$100M Founder Explains How to Build a Valuable Company

Summary

The speaker, having sold nine companies and one for $46.2 million, shares insights on building a business for sale. He emphasizes the importance of distinguishing between the 'goose' (the core, sustainable, and valuable business) and the 'golden eggs' (recurring revenue streams). He advises against selling the goose and instead suggests scaling the business to create multiple 'eggs' for a larger exit strategy. The speaker also discusses various business models, including event spaces, Amazon stores, and accounting firms, and how to make them more attractive to potential buyers or investors.

Takeaways

• 📚 The speaker emphasizes the importance of understanding the difference between the 'goose' and the 'eggs' in a business, where the goose represents the sustainable, valuable asset and the eggs represent the products or services that generate revenue.
• 💡 Selling the 'goose' is often not advisable as it involves giving up the ongoing revenue stream; instead, the focus should be on selling the 'eggs' or the business's offerings to maintain a continuous income.
• 🎯 The speaker shares personal experience, having built and sold nine companies, to highlight the lessons learned in business and exit strategies.
• 📈 The concept of a 'roll-up' is introduced, where a business aggregates similar smaller businesses to increase value and create a more attractive exit opportunity.
• 🔑 Key factors for a sellable business include it being faceless (not dependent on a single key person), recurring, and having a clear market and demand.
• 🚀 The speaker suggests that businesses should aim to be bigger than the founder's personal brand to reduce keyman risk and increase the business's value.
• 💼 The potential for raising money through a business like 'acquisition.com' is mentioned, allowing for liquidity events without completely exiting the business.
• 🔍 The importance of market research is underlined, by looking at mergers and acquisitions activity related to the type of business one operates to understand what buyers value.
• 🛠️ The script advises on restructuring a business to align with what investors prefer, such as creating a system that can be replicated and sold as a package.
• 🏆 The speaker highlights the power of collaboration over competition, especially in fragmented industries, to create more value and opportunities for all parties involved.
• 💰 The potential for creating a roll-up or aggregation of businesses is presented as a high-value exit strategy, where the collective value is greater than the sum of its parts.

Q & A

What is the main message of the video about building a business for sale?

The main message is to focus on building a business that can generate recurring value ('eggs') rather than selling the core business ('goose') outright, in order to create a sustainable and sellable asset.

What was the mistake the event business owner made according to the speaker?

The event business owner was trying to sell the 'goose' (the core business) instead of selling the 'eggs' (the potential of his business model and system), which could have been more valuable in the long run.

What is the story of the goose and the golden eggs meant to illustrate?

The story illustrates the importance of not sacrificing long-term value for short-term gain, emphasizing the value of a business that can consistently produce ('lay golden eggs') over time.

Why did the speaker advise the Amazon store owner to consider a different approach to selling his business?

The speaker advised the Amazon store owner to consider bundling his students or clients into a sellable asset because the individual Amazon stores are straightforward and faceless, making them more attractive to potential buyers.

What is the significance of the 'goose' being incredibly valuable but not sellable in the context of the script?

The 'goose' represents the core, often non-transferable value of a business. It signifies that while the business may be valuable, it may not be sellable due to factors like being too dependent on the owner or not having a recurring revenue model.

What does the speaker suggest for businesses that are dependent on a single person or 'keyman'?

The speaker suggests that businesses dependent on a single person should aim to reduce this dependency by creating systems, processes, and recurring revenue models that can operate independently of the individual.

How does the speaker describe the process of identifying the 'goose' and 'eggs' in one's business?

The speaker describes it as a high-leverage activity where one must determine which components of the business are creating value and which are the valuable assets that can be sold or leveraged for growth.

What is the role of the 'eggs' in the business growth strategy discussed in the video?

The 'eggs' represent the potential for growth and expansion. They are the assets or business models that can be replicated or sold to generate revenue and increase the overall value of the business.

Why did the speaker sell Gym Launch differently from other businesses?

Gym Launch was sold differently because it had removed the keyman risk, had recurring revenue, and had grown to be larger than the speaker himself, making it a more attractive and sellable business.

What is the importance of understanding the market for your type of business when considering a sale?

Understanding the market is crucial because it helps identify whether there is demand for the type of business you are selling, the typical sale price, and what buyers are looking for, allowing you to align your business model with these preferences.

How can a business owner prepare their business for sale by focusing on the 'eggs'?

A business owner can prepare their business for sale by creating systems, processes, and a model that can be replicated or scaled. This could involve setting up a franchise-like system without the legalities of franchising, ensuring the business is faceless and has high revenue retention.

What is the speaker's advice for a media company looking to become sellable?

The speaker advises the media company to focus on either creating a product that can be promoted through their talent or selling advertising space. The key is to leverage their Impressions and stable of talent to create a product or service that can be sold repeatedly.

How does the speaker view competition in the business world?

The speaker views competition as less important than collaboration. He suggests that businesses often compete against broader market forces rather than each other and that collaboration can lead to greater success for all parties involved.

What is the concept of a 'rollup' in the context of selling a business?

A 'rollup' refers to the strategy of aggregating multiple similar businesses into a larger entity to increase its value and attractiveness to buyers. This can result in a higher selling price due to economies of scale and the potential for synergies.

Why is it beneficial to sell a portion of a business rather than the entire business?

Selling a portion of a business allows the owner to maintain control and continue benefiting from the business's growth while also providing liquidity and reducing risk. It also allows for the injection of capital to fund further growth or acquisitions.

What is the significance of the dental association example in the video?

The dental association example illustrates the power of collaboration over competition. By banding together to negotiate better rates on consumable products, the association members saved more than the cost of their membership, creating a win-win situation.

Outlines

00:00

💼 Building a Business for Sale: The Goose and the Golden Eggs

The speaker, having sold nine businesses including one for 46.2 million, shares insights on building a business with the intent to sell it. He emphasizes the importance of distinguishing between the 'goose' (the business itself) and the 'golden eggs' (recurring revenue streams or assets). He illustrates this with an example of an event rental business owner who expanded into coaching others to do the same, suggesting that one should aim to sell the 'eggs' rather than the 'goose'. The story of the goose and the golden egg is recounted to underline the point that businesses should be structured to continue generating value over time, rather than seeking a quick sale. The speaker also introduces the concept of a 'roll-up' strategy, where multiple smaller businesses are aggregated for a larger exit.

05:00

🔍 Assessing Business Value: Identifying the Goose and the Eggs

This paragraph delves into how to determine the value of a business by identifying dependencies and recurring revenue. The speaker suggests that businesses dependent on a single individual are less valuable. He contrasts businesses like gyms, which are not frequently sold, with those like franchise chains or accounting firms that have high revenue retention and are more attractive for acquisitions. The speaker advises looking for M&A activity in the industry to understand market demand and to align the business model with what investors prefer, ultimately aiming to create a sellable business without having to sell the core asset that generates value.

10:01

🚀 Scaling Business for Exit: From Solo Ventures to Roll-ups

The speaker discusses strategies for scaling a business to make it more sellable, using the example of an Amazon store owner who transitioned into teaching others to start their own Amazon stores. He suggests creating a system that can be sold as a package, making the business more attractive to potential buyers. The speaker also talks about his own business, Acquisition.com, as an example of a 'goose' that is not sellable but can generate sellable 'eggs' through its investments. He emphasizes the importance of understanding the market and positioning the business to be part of a larger, more attractive acquisition target.

15:03

🤝 Collaboration Over Competition: The Power of Group Dynamics in Business Exits

In this paragraph, the speaker highlights the benefits of collaboration over competition, especially in the context of business exits. He uses examples from the dental association and the accounting industry to illustrate how grouping together can increase the value of individual businesses and create a more attractive exit strategy. The speaker points out that private equity buyers are interested in aggregated value and are less concerned with individual business rivalries. He encourages business owners to consider the bigger picture and to work together to create more substantial value, which can ultimately lead to a more successful exit.

Keywords

💡Business Exit Strategy

A business exit strategy refers to the plan an entrepreneur makes for transferring ownership of the company they have built. In the video, the speaker emphasizes the importance of understanding what part of the business is valuable and sellable versus what should be kept to continue generating value. The concept is illustrated through the story of the goose and the golden eggs, where the 'goose' represents the ongoing business generating recurring revenue, and the 'eggs' are the individual sellable assets or opportunities.

💡Golden Goose

The term 'Golden Goose' is a metaphor used in the script to represent a business or asset that consistently generates wealth or value over time. The speaker advises against selling the 'Golden Goose' and instead focuses on selling the 'eggs', which are the products or services that the business produces. The narrative of the countryman and his goose is used to illustrate the folly of sacrificing a long-term revenue stream for a short-term gain.

💡Rollup

A rollup is a strategy where a company acquires multiple smaller businesses in the same industry to consolidate them into a larger entity. The speaker mentions this in the context of the event business and Amazon stores, suggesting that the businesses should aim to be part of a rollup, making them more attractive to potential buyers due to their standardized systems and processes.

💡Keyman Risk

Keyman risk is the vulnerability that a business faces when it is heavily reliant on the expertise or capabilities of one or a few individuals. The video script discusses the importance of reducing keyman risk to make a business more attractive for sale, as investors are less likely to buy a business that is overly dependent on a single person.

💡Recurrring Revenue

Recurring revenue refers to income that a business receives on a regular basis, typically from subscriptions or services that customers pay for repeatedly. The speaker highlights the value of having a business model that generates recurring revenue, as it provides a more predictable and stable income stream, which is attractive to potential buyers.

💡Stickiness

In the context of the video, 'stickiness' refers to the ability of a product or service to retain customers over time. A business with 'sticky' offerings is more valuable because it has a loyal customer base that is less likely to churn, ensuring a steady flow of income.

💡M&A Activity

M&A stands for mergers and acquisitions, which is the process of combining or acquiring other companies to grow a business. The script suggests examining M&A activity in one's industry to understand what types of businesses are sellable and what characteristics make them attractive to buyers.

💡Gym Launch

Gym Launch is used as an example in the video to illustrate a successful business model that was sold. It represents a business that had removed keyman risk, had recurring revenue, and had a scalable system in place, making it an attractive acquisition target.

💡Faceless Business

A 'faceless business' in the script refers to a business that is not dependent on the personal brand or presence of the owner. The speaker mentions that such businesses are more sellable because they can be more easily integrated into larger entities without the need to account for the departure of a key individual.

💡Liquidity Event

A liquidity event is a financial transaction where an owner of an asset converts it into cash. In the video, the speaker discusses raising money through a liquidity event as a way to fund growth or take some profits without completely exiting the business, as exemplified by the strategy of selling a portion of a company's shares to investors.

💡Competition vs. Collaboration

The script contrasts the traditional view of business competition with the idea of collaboration for mutual benefit. The speaker suggests that by working together, businesses can create more value and that the focus should be on the larger market opportunity rather than on competing with each other.

Highlights

The speaker has built and sold nine companies, with the last one being sold for 46.2 million dollars.

The concept of selling 'eggs' instead of the 'goose' is introduced, emphasizing the value of recurring revenue over a one-time sale.

The story of the goose and the golden egg is used as a metaphor for the importance of maintaining a business that generates ongoing value.

The speaker advises on building a business to be part of a rollup, creating value by standardizing systems and processes across multiple entities.

The idea that the 'goose' is often valuable but not sellable is highlighted, suggesting that businesses should focus on what brings in recurring value.

The speaker shares his experience with acquisition.com, explaining how selling subsidiaries rather than the platform itself can be more beneficial.

The importance of identifying keyman risk and making a business less dependent on a single individual is discussed.

The concept of 'stickiness' in a business model is introduced, explaining how recurring revenue and customer retention increase business value.

The speaker provides an example of how an Amazon store business was advised to bundle customers together to create a sellable asset.

The distinction between selling a business with high market demand versus one that is not commonly bought or sold is made clear.

The speaker explains how to determine if a business is sellable by looking at mergers and acquisitions activity in the industry.

The importance of positioning a business to appeal to investors by understanding what they value is emphasized.

The speaker shares insights on how to structure a business for exit, using gym launch as an example of a successfully sold business.

The concept of raising money as a form of liquidity event rather than a complete exit is introduced.

The idea of collaboration over competition is highlighted as a way to increase business value and create opportunities for all parties involved.

The speaker provides an example of a dental association that created value through group buying and was later sold for a significant sum.

The transcript concludes with the importance of understanding the difference between the 'goose' and the 'eggs' in one's business to maximize value and create a successful exit strategy.

Transcripts

if you want to build a business that you

can eventually sell this video is for

you I've built and sold nine companies

the last one I sold was 46.2 million and

so I'm just drawing on my experience

from selling those to different partners

competitors private Equity strategic

buyers so that I can tell you the things

that I've learned so that you can get

there much faster than it took me there

was a guy who had uh rental events so

basically he started an event business

where he would he'd basically have a

venue that he would rent and uh you know

he'd have two three events a week there

and he would charge whatever the you

know the the day rate is for the event

and that would be more than what his

rent was and that was the entire

business and so he had three

locations he sold those and then he

started uh a coaching business or an

education business around helping other

people find event spaces rent them out

and do the same thing that he did right

and so he was like Hey I want to sell

this business the way that you sold gym

launch and after talking to him I was

like dude I think you're going about

this all wrong you're trying to sell the

Goose when you should be trying to sell

the eggs and this will be the common

theme throughout this is that most

people are trying to sell the goose

rather than sell the eggs and you never

want to sell the goose you want to keep

the goose and let it keep laying golden

eggs right so that you can keep selling

them and for those you who don't know

the story of the the goose and the

golden egg uh I'll read it to you it's 2

seconds there was once a countryman who

possessed the most wonderful Goose you

can imagine for every day when he

visited the nest the goose had laid a

beautiful glittering golden egg the

Countryman took the eggs to the market

and soon began to get rich but it was

not long before he grew impatient with

the goose because she only gave him one

egg a day he was not getting rich fast

enough then one day after he had

finished counting his money the idea

came to him that he could get all the

golden eggs at once by killing the goose

and cutting it open but when the deed

was done not a single golden egg did he

find and his precious Golden Goose was

dead there's something that creates

value and then there's the thing that is

valuable and so figuring out which of

the things that you have in your

business is the goose and which of them

is the eggs is one of the the highest

leverage things that you can do because

you can build towards the exit

intelligently and so in this business I

was like hey man you're getting all

these uh people on using your system

systems and your processes and your

price points I was like you're doing all

the work that a rollup would have to do

if they acquired a bunch of these

businesses I was except you're doing it

up front and so why don't you know this

ahead of time and say Hey I want to

build so that I can have the hundred or

500 or thousand of my students who are

using my system for doing event spaces I

should use all of those guys and I

should set it up ahead of time saying

hey use these colors and use these

systems and use these price points and

in the future if you're successful if

you're the top 10% of the students here

I have an opportunity where you can roll

up and sell with me in a group of 20 or

50 of these and so here's the thing if

that's the business model then you can

just roll up 20 to 50 every other year

and have a massive exit while you still

keep the goose that brings those people

in and the thing is is that the goose

often is incredibly valuable but not

sellable and that's what's that's the

difficult part about this right and I'll

give you a counter example so for me

acquisition. comom is my Goose right

like am I going to sell acquisition.

comom not really there are some things

that I'll talk about in a second about

like transactions you can have at the

goose level but what what really makes

sense for me it's for me to sell the

eggs it's for me to sell the subsidiar

it's for me to sell the companies that

acquisition. comom invests in right so

the big picture is understanding what is

your goose and what are your eggs so

I'll give you a different story so I had

a dude who uh who who saying he had a

couple Amazon stores you'll notice this

recurring theme had a couple Amazon

stores and he did well with those and

sold the Amazon stores and he started

teaching people how to sell you know to

start and build Amon Amazon stores and I

was like okay he's like so I want to

potentially sell this company I was like

well the thing is is that this business

isn't very recurring it's not very

sticky uh it has huge keyman risk with

you being the face of it like not a lot

of investors would a want to buy it or B

if they did they wouldn't b a lot of

money for it I was like so why don't you

think about a way to get all these

people that you're helping start Amazon

stores uh bundled together so that they

become a sellable asset because the

thing is is like just like the event

business that guy had already sold three

of the event venues we know they're

sellable businesses they're very

straightforward they're faceless like

they're relatively turn key same thing

with Amazon stores like they're faceless

like another investor can say okay how

much does it cost what's my you know

what's my yield what's my return going

to be over time okay and like these are

very sellable things and so it takes a

lot less effort to take something that

is already very sellable and just think

how can I do way more of them or how can

I make them bigger rather than try and

take something that inherently has a ton

of uh key man risk isn't recurring um

has a lot of volatility in terms of

acquisition like all of those things

make it not very attractive to a

potential investor real quick if you

want to sell your company or make it

into a sellable business acis.com just

started our Workshop division for

companies that we don't own which is

just walking through the process that we

do to build significantly more valuable

companies at an accelerated Pace we have

it here at our headquarters in Vegas and

so if that sounds interesting you go to

acquisition. comom hit scale and follow

the steps and if you qualify our guys

will be in touch so let's get t for a

second how do you figure this out with

your business so the first thing is is

that is there something that's dependent

on you if anything is dependent on you

for the business it's inherently going

to be significantly less valuable number

one number two is there a component of

your business or of your customers

businesses that's very stickier

recurring so for example gyms micro gyms

for gym launch intrinsically they they

don't get sold very often so there's not

a market for small service-based

facilities like person training Studios

things like that a lot of people don't

want to buy that why because they have

keyman risk at their level too right

whereas if I had if I were helping uh

franchise chains of restaurants like

subway uh you know improve their

profitability then there would be a

clear exit path because franchise that

are existing trade all the time same

thing for accounting firms because they

have high Revenue retention and so

basically if you look at all the

different things that exist in your

business whether it looks at your

customers you look at different service

lines that you offer within your

business and then the overall watching

business itself one of those things

should have some level of Revenue that

sticky and that doesn't require a face

and there there's a lot of other factors

but if I had to like pick a couple those

would be two um that would be really

important that I'd be trying to sus you

know pull apart to figure out what is

the egg and what is the goose and the

easiest way to know if you're right

about this is looking for m&a activity

so mergers and Acquisitions activity for

that type of business so if you look if

you Google like coaching business m&a

ity one it'll show you how much there is

and if you don't find a lot then you'll

be like okay maybe there isn't a big

market for this number one number two if

you do find some what is the difference

between those businesses and my business

and then you'll be able to bridge the

gap and say oh these are the things that

these buyers like not these other things

and then you can start orienting your

effort and your business model around

the things that investors have proven

that they like what I don't want to go

is try and sell a product to a market

that doesn't exist so you have to zoom

all the way back out and think of your

business as a product and an investor or

potential acquir as a customer and so

somebody might listen to this and say

okay well what about gym launch like gym

launch was uh that type of business well

the one thing is that gym launch was

really dangerously close to being a

franchise and so I knew what franchise

laws were and so I purposely like name

system fee by the ways what you need to

be a franchise name as in everybody's

under the same name system everyone use

same systems and there's a fee

Associated and so if you have all three

you have a franchise and if you don't

have a franchise and you're doing all

three of those things you have an

illegal franchise uh which means you're

actually subject to getting sued and all

that kind of stuff and so if you're in

the business of helping people do a

specific type of business you either

have to pick uh name and system with no

fee which most people don't do right but

you could do that you could go name and

fee like CrossFit for example like they

have a name and there's a fee but they

give No Business Systems right or you go

systems in fee but no name right which

was gym launch we didn't tell everyone

that they had to unify under one flag

now one of my potential ideas that I was

thinking about for gym launch in the

future was maybe I will start a

franchise off the side of it and with

the best people I'll plug them into

there now and that will be covered under

franchise law right but the reason that

Jim launch was sellable is that the big

things that everybody needed which was

that keyman was removed so I was no

longer involved in the delivery I was no

longer involved in the ads I had a

leadership team in place right all of

those things the the recurring Revenue

it is recurring Revenue business we did

have relatively good annual retention um

of customers uh and we had multiple

acquisition channels and over time I

grew gym launch to be bigger than me at

the time and here's a here's a nugget

that people don't don't get you see me

now and you see Jim launch right the

thing is is that this Dynamic of the

size of of me and audience you know

influence now uh and JY launch like I am

bigger than gym launch now when I sold

gym launch gy launch was much bigger

than me and so that's the big thing that

people Miss is that like if you're

bigger than the company you will always

be keyman risk for the business now in

that

instance you can sell the goose if you

are bigger but you usually have to sell

a minority and what that means is like

people aren't going to take a risk that

you're going to leave but you're saying

I want to take chips off the table or I

want to either fund an acquisition or I

want to like expand in this way and so

an investor will happily Bet On You by

investing in your business that's what

raising money is fundamentally and so if

I had so like acquisition. comom I

probably can't exit acquisition. comom

nor would I really want to because I'm

associating myself so strongly with it

for such a long period of time but what

I could do is I could raise money off

acquisition. comom and say look at all

of our Holdings and I'm going to sell 5%

or 10% of acquisition. comom at a

monster valuation so that I can either

take chips off the table if I wanted to

or more realistically I would say I want

to go buy this massive company and I

want investors to help me do that and

look out it will add uh value to all the

other Holdings that we have so we'll get

a disproportion return on it right that

me doing that isn't really an exit it's

a transaction or a liquidity event but

it's not me leaving the business like

you look at Beast Industries right like

uh with uh with Jimmy uh Mr Beast he he

raised at the holdco level so that means

that Beast Burger the the the software

he has uh Feasta bles all of them are

under that big thing and so he's not he

can't exit his YouTube channel but he

can sell a portion of it to fund more

growth which is what raising money is

and so he's be able to do that if you

look at um look at Elon right Elon is

inpally linked with the companies that

he has and so his way of doing that is

like they're mostly public companies uh

with the exception of SpaceX and so by

doing that the public participates but

he's not leaving he's the owner of the

business he's still running the business

but he allows other people to

participate in the growth of the company

overall so back to smaller businesses so

I had a a media company um that reached

out to me and was like hey I'm trying to

figure out um like how I structure my

media company to become sellable he had

a number of stars or talent in his in

his kind of like stable right and so if

you're in that business you basically

need to pick one of two directions so

either you get all of the guys in the

stable to support a product so they'd be

like hey this is our hair gel this is

our dip this is our whatever right and

ideally you want that consumable to be a

recurring thing something that and when

I say recurring it doesn't have to be

recurring but it can also be reoccurring

meaning uh if I use hair gel I might not

want to have a subscription for it but

if I when I run out I buy more of the

same thing like I'm not a recurring

subscription for Coca-Cola products but

I do Buy cocaa

stuff on a reoccurring basis and so if

you get enough exposure then people will

buy that right and so the idea here is

that for him either has to have a

product or he sells advertising space

and The Impressions that he's able to

consistently generate become the product

right like so if you're a media company

it's one of those two things you're

either you're either pushing all of that

those Impressions that you're getting

from your stable into one product you

own or you're saying I'm going to let

any advertisers come in as long as it

makes sense for our brand or the brand

of the talent uh to place ads on their

and I'm selling media space itself those

are the two ways that that business

would work now if he wanted to exit that

business he can't exit the Stars the

stars are what generate The Impressions

now if he's not a star he could exit the

business if he has the stable of stars

and he's selling advertising space but

if I were him I would say well I would

rather just have this incubator where I

could just blow up uh products and again

which one's the goose which one's the

eggs in this instance having all this

massive media and Impressions and

whatnot that's the goose and then the

eggs would be the products that we'd

sell through that distribution Now using

the strategy I was saying before he

could raise money by saying I'm going to

sell 10% so I can front all the capital

for this massive launch because if you

have a ton of Impressions is one of the

big issues that a lot of creators have

is that their the their Impressions and

their Fame far surpass their wealth and

so in order for them to accommodate the

demand that they have they'd have to

basically have a ton of money they don't

have to Buy in inventory um and get you

know third like Logistics set up and

like all these other things up front to

do it right right because you want to do

a good job because you can only have one

reputation and so they have to front all

this stuff and if you don't have money

it gets very hard right and so that's

where sometimes having like you're not

exiting your brand before you have the

product you take a tiny bit you give it

to somebody else so they can bet on you

and then you can put that money towards

something that will make everybody more

money now um I'll give you a fourth

example of this so I had an accounting

firm uh kind of like coach consultant

whatever you want to call it reach out

and um he was like hey I'm trying to

think about the ultimate version of my

business now his business was a business

World role it made a lot of sense

because there's a lot of m&a activity in

the accounting space um for a variety of

reasons but one of them is that uh the

book of business is just worth a lot of

money there's usually high gross margins

or net margins in the business uh it's

incredibly recurring and sticky like

people don't normally switch who they're

doing their taxes with year to year to

year and so they have massive ltvs um

the hardest part of the business bus's

acquisition is getting customers but get

keeping customers is actually not too

difficult in that business as long as

you do a good job and so he was like how

do I sell my accounting firm coaching

Consulting thing and I was like well

that's not what you want to sell because

no one's buying that but what people are

buying is accounting firms in glob

together and so the the top version of

your business is having a rollup of 10

20 accounting firms that you can exit

every one or two years and exit for 100

million bucks or whatever and you take

your slice and you say hey I'm the one

who's putting this deal together and I

get 20% get 30% whatever and if you're

thinking about this and you're like well

why would somebody give up that kind of

percentage well here's how it works so

when you buy in bulk right when you go

buy toilet paper or Costco as a consumer

when you buy in bulk you get a discount

like the more you buy the less you pay

per roll that makes sense what's

interesting is that in investing it's a

volume premium so basically the more

profit you have the bigger the company

is the bigger the rollup is the more you

get per and it's because big money is

lazy and so they will pay a premium to

not have to do as many deals because

deals are costly it cost a lot of time a

lot of attention and so if you have to

do a 100 deals versus doing one deal

you'll pay a premium to only have to do

one deal and so if those individual

accounting firms could sell at call it

uh four times earnings on their own

right if they can sell in aggregate

together for call it 12 times earnings

then even if they give up 30% of the 12x

they're still double as good as they

were before and so everybody wins and

the thing is is that I spend a lot of

time trying to find those types of

situations in business where it's like

literally everyone wins it's like if we

work together rather than be competitive

if we can collaborate and I'm telling

you all the guys that I know who make

gobs and gobs and gobs and money like

it's so rare that you're actually

competing against people like I used to

say this in the weight loss world I was

like we're not competing against each

other guys like because I had obviously

a big community of gym owners and we had

tons of gyms that are on the same Market

I was like guys we're competing against

the couch like we're competing against

Netflix we're not competing like we're

competing against chocolate like we're

not we're not competing against each

other right like it's it's only I think

it's like 11% of Americans like have a

gym membership it's still a tiny percent

of people who go to the gym and and

that's have a membership not even use

their membership and so I mean just look

at how many fat people there are like

it's not like it's not like the problem

doesn't exist right and so people get

really obsessed about their competition

rather than just thinking okay how can

we collaborate and we can all get better

because the thing is is that the private

Equity buyer the ultimate person at the

top of this food chain who who uh

Aggregates fragmented

Industries those guys don't think like

small business owners they just think

think oh this is really fragmented I'm

going to roll all these together and

make a much bigger thing they don't care

that you have some sort of animosity cuz

they just remove both Founders who have

egos and say cool these two work well

together and I can see some synergies in

terms of cost and I can get more profit

and own more of the market they just

don't think about it like that and so

all the richest guys I know are just

like like it's so funny because there's

these these these blood feuds that exist

between businesses that are local but

like the guys who you eventually sell to

if you you know succeed and do a good

job with it those guys don't care at all

and they just roll everything together

anyways and so we have this whole

Obsession about like competing but like

the reality is that if you collaborate

you end up making a lot more money I'll

tell you another quick example on this

so there was a dental association that

we were looking really heavily into so

they had like 700 uh dentists that were

in their Association and dentists have

to buy like floss and toothbrushes and

toothpaste and whatever you know other

stuff they need right and so they spend

like 20 30,000 a year on kind of like

consumable products that they have to

use in their practice and so what they

did was they did a co-op in terms of

group buying so they said hey let's all

come together rather than be competitive

let's collaborate and let's buy together

as one and by doing that they're able to

negotiate a big discount in rates and so

the discount that those guys would save

in buying together exceeded the cost of

the annual membership which by the way

brilliant model and so like as long as

you plan on being in business why would

you not want to have a savings that's in

excess of the cost of an association

which if you ever have the opportunity

to do that like I said great model

especially in a niche and so they they

did exactly what I'm talking about is

that he took the top you know 11 of the

of the dentists rolled them up and they

sold it for 120 million but the PE group

damned them was extra smart we were

bidding against them um for the business

was like hey you know what we'll buy

your business too while we're at it

because we'll buy your goose and the

eggs because they all they saw was wait

you have 700 other dentists in here well

that's our that's our egg pipeline for

the next 5 years and so they just was

like cool so we'll do this roll up and

we'll pay you a a premium on your uh

Revenue which was actually recurring to

be in in defense of this business which

is again why it was sellable because

they just knew that they're like okay

well we'll do this rollup but next year

we'll just grab another 20 of them or

another 50 of them and keep add adding

it together and so the thing is is that

the most valuable version of that

business wasn't actually that business

it was the eggs of that business and so

making sure that you understand which is

the goose and which is the eggs for the

business that you're building then I can

Orient my whole business to shoot out as

many of these eggs as I can and by doing

that you have a goose that lays golden

eggs and ideally you hold on that goose

and you pet that little Goose as long as

you can