate brokerage.

617
00:33:44.720 --> 00:33:48.000
And one of his mentors told him this, which is surely have to get rich once.

618
00:33:48.000 --> 00:33:51.840
And so our goal with the founders is that like, I say at this beginning is that this is

619
00:33:51.840 --> 00:33:53.640
the best deal they've ever done.

620
00:33:53.640 --> 00:33:56.400
And they should only have to make this one good deal one time.

621
00:33:56.400 --> 00:34:01.920
And so we take them from where they are to a level of exit or a level of enterprise value

622
00:34:01.920 --> 00:34:05.840
if they want to keep it for the long haul, either or that they don't have to get rich

623
00:34:05.840 --> 00:34:06.840
again.

624
00:34:06.840 --> 00:34:09.680
Like they get rich once and they are set for life and they create generational life changing

625
00:34:09.680 --> 00:34:10.680
well.

626
00:34:10.680 --> 00:34:11.680
That is the idea.

627
00:34:11.680 --> 00:34:14.200
And again, this is why it is a founder-friendly company in terms of how we structured

628
00:34:14.200 --> 00:34:15.720
acquisition knockout.

629
00:34:15.720 --> 00:34:18.200
Number three is that I don't need the business to be perfect.

630
00:34:18.200 --> 00:34:21.800
So I think in the beginning I was looking for unicorns that don't really even exist.

631
00:34:21.800 --> 00:34:26.120
And the more I've just kind of been in the game, it's just like every business has skeletons.

632
00:34:26.120 --> 00:34:28.320
Every business has bodies buried everywhere.

633
00:34:28.320 --> 00:34:31.400
And so the question is like, are these bodies material to the likelihood that it's going

634
00:34:31.400 --> 00:34:32.880
to be here tomorrow?

635
00:34:32.880 --> 00:34:36.920
And so we don't need businesses to be perfect in order for us to invest in them.

636
00:34:36.920 --> 00:34:40.440
This is partially like a soft plug which is like, I've had a number of founders like,

637
00:34:40.440 --> 00:34:43.920
I want to fix this thing or I have this huge issue or they're like embarrassed about

638
00:34:43.920 --> 00:34:44.920
it.

639
00:34:45.280 --> 00:34:48.920
I told you, there was a company that had 25% of the turn which is a trotious, right?

640
00:34:48.920 --> 00:34:51.480
But they had other things that were really good and we're like, all right, well, we can

641
00:34:51.480 --> 00:34:52.480
fix this.

642
00:34:52.480 --> 00:34:53.480
This is a grip issue.

643
00:34:53.480 --> 00:34:56.440
Like in some ways, if you have a massive hole, sometimes it's like, you're about like,

644
00:34:56.440 --> 00:34:59.360
we cannot be on like a massive amount of growth really quickly rather than waiting and

645
00:34:59.360 --> 00:35:01.440
slogging through on your own, not knowing what to do.

646
00:35:01.440 --> 00:35:04.760
And so yeah, like in perfect businesses, the name of the game, the question is, what is

647
00:35:04.760 --> 00:35:05.760
the potential?

648
00:35:05.760 --> 00:35:10.440
So how strong are their backs compared to the grip that we can identify as the constraint?

649
00:35:10.600 --> 00:35:15.080
Number four is that a business doesn't need a compounding vehicle within the business

650
00:35:15.080 --> 00:35:19.440
at the point of the acquisition, meaning if a company doesn't have something that compounds

651
00:35:19.440 --> 00:35:23.800
unto itself, some flywheel that continues to spin, it doesn't mean that it's a bad business,

652
00:35:23.800 --> 00:35:26.520
it means it's an opportunity for us to install one of those flywheel.

653
00:35:26.520 --> 00:35:28.600
So I'll give you an example, a couple of them flywheel.

654
00:35:28.600 --> 00:35:34.520
So if you continue to make content and your audience can compound month over month over

655
00:35:34.520 --> 00:35:38.640
month, then it means that no matter how big the company gets, it can still grow by 10%

656
00:35:38.640 --> 00:35:41.600
each month because those people tell other people, right?

657
00:35:41.600 --> 00:35:45.840
If you have a compounding vehicle for capital, then it means that like we have a way that

658
00:35:45.840 --> 00:35:49.440
we can reinvest capital every exp period of time and get why return.

659
00:35:49.440 --> 00:35:52.200
And it doesn't matter whether we're investing a million dollars or a hundred million dollars,

660
00:35:52.200 --> 00:35:54.120
we're still going to get the same return.

661
00:35:54.120 --> 00:35:56.040
And so that is something that can compound over time.

662
00:35:56.040 --> 00:35:59.800
Berkshire Hathaway is a compounding vehicle for capital, for money, right?

663
00:35:59.800 --> 00:36:04.040
If we have an incredibly strong word of mouth strategy, right, where every person who comes

664
00:36:04.040 --> 00:36:09.720
in brings 1.3 people with them, then whether we have 10 customers or 10,000 customers,

665
00:36:09.720 --> 00:36:11.760
it will still compound unto itself.

666
00:36:11.760 --> 00:36:17.200
You pretty much have to have a compounding vehicle to unlock crazy levels of growth and

667
00:36:17.200 --> 00:36:18.520
enterprise value.

668
00:36:18.520 --> 00:36:21.480
And that's what most companies who are going to acquire for the several hundred million

669
00:36:21.480 --> 00:36:26.200
dollars and up are going to look for is that there's at least one vehicle that compounds

670
00:36:26.200 --> 00:36:28.120
independent of scale.

671
00:36:28.120 --> 00:36:32.880
And so we just try and find, okay, even if this company doesn't have one, what could it

672
00:36:32.880 --> 00:36:33.880
be?

673
00:36:33.880 --> 00:36:35.880
And do we feel confident that we can make that flywheel spin?

674
00:36:35.880 --> 00:36:39.960
So a simple example is like you can calculate the hypothetical max of a business by multiplying

675
00:36:39.960 --> 00:36:43.520
sales velocity by lifetime value, all right, our lifetime gross profits.

676
00:36:43.520 --> 00:36:47.680
So we've got a business that does a thousand dollar a month agency service.

677
00:36:47.680 --> 00:36:49.960
The average customer stays for 10 months.

678
00:36:49.960 --> 00:36:52.840
That company signs up 10 customers month.

679
00:36:52.840 --> 00:36:57.160
Even that a thousand dollars a month, we know that month one, we're going to get 10,000,

680
00:36:57.160 --> 00:36:58.160
right?

681
00:36:58.160 --> 00:37:01.880
Month two, we're going to be at 19,000 because we're going to lose one from the first month.

682
00:37:01.880 --> 00:37:04.920
Because we have a 10 month LTV, so it's 10 month churn.

683
00:37:04.920 --> 00:37:07.240
So churn would actually be like 8%.

684
00:37:07.240 --> 00:37:09.760
But point being, you're going to lose someone from churn.

685
00:37:09.760 --> 00:37:13.000
And then it'll be an asymptote, which basically looks like this on a chart.

686
00:37:13.000 --> 00:37:15.760
Basically month one, you have the most growth month two by percentage, you have a little

687
00:37:15.760 --> 00:37:19.120
less, less, less, less, less until eventually flatlines.

688
00:37:19.120 --> 00:37:23.640
That flat line is a hypothetical max that you can calculate for yourself, which is sales

689
00:37:23.640 --> 00:37:28.600
velocity, which is number of units multiplied by the lifetime value or lifetime revenue of

690
00:37:28.600 --> 00:37:29.920
every average customer.

691
00:37:29.920 --> 00:37:33.600
So in this example, if it was a thousand dollars a month, the average person stays 10 months,

692
00:37:33.600 --> 00:37:36.640
then 10,000 dollars is the lifetime revenue from the customer.

693
00:37:36.640 --> 00:37:41.400
And if we sell 10 customers a month consistently, then 10 times 10,000 is 100,000.

694
00:37:41.400 --> 00:37:47.080
So this company will not grow past 100,000 dollars a month unless we either increase number

695
00:37:47.080 --> 00:37:50.440
of units sold or we increase the lifetime value.

696
00:37:50.440 --> 00:37:53.400
Now, let's say we double the lifetime value.

697
00:37:53.400 --> 00:37:54.400
What's going to happen?

698
00:37:54.400 --> 00:37:57.920
It'll just continue out again until it replats toes at 200,000.

699
00:37:57.920 --> 00:38:02.400
But if we just double the sales velocity, we sell twice as many customers from 10 to 20.

700
00:38:02.400 --> 00:38:07.640
Well, we'll do it again and we'll hypothetically max at 200,000 dollars a month.

701
00:38:07.640 --> 00:38:11.840
And so the idea is that when we see one of these issues or see one of these businesses,

702
00:38:11.840 --> 00:38:15.400
we have to have a way that we can see basically uncapped growth.

703
00:38:15.400 --> 00:38:19.160
And so that means we need to put a higher leverage front end so that we can actually grow

704
00:38:19.160 --> 00:38:23.240
the number of sales that we get every single month or that we can increase the lifetime

705
00:38:23.240 --> 00:38:25.720
revenue of every customer every single month.

706
00:38:25.720 --> 00:38:26.800
That is the idea.

707
00:38:26.800 --> 00:38:31.000
And so I used to reject companies that didn't have a compounding vehicle because honestly,

708
00:38:31.000 --> 00:38:34.520
it was just my own, I don't know, pickiness if you want to call it that way.

709
00:38:34.520 --> 00:38:38.440
But just being like, well, you need to have X, Y, and Z. And I want to see that.

710
00:38:38.440 --> 00:38:43.120
But now I see it actually just as a big opportunity for us to add huge value to the business with

711
00:38:43.120 --> 00:38:48.680
not a ton of effort on our part because we just know we can identify how to implement those

712
00:38:48.680 --> 00:38:50.200
flywheels into business.

713
00:38:50.200 --> 00:38:55.240
So for example, if we have a, like one of our companies has a founder driven face, right?

714
00:38:55.240 --> 00:38:59.200
And they use organic content in order to generate the vast majority of their leads.

715
00:38:59.200 --> 00:39:00.960
And so for us, what do we do?

716
00:39:00.960 --> 00:39:04.560
Well, he has a fixed number of media people and he puts out X number of content.

717
00:39:04.560 --> 00:39:09.200
And so for us to improve that, we can increase the number of content, which is a linear improvement,

718
00:39:09.200 --> 00:39:13.480
but we can make the quality of the content better, which is a exponential improvement.

719
00:39:13.480 --> 00:39:16.680
And so if we do that, then we know that his audience will grow disproportionately every

720
00:39:16.680 --> 00:39:18.760
single month and keep getting bigger and bigger.

721
00:39:18.760 --> 00:39:21.920
And so that's a very big unlock for us to continue to get more and more leads every single

722
00:39:21.920 --> 00:39:24.560
month, month after month with a limited one time effort.

723
00:39:24.560 --> 00:39:28.120
On the flip side, if we were to, you know, change the deal structure on something so that

724
00:39:28.120 --> 00:39:34.040
we can massively extend the LTV of a company, like cutting churn from 10% to 3%, then we

725
00:39:34.040 --> 00:39:36.120
will unlock huge amount.

726
00:39:36.120 --> 00:39:38.960
Now what we'll do is it'll unlock growth until the new hypothetical max.

727
00:39:38.960 --> 00:39:40.280
I'll be real.

728
00:39:40.280 --> 00:39:43.400
There are some times where the hypothetical max gets unlocked to, let's say, four million

729
00:39:43.400 --> 00:39:45.720
dollars a month and the company's doing 500,000 a month.

730
00:39:45.720 --> 00:39:50.920
I'm good with that win, right, like even if it's not forever, we can still basically linearly

731
00:39:50.920 --> 00:39:55.560
grow now that we've unlocked this next level until we tap out at four million dollars a

732
00:39:55.560 --> 00:39:56.560
month.

733
00:39:56.560 --> 00:39:59.320
And at that point, we have a $200 million sale if that's what the guy wants, or he just

734
00:39:59.320 --> 00:40:01.320
wants to keep pretty money, which we're also okay with.

735
00:40:01.320 --> 00:40:04.000
Fifth belief is that businesses should have gray hair on the team.

736
00:40:04.000 --> 00:40:06.720
And it doesn't mean literal gray hair, but it's more been there done that.

737
00:40:06.720 --> 00:40:10.120
And so think about this as 80, 20, and this is kind of laylandized rule of thumb, is

738
00:40:10.120 --> 00:40:14.240
that 20% of your team should have already been to where you're trying to go.

739
00:40:14.240 --> 00:40:18.160
And this is super important, especially for first time founders, because what I was

740
00:40:18.160 --> 00:40:21.560
mentioning earlier where you have one brain that becomes the cap of the business, right?

741
00:40:21.560 --> 00:40:24.800
And so if you're teaching everyone how to do everything, the likely that you're going

742
00:40:24.800 --> 00:40:27.760
to make into massive business, especially on a short time horizon, is really low.

743
00:40:27.760 --> 00:40:29.640
When I say short, I mean like five years.

744
00:40:29.640 --> 00:40:35.320
So like you can't solo get your way to like 10 or like 20 years later, you can get there.

745
00:40:35.320 --> 00:40:38.640
It's just to take so much more effort for one person to download their brain into that

746
00:40:38.640 --> 00:40:39.640
many people.

747
00:40:39.640 --> 00:40:43.280
And you have to be exceptionally smart because you got to learn really deep on lots of things.

748
00:40:43.280 --> 00:40:46.400
It's not realistic, or at least it's not my preferred way to grow.

749
00:40:46.400 --> 00:40:51.040
And so we want at least 20% of the team, which sometimes we have to write size and say,

750
00:40:51.040 --> 00:40:54.080
hey, we need two big leaders or experienced leaders who have been there done that in these

751
00:40:54.080 --> 00:40:56.400
functions to get us where we want to go.

752
00:40:56.400 --> 00:40:59.960
An example that would be like pulling in a true CFO for a company that's at a million

753
00:40:59.960 --> 00:41:03.640
dollars a month and say, okay, this person is going to help us get all this stuff cleaned

754
00:41:03.640 --> 00:41:07.240
up so that in a year and a half or two years, we can be at two and a half million a month

755
00:41:07.240 --> 00:41:10.040
and we can actually have audit of financials and actually do an exit.

756
00:41:10.040 --> 00:41:15.880
Or let's say we're in a company that the founders, the was the salesman, moves up to managing

757
00:41:15.960 --> 00:41:19.920
a team of three to five sales people, but he's never really stood up and scaled a sales

758
00:41:19.920 --> 00:41:20.920
team.

759
00:41:20.920 --> 00:41:24.360
Well, sometimes it's good to bring in an outside person who's scaled multiple companies

760
00:41:24.360 --> 00:41:29.280
from five to 50 and have that person come in that role, move the founder over to their

761
00:41:29.280 --> 00:41:32.920
operating or doing something else that they actually do have more experience or expertise

762
00:41:32.920 --> 00:41:33.920
in.

763
00:41:33.920 --> 00:41:37.480
And so the idea is we want someone who has gray hair or multiple people in gray hair on

764
00:41:37.480 --> 00:41:40.080
the team so they can also be mentors to the rest of the team.

765
00:41:40.080 --> 00:41:44.200
It also gives of an interesting feeling of stability for attracting talent.

766
00:41:44.200 --> 00:41:48.520
So especially if you're a younger founder, like having a few people in their 40s or 50s

767
00:41:48.520 --> 00:41:52.560
on the team, when other people who are new and talented are interviewing, they're like,

768
00:41:52.560 --> 00:41:54.080
okay, this is a stable thing.

769
00:41:54.080 --> 00:41:57.200
This isn't just like four kids who like are doing this in their basement.

770
00:41:57.200 --> 00:41:58.680
And like, again, this isn't me hating on that.

771
00:41:58.680 --> 00:41:59.680
I love you guys.

772
00:41:59.680 --> 00:42:00.840
And that's why I'm telling this.

773
00:42:00.840 --> 00:42:08.560
But like, when Layla was 23 and I was 26 or seven, we hired Suzanne or CFO and I won't

774
00:42:08.560 --> 00:42:12.600
say what Suzanne's age, don't worry, Suzanne, she'd been in the industry 35 years.

775
00:42:12.600 --> 00:42:17.280
And she had been sell side 40 times and she'd been on the founder side of the table selling

776
00:42:17.280 --> 00:42:18.280
40 times.

777
00:42:18.280 --> 00:42:21.200
She'd done a $15 billion, a $5 billion, a $1 billion.

778
00:42:21.200 --> 00:42:23.400
And her most recent transaction was $750 million.

779
00:42:23.400 --> 00:42:27.440
And so we felt really confident that she had the experience to help our company, which

780
00:42:27.440 --> 00:42:29.160
at the time was valued at about $150 million.

781
00:42:29.160 --> 00:42:31.160
And you feel like, wait, didn't you sell for 50?

782
00:42:31.160 --> 00:42:32.160
Yeah, I did.

783
00:42:32.160 --> 00:42:33.160
I sold for a way under value.

784
00:42:33.160 --> 00:42:35.680
If you're like, I just being very upfront about it.

785
00:42:35.680 --> 00:42:38.080
I sold a gym company during COVID.

786
00:42:38.080 --> 00:42:40.520
So like, take that for what you want.

787
00:42:40.520 --> 00:42:41.920
It was because I wanted to do this more.

788
00:42:41.920 --> 00:42:46.280
And for me, I knew that I, for me, when I'm gunholed on something and this is what I think

789
00:42:46.280 --> 00:42:49.360
about every morning, like, it was the right move for what I needed to do.

790
00:42:49.360 --> 00:42:53.160
So it's going to be a great investment for the private equity from the bottom.

791
00:42:53.160 --> 00:42:57.480
Anyways, gray hair on the team can give you a little bit more emotional stability, can

792
00:42:57.480 --> 00:43:01.680
give you somebody to bounce ideas off of, can implement things that you don't know.

793
00:43:01.680 --> 00:43:05.960
Because here's a good, let me test for this in the interview process.

794
00:43:05.960 --> 00:43:09.360
If you don't feel like you're learning something from the person you're interviewing, it's

795
00:43:09.360 --> 00:43:11.400
not the right person.

796
00:43:11.400 --> 00:43:13.800
So if it's a role or department that you don't have experience in.

797
00:43:13.800 --> 00:43:17.240
So if it's like you're hiring for HR, you're hiring for finance, you're hiring for IT,

798
00:43:17.240 --> 00:43:20.280
you're hiring for marketing, whatever department you don't know anything about.

799
00:43:20.280 --> 00:43:24.480
If you feel like you know more than the person you're interviewing, don't hire.

800
00:43:24.480 --> 00:43:25.960
They should be teaching you.

801
00:43:25.960 --> 00:43:30.200
And that is actually where the next level of education happens as a founder is the talent

802
00:43:30.200 --> 00:43:34.600
that comes in your company because you've built something of appreciable enough size

803
00:43:34.600 --> 00:43:36.680
that you can attract a higher level of talent.

804
00:43:36.680 --> 00:43:40.400
And then everyone starts getting better and cross pollinating, cross learning.

805
00:43:40.400 --> 00:43:44.320
And transparently, one of the big competitive modes that we have at Acquisition.com is

806
00:43:44.320 --> 00:43:46.560
that we have a big brand.

807
00:43:46.560 --> 00:43:51.480
And so we are able to attract really high level talent that a smaller company might not

808
00:43:51.480 --> 00:43:52.640
otherwise be able to attract.

809
00:43:52.640 --> 00:43:56.480
They will respond to our emails, they will take our phone calls, they will do our interviews,

810
00:43:56.480 --> 00:44:00.080
and they will believe us when we vouch for a company because they know there is a, don't

811
00:44:00.080 --> 00:44:04.640
take this the wrong way, a professional or legitimate investor that backs the company.

812
00:44:04.640 --> 00:44:08.000
And so in that way, we have, I mean, this is a competitive mode, this is an advantage

813
00:44:08.000 --> 00:44:09.000
for us.

814
00:44:09.000 --> 00:44:12.600
And so that we can get a disproportionate amount of value in a company that the IQ per

815
00:44:12.600 --> 00:44:15.640
square foot, we can jam into a company goes way up.

816
00:44:15.640 --> 00:44:19.600
And then that unlocks a huge amount of growth that founders wouldn't otherwise have experienced.

817
00:44:19.600 --> 00:44:20.600
Yeah.

818
00:44:20.600 --> 00:44:23.760
And so at the beginning, I promise to give you a checklist of things that would increase

819
00:44:23.760 --> 00:44:26.640
the likelihood that you could get selected as a portfolio company or move further the

820
00:44:26.640 --> 00:44:27.640
process with us.

821
00:44:27.640 --> 00:44:32.040
And just as a quick side note, if you go through the process, my promise to you is that as

822
00:44:32.040 --> 00:44:36.280
long as you're meeting the basic level of quantitative qualifications, if we decide not

823
00:44:36.280 --> 00:44:40.080
to do a deal with you, we will still give you what our recommendations are that you can

824
00:44:40.080 --> 00:44:41.960
benefit from for your company.

825
00:44:41.960 --> 00:44:44.720
And we will tell you the things that we think you should fix that would make us interested

826
00:44:44.720 --> 00:44:48.680
in again or went to say, hey, this might not be our type of deal, but we'd still recommend

827
00:44:48.680 --> 00:44:50.400
you do these things that would increase the value of the company.

828
00:44:50.400 --> 00:44:54.280
And that's our way of trying to always make, leave everyone better off than we found

829
00:44:54.280 --> 00:44:55.280
them.

830
00:44:55.280 --> 00:44:56.280
So that's one of my promises to you.

831
00:44:56.280 --> 00:44:59.160
And if you ever feel like you didn't get that, please let us know.

832
00:44:59.160 --> 00:45:01.200
That being said, checklist.

833
00:45:01.200 --> 00:45:02.880
So one is know your numbers.

834
00:45:02.880 --> 00:45:05.280
Like if you don't know your numbers, it makes it really hard to assess anything.

835
00:45:05.280 --> 00:45:08.040
It's also kind of a leading indicator that someone's like really not that organized.

836
00:45:08.040 --> 00:45:10.560
And if you want to get really big scale, you got to know your numbers.

837
00:45:10.560 --> 00:45:11.960
So it's like scene shark tank.

838
00:45:11.960 --> 00:45:13.720
The first thing this is like know your numbers.

839
00:45:13.720 --> 00:45:17.840
Number one, number two, don't, this is like the core layer, but feel separate, which

840
00:45:17.840 --> 00:45:20.160
is don't inflate your numbers, right?

841
00:45:20.160 --> 00:45:23.880
Which is, you know, if, sometimes I don't really get this, it's like, you're not going

842
00:45:23.880 --> 00:45:24.880
to talk to me, right?

843
00:45:24.880 --> 00:45:26.600
Like it's not like you're hopping on the phone.

844
00:45:26.600 --> 00:45:28.720
That's like, that doesn't happen until we close deals.

845
00:45:28.720 --> 00:45:33.080
So you're not going to like fool us and be like, oh, yeah, we're doing a million a month

846
00:45:33.080 --> 00:45:34.080
and we'll be like, cool.

847
00:45:34.080 --> 00:45:35.080
So that's the financials.

848
00:45:35.080 --> 00:45:37.760
And then it's like, oh, you're, you did a million dollars last year.

849
00:45:37.760 --> 00:45:39.160
That's not a million dollars a month.

850
00:45:39.160 --> 00:45:40.600
Well, yeah, but I mean, like we're gonna.

851
00:45:40.600 --> 00:45:43.680
And it's like that, that, that don't, like that'll immediately disqualify.

852
00:45:43.680 --> 00:45:47.320
And we're also like not really being kind to like give you a big laundry list of stuff

853
00:45:47.320 --> 00:45:48.600
because you've lied to us.

854
00:45:48.600 --> 00:45:50.120
So don't do that.

855
00:45:50.120 --> 00:45:52.120
Number three is having a big goal.

856
00:45:52.120 --> 00:45:56.000
And so this is important because I said earlier that you get to adopt some of my litmus

857
00:45:56.000 --> 00:45:59.840
tests or my measuring six for money, is that like if someone comes in and says they want

858
00:45:59.840 --> 00:46:02.560
to have a 20 million dollar exit or something like, there's nothing wrong with that.

859
00:46:02.560 --> 00:46:06.840
It's just, that's not interesting to us because I have to allocate our resources and it has

860
00:46:06.840 --> 00:46:11.320
to be the biggest banks for buck in terms of founders, like it's not about the size of

861
00:46:11.320 --> 00:46:12.320
the company.

862
00:46:12.320 --> 00:46:14.280
It's about the size of the founders vision.

863
00:46:14.280 --> 00:46:18.800
And so if the founder has, you know, five, 10 locations of a thing and they want to go

864
00:46:18.800 --> 00:46:21.760
national and they're like gung ho and they're mission driven and they love the product

865
00:46:21.760 --> 00:46:26.360
and they've great repeat customers because there's amazing word of mouth and like, let's

866
00:46:26.360 --> 00:46:27.360
do it.

867
00:46:27.360 --> 00:46:28.600
You know, I mean, like I'm in for it.

868
00:46:28.600 --> 00:46:32.200
But if someone's like, yeah, I just want to get to, you know, 20 locations in the exit,

869
00:46:32.200 --> 00:46:35.200
unless it was like us buying majority up front and then them staying on for a period of time

870
00:46:35.200 --> 00:46:39.040
to then help them like, you know, exit from that perspective, then maybe that's what

871
00:46:39.040 --> 00:46:40.040
we do.

872
00:46:40.040 --> 00:46:42.840
But that's because for us, we're going to want to do something that's going to go big.

873
00:46:42.840 --> 00:46:45.240
Number four is speed and decision making.

874
00:46:45.240 --> 00:46:46.880
So there's kind of like parallel sides.

875
00:46:46.880 --> 00:46:52.040
So speed is one of the best ways and I learned this from Mark Reberge in sales acceleration

876
00:46:52.040 --> 00:46:53.040
formula.

877
00:46:53.040 --> 00:46:57.080
You can actually test someone's attention to detail and work ethic by the speed that

878
00:46:57.080 --> 00:46:58.480
they communicate.

879
00:46:58.480 --> 00:47:01.920
And so if someone is very quick to respond throughout the entire process, we know that they'll

880
00:47:01.920 --> 00:47:06.360
be very, they'll be very likely to be very quick to respond as a founder inside the portfolio.

881
00:47:06.360 --> 00:47:10.560
And so the way you act during the deal process is a great predictor for us or a great measuring

882
00:47:10.560 --> 00:47:12.520
stick for us to see how you're going to act afterwards.

883
00:47:12.520 --> 00:47:15.920
And so there's many founders that we just qualified simply based on their behavior during

884
00:47:15.920 --> 00:47:20.920
the process because the bigger thing that we're looking at is who you are, the secondary

885
00:47:20.920 --> 00:47:23.440
thing we're looking at is the company that you own and the company that we're investing

886
00:47:23.440 --> 00:47:24.440
in.

887
00:47:24.440 --> 00:47:27.720
And that again is because of the big lessons that we have learned is that the tail of

888
00:47:27.720 --> 00:47:29.160
two companies.

889
00:47:29.160 --> 00:47:37.320
So how you act is more important than what you own for us and our business model.

890
00:47:37.320 --> 00:47:41.400
The decision making is also a function of speed, but it's really the way that you approach

891
00:47:41.400 --> 00:47:42.400
decision.

892
00:47:42.400 --> 00:47:46.880
So if someone who is really skittish, really back and forth says yes, then no, then changes

893
00:47:46.880 --> 00:47:53.040
their mind, that is very hard to do business with from a deal process and then post deal.

894
00:47:53.040 --> 00:47:55.840
If we're like, okay, let's implement this price change and like, yeah, let's do it.

895
00:47:55.840 --> 00:47:58.800
And they're like, oh, wait, what if they said, wait, no, I wanted to actually, I do want

896
00:47:58.800 --> 00:48:02.520
to do like very, very hard, very erratic, really tough.

897
00:48:02.520 --> 00:48:05.880
Number five, I think I'm about five is focus.

898
00:48:05.880 --> 00:48:09.000
And this is, I said it was a point earlier, but I'm re-emphasizing this because there's

899
00:48:09.000 --> 00:48:10.440
a couple of ways to do this manifest.

900
00:48:10.440 --> 00:48:14.640
One is the guy who owns 10 companies and you're like, well, wait, Alex, you own 10 companies.

901
00:48:14.640 --> 00:48:16.560
I'm not CEO of 10 companies.

902
00:48:16.560 --> 00:48:17.560
Big difference.

903
00:48:17.560 --> 00:48:21.400
Just like you can own 10 stocks or 100 stocks, all right, like I'm not CEO of this company.

904
00:48:21.400 --> 00:48:22.920
I am, I'm not even CEO of this company.

905
00:48:22.920 --> 00:48:26.040
I'm founder of this company, all right, and I just make videos.

906
00:48:26.040 --> 00:48:28.240
If somebody comes in and says, like, help me grow this thing.

907
00:48:28.240 --> 00:48:31.280
And it's like, yeah, this is like, it's only five hours a week and I've got this and

908
00:48:31.280 --> 00:48:36.120
I'm just, you know, like all that, like, no, like we just say, like, no, I'm good man.

909
00:48:36.120 --> 00:48:39.520
Pick one and while I'll be grow that one and get rid of the rest of them.

910
00:48:39.520 --> 00:48:40.520
And so yeah.

911
00:48:40.520 --> 00:48:45.680
And so those founders we don't work well with and then focus from a future perspective.

912
00:48:45.680 --> 00:48:49.680
So if someone's like, hey, I want to do all these things and we need to, like, there's

913
00:48:49.680 --> 00:48:52.720
so much money on the table and we need to vertically and agree and we need to add this

914
00:48:52.720 --> 00:48:53.720
thing.

915
00:48:53.720 --> 00:48:54.720
I need to build a software.

916
00:48:54.720 --> 00:48:59.320
It's like, dude, like you sell cleaning services, calm down.

917
00:48:59.320 --> 00:49:01.960
Like let's just sell more cleaning services.

918
00:49:01.960 --> 00:49:07.360
And for some founders, that answer is too difficult because their emotional needs for

919
00:49:07.360 --> 00:49:12.080
novelty surpass their deeper desire for growth or impact.

920
00:49:12.080 --> 00:49:13.080
Real talk.

921
00:49:13.080 --> 00:49:18.400
Like your short term need for something new surpasses your long term need to make a big

922
00:49:18.400 --> 00:49:19.640
difference.

923
00:49:19.640 --> 00:49:20.640
We need this to be flipped.

924
00:49:20.640 --> 00:49:23.680
We need someone to say, man, I would love to be distracted by all these shiny things.

925
00:49:23.680 --> 00:49:28.040
But I know all I need to do is keep doing these things and I would like your help to unlock

926
00:49:28.040 --> 00:49:29.720
all of these levels of growth.

927
00:49:29.720 --> 00:49:31.760
That is the type of found that we want to work with.

928
00:49:31.760 --> 00:49:35.040
Number six is the beer at the airport test.

929
00:49:35.040 --> 00:49:37.840
But I do like this because I think it's very simple.

930
00:49:37.840 --> 00:49:40.880
If we don't look forward to talking to you, we just won't do the deal.

931
00:49:40.880 --> 00:49:44.760
And this one actually, like, more and more and more, like I'm so stoked about the companies

932
00:49:44.760 --> 00:49:49.360
that we have in the portfolio and in the pipeline right now, like I like all of them.

933
00:49:49.360 --> 00:49:51.720
And a mentor of mine said this and I really like it.

934
00:49:51.720 --> 00:49:56.200
He said, the litmus test for doing deals at, he said at our level is very honored by

935
00:49:56.200 --> 00:50:01.600
that, was if you wouldn't do, if you wouldn't help the person for free, don't help them as

936
00:50:01.600 --> 00:50:02.960
a part of a deal.

937
00:50:02.960 --> 00:50:04.680
And he's like, that's how I have to feel about it.

938
00:50:04.680 --> 00:50:08.680
He said, like, I want to help this person and the economics is only there to just make

939
00:50:08.680 --> 00:50:09.680
it make sense.

940
00:50:09.680 --> 00:50:14.440
But like, that was a great litmus test for me to say, like, am I looking forward to hopping

941
00:50:14.440 --> 00:50:19.120
on calls or talking to this person or like having dinner with them or seeing them, you

942
00:50:19.120 --> 00:50:22.440
know, having them fly out or whatever.

943
00:50:22.440 --> 00:50:26.080
And it's not really advice for me to use, like, be a cool person.

944
00:50:26.080 --> 00:50:28.760
He's like, darn, not a cool person.

945
00:50:28.760 --> 00:50:30.520
But that is a huge part of it, right?

946
00:50:30.520 --> 00:50:33.680
And I will share something that has been interesting and not necessarily a red flag, but

947
00:50:33.680 --> 00:50:38.640
just something that I have found, which is why combinator, for example, doesn't even

948
00:50:38.640 --> 00:50:40.240
accept solo founders.

949
00:50:40.240 --> 00:50:44.760
So why combinators, one of the probably the most storied incubators in Silicon Valley.

950
00:50:44.760 --> 00:50:50.480
And they judge exclusively off founders and they, their entire process is 10 minute interviews.

951
00:50:50.480 --> 00:50:51.640
And that's how they make the call.

952
00:50:51.640 --> 00:50:55.080
And when you talk to the founders, they say, when I say founder founders of YC, they say,

953
00:50:55.080 --> 00:50:56.080
we could do it in three.

954
00:50:56.080 --> 00:50:57.560
We just would feel impolite.

955
00:50:57.560 --> 00:51:02.240
So we do it in 10, like, to give you some context of how important they bet on the jockies

956
00:51:02.240 --> 00:51:03.240
plural.

957
00:51:03.240 --> 00:51:08.360
And so one of the things that we have noticed is that the growth rate in general of companies,

958
00:51:08.360 --> 00:51:10.360
again, there's always exceptions.

959
00:51:10.360 --> 00:51:14.920
But in general, companies that have more founders or more vested partners, key point, doesn't

960
00:51:14.920 --> 00:51:17.720
have to be like, okay, there's three founders, they're all one thirds.

961
00:51:17.720 --> 00:51:21.800
It could be a solo founder with three people who have some sort of equity percentage that

962
00:51:21.800 --> 00:51:26.120
feel ownership over the business that are really stallions that can really drive stuff.

963
00:51:26.120 --> 00:51:30.560
Those companies in general do better because you have more brains working on the thing that

964
00:51:30.560 --> 00:51:33.840
are independently intelligent and problem solving.

965
00:51:33.840 --> 00:51:37.400
And in that tale of two companies that I was telling you earlier, this is three equal

966
00:51:37.400 --> 00:51:39.920
founders, one founder, a hundred percent.

967
00:51:39.920 --> 00:51:43.480
So it's like, we've seen these types of examples because if you have a founder who's

968
00:51:43.480 --> 00:51:48.400
over a customer's success at founder over marketing and founder over sales, you can implement

969
00:51:48.400 --> 00:51:51.560
changes in improvements in all three departments and know that they're all getting done every

970
00:51:51.560 --> 00:51:52.560
quarter.

971
00:51:52.560 --> 00:51:56.360
Whereas if a solo founder might be like, all right, I can do the sales in this quarter,

972
00:51:56.360 --> 00:51:59.800
the marketing one next quarter, and the successful in the quarter after that.

973
00:51:59.800 --> 00:52:01.280
So we can get three times the rate of progress.

974
00:52:01.280 --> 00:52:05.680
Now, in theory, you want other people who can execute those things on your behalf.

975
00:52:05.680 --> 00:52:08.600
But sometimes when you're earlier on, you don't have the ability to attract that level

976
00:52:08.600 --> 00:52:09.600
of talent.

977
00:52:09.600 --> 00:52:11.520
And again, that's how we come in.

978
00:52:11.520 --> 00:52:17.400
And so, yes, big picture, be speedy, be honest, actually have the numbers that you say

979
00:52:17.400 --> 00:52:20.920
you do, be focused on the actual business that you say you want to have, have a big dream

980
00:52:20.920 --> 00:52:25.800
for where you want to go because it has to be compelling for us, be cool, and have other

981
00:52:25.800 --> 00:52:28.880
stallions that are in the stable with you trying to run in the same direction.

982
00:52:28.880 --> 00:52:33.400
And tip number seven is more of an observation than it is a command or a recommendation.

983
00:52:33.400 --> 00:52:36.520
Having a few other people on the team that have a little bit of equity, when I say a little

984
00:52:36.520 --> 00:52:39.600
bit, I'm not saying give 10% of the company, I'm saying give one or two percent that

985
00:52:39.600 --> 00:52:42.840
can invest over a few years of the company to get people bought in.

986
00:52:42.840 --> 00:52:45.400
Like, when we sold Jim Monch, we didn't own 100% of it.

987
00:52:45.400 --> 00:52:49.520
I think we sold, we own 94% or something like that.

988
00:52:49.520 --> 00:52:53.640
And so it's okay to let other people make money.

989
00:52:53.640 --> 00:52:56.320
And I think the trade is almost always worth it.

990
00:52:56.320 --> 00:53:01.040
And so again, multiple founders or multiple vested parties in it is just a plus.

991
00:53:01.040 --> 00:53:02.040
It's not a requirement.

992
00:53:02.040 --> 00:53:05.640
It is an observation that we have seen in terms of me equipping you with the things that

993
00:53:05.640 --> 00:53:08.800
make you most likely to go through and win with us.

994
00:53:08.800 --> 00:53:11.960
And my last piece of advice, since we spent the whole time talking about the acquisition

995
00:53:11.960 --> 00:53:14.920
.com business model, is that if you're a company that's doing over a million dollars

996
00:53:14.920 --> 00:53:18.560
a year in profit or two million dollars a year in profit, if you are kind of a founder

997
00:53:18.560 --> 00:53:21.280
face, obviously if you're not a founder face and you're doing over two million dollars

998
00:53:21.280 --> 00:53:22.720
a year, that works still.

999
00:53:22.720 --> 00:53:26.440
Go to acquisition.com, fill out the form and our team will be in contact with you and

1000
00:53:26.440 --> 00:53:31.880
we'd love to help you understand more about the business, see where we can unlock value.

1001
00:53:31.880 --> 00:53:36.280
And the worst case scenario is you get a full plan of what we would do on your behalf

1002
00:53:36.280 --> 00:53:37.480
if we were to work with you.

1003
00:53:37.480 --> 00:53:40.680
And the best case scenario is that we partner with you and we take this thing to the moon.