Unlock the Path to $10,000,000 Net Worth in 3-6 Years – Adam Coffey Reveals How!

Summary

In this engaging podcast episode of Brainsky Unleashed, host Thomas interviews private equity expert Adam Coffey, author of the 'Private Equity Handbook' and other bestsellers. Coffey, who has overseen over two billion in exits, debunks myths about private equity, emphasizing its role in wealth creation. He advocates for strategic business investments over long-term ownership, highlighting the potential of 'buy and build' strategies to rapidly grow and sell businesses. Coffey's insights provide a practical guide for entrepreneurs looking to leverage private equity for significant financial gains.

Takeaways

• 😀 Adam Coffey, a bestselling author and expert in private equity, shares his insights on the podcast 'Brainsky Unleashed'.
• 📚 Coffey has written three books: 'Private Equity Handbook', 'Exit Strategy', and 'Empire Builder', and has extensive experience in buying and selling companies.
• 💼 With over 3 billion in total exits, Coffey emphasizes the practical, hands-on approach to private equity rather than just theoretical knowledge.
• 🚀 Private equity is often misunderstood and associated with negative press, but Coffey argues it's a powerful tool for business growth and wealth creation.
• 💡 Coffey advises entrepreneurs to view their businesses as investments with an exit strategy, potentially leading to significant wealth in a shorter timeframe than traditional business models.
• ✈️ He shares his personal experiences, including buying and selling the same company multiple times, to illustrate the potential of private equity for recurring wealth generation.
• 💼 Coffey discusses the importance of having a clear business exit strategy and not treating it as a one-time event, but as a series of opportunities.
• 💹 He explains the concept of 'rollover investments', where entrepreneurs can reinvest a portion of their earnings to grow their businesses with private equity backing.
• 🏢 Coffey suggests targeting small businesses with stable earnings, recurrent revenue, and low capital expenditure as ideal candidates for private equity investment.
• 🔍 He provides practical advice on how to identify and approach potential businesses for acquisition, emphasizing the importance of due diligence and strategic planning.

Q & A

Who is Adam Coffey and what is his expertise?

Adam Coffey is an all-time bestselling author with three books on private equity, including the 'Private Equity Handbook', 'Exit Strategy', and 'Empire Builder'. He has extensive experience in private equity, having bought and sold 58 companies with over two and a half billion in exits as a CEO.

What is the significance of private equity according to Adam Coffey?

Adam Coffey views private equity as a crucial market propeller that allows business owners to sell their companies at high multiples. He emphasizes that private equity, with over six trillion in assets under management, is not something to fear but to understand and utilize for business growth and wealth creation.

Why does Adam Coffey recommend buying a business rather than starting from scratch?

Adam Coffey suggests buying a pre-existing business to avoid the risks associated with startups, such as market attraction and initial capital requirements. A purchased business comes with a history of revenue and earnings, existing customers, and verifiable financials, which can simplify the growth process.

What is the '30-20-10' rule that Adam Coffey mentions?

The '30-20-10' rule is a financial heuristic Adam Coffey uses to assess the health of a business. It stipulates that a healthy business should have at least 30% gross profit, less than 20% of expenses dedicated to customer acquisition and back-office operations, and generate at least 10% net profit margins.

How does Adam Coffey define a successful exit strategy?

For Adam Coffey, a successful exit strategy is not a one-time event but an ongoing process. He illustrates this with the concept of multiple 'rest stops' on a wealth creation journey, where an entrepreneur can sell a company multiple times, each time at a higher valuation, thus accumulating wealth more rapidly.

What is the importance of recurrent revenue according to the strategies discussed by Adam Coffey?

Adam Coffey stresses that recurrent or contracted revenue is more desirable than project-based revenue because it provides a steady, predictable stream of income. This type of revenue minimizes the need to constantly find new customers, which is essential for business stability and growth.

Why does Adam Coffey advocate for investing in 'needs' rather than 'wants'?

Investing in 'needs' is advised by Adam Coffey because businesses that fulfill necessary requirements are more resilient to economic downturns. People will always need services like pest control or HVAC maintenance, making these businesses more stable and less cyclical compared to those selling non-essential 'wants'.

How does Adam Coffey suggest financing the purchase of a business?

Adam Coffey recommends using a combination of the owner's rollover equity, commercial loans, and SBA loans to finance business purchases. He also discusses the strategic use of personal capital infusion at later stages to increase returns and control.

What role does private equity play in the growth of an acquired business according to Adam Coffey?

Private equity, according to Adam Coffey, acts as an accelerator for business growth by providing an unlimited checkbook for acquisitions and expansion. It allows entrepreneurs to buy and scale businesses rapidly without worrying about capital constraints.

How does Adam Coffey propose to find and筛选 business acquisition targets?

Adam Coffey suggests building a funnel by using databases from state websites or services like Dun & Bradstreet or Grata to find businesses within specific NAICS codes. He then filters these down based on criteria like revenue, earnings, and owner profile to identify potential acquisition targets.

Outlines

00:00

🎙️ Podcast Introduction and Guest Welcome

The host of the podcast 'Brainsky Unleashed' enthusiastically introduces the episode, expressing his excitement to have Adam Coffey, a renowned expert in private equity and best-selling author, as a guest. They discuss Adam's extensive experience in the field, having bought and sold 58 companies with over two billion dollars in exits. The conversation sets the stage to delve into the world of private equity and the strategies Adam has used to achieve success.

05:01

📚 Private Equity Insights and Entrepreneurial Education

Adam Coffey shares his philosophy on private equity, emphasizing that it is not as daunting as it seems and is, in fact, a crucial component of the market that allows business owners to sell at high multiples. He discusses the importance of education in this field, noting that many business owners, even successful ones, have a limited understanding of private equity. Adam suggests that with the right knowledge, entrepreneurs can leverage private equity to their advantage, securing capital for business growth and wealth generation.

10:02

🚀 Private Equity as a Tool for Accelerated Growth and Wealth Creation

The conversation shifts to how private equity can be used strategically by entrepreneurs. Adam Coffey explains that private equity is not just a one-time event but a tool for ongoing wealth creation. He uses the analogy of a pilot planning a flight to illustrate the importance of having a clear destination and plan in business. Adam discusses his approach to building businesses rapidly through strategic acquisitions and the benefits of being a rollover investor, allowing for multiple exits and significant wealth accumulation in a shorter timeframe.

15:04

💼 The Importance of Business Selection in Private Equity Strategies

Adam Coffey delves into the specifics of choosing the right business to buy or invest in, using filters like 'needs over wants' and 'recurrent revenue over project-based revenue'. He stresses the importance of low capital expenditure and high free cash flow in a business, which makes it an attractive candidate for private equity investment. The discussion highlights how these factors can stack the odds in favor of success and how to align business acquisition with private equity strategies for optimal growth and profitability.

20:04

💼 Financing Strategies for Business Acquisitions

The focus of this section is on how to finance the acquisition of businesses, especially in the context of private equity. Adam Coffey discusses leveraging the cash flow of the acquired business to service debt, the use of seller rollovers to reduce the initial capital outlay, and the strategic use of personal equity in subsequent deals to maximize returns. He also touches on the importance of having a good understanding of EBITDA and how it affects the valuation and financing of businesses.

25:07

🌟 Scaling Business Through Strategic Acquisitions

Adam Coffey explains how to scale a business by acquiring others strategically. He discusses the process of buying multiple companies, integrating them, and then selling the conglomerate to private equity firms at a significant profit. The conversation covers how to identify and approach potential acquisitions, the importance of recurrent revenue and low capital expenditures in scaling, and the concept of using other people's money to grow one's business empire efficiently.

30:08

💼 The Art of Building a Business Funnel for Strategic Acquisitions

In this segment, Adam Coffey talks about the process of building a business funnel to find suitable acquisition targets. He covers various methods, from using online databases and government websites to hiring business brokers. The discussion emphasizes the importance of filtering and qualifying potential businesses based on specific criteria such as industry, revenue, and the owner's profile. Adam also shares his insights on the sales aspect of reaching out to business owners and the option of outsourcing this task.

35:10

🌟 Final Thoughts and Encouragement for Entrepreneurial Success

The podcast concludes with Adam Coffey offering final thoughts and advice to listeners. He encourages calculated risks and the pursuit of entrepreneurial ventures as a path to wealth and success. Adam also invites listeners to engage with him on LinkedIn, offers his books and seminars as resources, and expresses his optimism about the resurgence of entrepreneurial spirit, particularly among the younger generation.

Keywords

💡Private Equity

Private Equity refers to funds or capital that are not listed on a public exchange and are typically provided to companies that are not publicly traded. In the context of the video, private equity is discussed as a significant tool for business growth and investment, with the guest, Adam Coffey, being an expert in this field. He explains how private equity can be used to propel businesses to new heights by providing the necessary capital for expansion and acquisition.

💡Roll-up Strategy

A roll-up strategy is a method of growing a business by acquiring multiple smaller companies in the same industry and integrating them into the acquiring company. The video discusses Adam Coffey's experience with roll-ups, where he bought several companies, created a larger entity, and then sold it for a significant profit. This strategy is central to the discussion on how entrepreneurs can rapidly grow their wealth through strategic acquisitions.

💡Exit Strategy

An exit strategy in business refers to the plan for selling or liquidating all or part of an investor's ownership interest in a company. The script mentions Adam Coffey's books, including 'Exit Strategy,' highlighting the importance of having a well-planned exit to maximize returns on investment. The conversation emphasizes that an exit is not the end but a 'rest stop' on the wealth creation journey.

💡EBITDA

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a measure of a company's financial performance and is used to analyze and compare profitability. In the script, EBITDA is mentioned as a key financial metric that investors and entrepreneurs look at when considering business acquisitions or when seeking funding from private equity firms.

💡Recruiting Rollover Investors

Rollover investors are existing business owners who reinvest a portion of their proceeds from the sale of their business into the acquiring entity. The script discusses the strategy of convincing business owners to become rollover investors as part of a buy-and-build strategy, which helps in funding the acquisition and retaining valuable expertise within the newly expanded business.

💡SBA Loans

SBA Loans refer to the Small Business Administration loans in the United States, which are designed to help small businesses get the funding they need. The video mentions SBA loans as a potential financing option for entrepreneurs looking to buy businesses, highlighting the role of government-backed financial assistance in facilitating business growth.

💡Multiples of Earnings

Multiples of earnings is a valuation method used to determine a company's value based on its earnings. It involves multiplying the earnings of the company by a certain multiple to account for factors like growth potential and industry norms. The script discusses how businesses are often sold at a multiple of their EBITDA, which is a common practice in private equity transactions.

💡302010 Rule

The 302010 rule is a financial heuristic used to evaluate the health of a business. It suggests that a healthy business should have at least 30% gross profit, operating expenses (including sales, general, and administrative costs) less than 20%, and net profit of at least 10%. The video script mentions this rule as a way to assess whether a business is a good candidate for acquisition and growth.

💡Recurrent Revenue

Recurrent revenue, also known as recurring revenue, is income that a business receives regularly, typically from subscriptions or maintenance contracts. In the video, recurrent revenue is emphasized as a desirable trait in businesses because it provides a steady and predictable stream of income, which is attractive to both entrepreneurs and private equity investors.

💡Capital Expenditure

Capital expenditure (CapEx) refers to funds used by a company to acquire or upgrade physical assets such as buildings, industrial plants, or equipment. The script mentions low capital expenditure as a positive attribute for businesses, as it implies less need for reinvestment and more potential for free cash flow, which is beneficial for business growth and profitability.

💡Entrepreneurial Wealth Creation

Entrepreneurial wealth creation is the process by which entrepreneurs build and grow businesses to accumulate wealth. The video underscores the idea that significant wealth is typically generated not through employment but through entrepreneurship, especially by buying, building, and selling businesses. The discussion serves to inspire and guide listeners on how to embark on this path.

Highlights

Adam Coffey, a private equity expert, shares his insights on the industry.

Coffey is the author of 'Private Equity Handbook', 'Exit Strategy', and 'Empire Builder'.

He has bought and sold 58 companies, with exits over two and a half billion dollars.

Private equity is often misunderstood and perceived negatively due to media portrayal.

Coffey explains the importance of private equity in providing a market for business sales.

He discusses the fear of the unknown and the need for education in private equity.

Private equity can be a tool for entrepreneurs to grow their businesses faster.

Coffey emphasizes the importance of having a clear exit strategy as an entrepreneur.

He shares his experience of selling the same company five times in 13 years.

Coffey advises on how to approach private equity as a means to accelerate business growth.

He explains the concept of 'rollover investors' and how it can benefit entrepreneurs.

Coffey outlines the criteria for choosing a business to buy, focusing on 'needs' over 'wants'.

He discusses the advantages of recurrent revenue versus project-based revenue.

Coffey provides a step-by-step guide on how to finance and buy a business.

He shares his strategy for buying multiple companies and creating a rollup.

Coffey talks about the potential for wealth generation through strategic business investments.

He emphasizes the importance of using other people's money to grow wealth efficiently.

Coffey provides advice on how to build a business funnel and approach potential business owners.

Transcripts

entertainment insights don't take life

too seriously welcome to brainsky

Unleashed hello everyone and welcome to

brainsky Unleashed this today is

probably one of my most favorite podcast

recordings ever I am honored and

thrilled to be with a man who is I would

say probably the daddy of the mac daddy

when it comes to private Equity he is

like the the the hot stepper he is the

lyrical gangster when it comes to

private Equity today on our show we have

all-time bestselling author three books

private Equity handbook exit strategy

Empire Builder we've got Adam coffee

Adam welcome to the show Thomas good to

be here good to see you glad we finally

were able to make this happen get our

schedule synced up hello to all your

listeners out there it's uh it's good to

be here oh man and I'm happy to have you

so we're going to talk about private

Equity today because I have been a fan

of yours since uh meeting you at an

event called uh Mega success uh last

November and I have read your books and

I have been to your seminars and I am

like now a a faithful

disciple of the Adam coffee style

private equity and I'm gonna be doing a

roll up I'm rolling up with Adam coffee

so Le let's talk about that for a minute

first of all for for those of you

uh who are unaware uh Adam you have uh

you have bought and sold 58 companies

you have had how many exits up to over

two billion dollar two and a half

billion in uh in exits but who's

counting no one is counting two and a

half yeah that's that's as CEO you know

total exits I'm over three billion now

um but as CEO two and a half billion

only over three billion so we're not

exactly talking to somebody here who

does theory we're talking to someone who

does

fact I love that I am I I'm definitely a

practitioner you know and I I I have a

lot of f you know I teach in the

academic environment too and I have a

lot of friends who are professors and

and I I chide them from time to time you

know and I I talk about hey in life you

can learn from people who teach Theory

or you can learn from people who have

walked in the shoes you know that you

hope to walk in one day they've walked

on the road you know to success that

you're hoping to uh to follow and and so

I I'm I'm always you know kind of gently

ribbing my my academic friends you know

they're brilliant too in their own

rights but yes I am a practitioner amen

live the dream which means I've made

every mistake a human being can make

over a 21 year run as a CEO you know

throw in 10 years with Jack Welsh at GE

so you're talking 31 years in business

and you know I I've made all those

mistakes and so you don't have to

listeners I am so glad that I have so

much in common with you Adam because I

too have made lots of mistakes lots of

wonderful mistakes which are so

educational so uh let me ask you this

because private Equity tends to scare

the living crap out of people can you

explain to me why is private Equity not

actually the

boogeyman you know great question so I I

I find kind of couple common themes here

what one of them is when we hear about

private Equity we hear about it maybe

it's on the news you know a news story

CNBC we hear something you know where

wherever we hear generally if we hear

about something on TV it's negative

almost never do we get the positive side

of of any industry you know because

because positive news doesn't sell

doesn't get ratings yeah yeah we we we

hear the dirt we hear all the crap you

know and then you hear about you know

horror stories from people at mixers or

ACG events or wherever you happen to be

and and it's like someone had a bad

experience and and and they're talking

about that bad bad experience and so I

I'd say there's the fear of of what we

don't understand what we don't know and

you know haven't been to to my seminars

you know when I talk about private

Equity I generally like to give a 10

question quiz to uh multiple choice real

easy questions um and I give it to a

room full of people and these are not

people who are are unsuccessful these

are business owners these are are

millionaires and uh and Hell In some

cases billionaires and I I've been in

that room and nine figure millionaires

eight figure millionaires billionaires

and and when I give my basic 10 question

quiz Thomas 90% of the room fails

miserably and people who pass generally

get a six six out of 10 and so I know

that while most entrepreneurs have heard

of private equity in fact they have a

very uh rudimentary or just wrong

understanding of what it is and how it

works and so I think as a result of that

we're afraid of what we don't understand

you have to keep something in mind if

you're an entrepreneur the reason why we

have an ability to build a company and

sell it and make a fortune is because

there is this thing out there called

private Equity that props up and creates

a market by which you know we are able

to to sell our businesses for for high

multiples big numbers and you know today

you know private Equity Six Trillion in

assets under management over 8,000 firms

and buy about 50% of all companies

bought and sold on the planet so they're

everywhere you can't hide from them so

instead of sticking your proverbial head

in the sand and ignoring it we need to

get educated because if we get educated

about it as entrepreneurs and business

owners we can learn how it works learn

what it needs to be successful and I

hate to use the word manipulate but we

can feed it what it needs and take from

it what we want which is capital to

invest in our businesses and to generate

wealth you know for our our families

build our Empires and so you know we

need to we need to understand and have a

very good understanding deep

understanding of what private Equity is

and how it works so that we can maximize

its potential in our businesses uh when

we're an entrepreneur now we talk about

that and yet most of us little people

who haven't really swam In The Swim

Lanes of private equity and we'll get to

that because that is a thing and it's

actually one of the most important parts

of your books actually as far as I'm

concerned is explaining things just the

importance of that

but we all think in terms of you know

we've got to build our business we're

going to stay in our business for 30

years we're g or or we're we're just

going to start a business and grow a

business we're gonna buy a business

we're gonna fix a business and we're

going to grow a business but we don't

necessarily think in terms of the way

you frame the the uses and purposes of

private Equity actually generate wealth

so in other words most of us go out I've

done it I'm that guy and bought

themselves or started themselves A

really lovely job but you on the other

hand completely flipped the script and

you could say you too can be an

entrepreneur but instead of having a job

you treat this thing like a very very

important investment that needs to be

worked diligently and that you could

pull out of that investment not in 20

years but in like three and walk away

with far more than you could after 20

years with that dream that you had so

can you kind of go into that a little

bit and explain what yeah and and let me

use a prop so let me go here to my

camera let me just pan up so on the

bottom one you see me flying a World War

II P-51 Mustang and on the top you know

doing an upside down Aeron roll over

Orange County California and then on the

top one I'm flying my my two- seat

Burger Chaser you know off the coast of

Catalina Island you know chasing a

buffalo burger why do I show you those

well for your entrepreneurs and

listeners out there um what do pilots do

we take off but before we take off we

have a destination in mind we know where

we're going and then we deconstruct the

trip you know how much fuel do I need

you know and what are the the air you

know what's the weather like in route

what are the winds a loft and if I get

into trouble what are my backup airports

you know I make all my contingencies so

as a pilot I start with a destination

and then I deconstruct the trip you know

and I mentally prepare I prepare the

aircraft you know and and I I take off

when I'm ready to do that and I I I fly

that Journey you know when you're an

entrepreneur too many business people

just start a company you know or buy a

company and it's like they really don't

have an idea or a sense of where they're

going and so they don't know when

they've arrived and they're unable to

deconstruct the journey and as a result

of that you know we we we spend a lot of

time and no matter how rich we are the

one thing in life we cannot buy is time

so we're wasting time so what well you

know let me use a real life example last

empire that I built um I started with a

platform company had a private Equity

sponsor um and we bought eight companies

we bought eight companies in three years

and then we sold it and you know we got

a four times multiple of invested

capital and then in the next two years I

bought 15 more companies and and so you

know you don't need a long you know or a

lot of time to make something happen you

know I'm out and so the biggest mistake

I think entrepreneurs make is they think

of an exit as a oneandone event so I'm

going to build my business I'm gonna

work in it for 20 years and then some

point I'm going to get old and I'm gonna

sell this puppy and then I'm going to

ride off into the sunset and and I tell

people it's like boy you're missing an

opportunity you know what you think is

the exit you know the the one exit you

know it's a oneandone event I see it as

the first rest stop in the wealth

creation Highway and highways have many

rest stops you got off at the first rest

stop you know I'm I'm glad for you

you're I'm happy you're happy you got a

a wheelbarrow full of gold but my

personal record is selling the same

company five times in 13 years and so I

got five wheelbarrows full of gold you

thought there was only one out there and

and a lot of entrepreneurs that I call

it the accidental arrogance of success

so sometimes they they also think you

know hey if I sell my business I'm

leaving I'm not going to be a rollover

investor or minority shareholder I'm

God's gift to this thing and it's like

no way am I going to partner behind

somebody else who technically can fire

me or tell me what to do I've never had

a boss never gonna have a boss you know

kind of thing and and I think boy you

know that that how arrogant is that

let's look at the the world's richest

two men um you know so I'm thinking Jeff

Bezos I'm thinking Elon musk and you

know last statistics I saw I think Jeff

Bezos owns today around

10.9% of of Amazon which means he's a

minority shareholder which means that

somebody else owns you know owns you

know almost 90% of that company and I

think Elon Musk owns like 133% of Tesla

something like that and so at the end of

the day it's like boy you know private

Equity is a tool I'm a tool for them

they've got limited partners who inv a

lot of money they need returns and so

the private Equity Firm comes with a

checkbook they're looking for an

investment to back they're not looking

to tell me how to run my company they're

looking to to to help me accelerate my

growth and to create returns that they

can pass on to their to their investors

and I look at them and say boy wouldn't

it be great if I never had to worry

about capital and I wanted to buy 23

companies over a 5year period like I did

with my last one you know and spend

hundreds of millions of dollars and I

don't have to sign any personal

guarantees and I don't have to worry

about where that money is going to come

from all I got to do is find the 23

companies to buy and I've got an

unlimited checkbook you know and and boy

wouldn't that be fun if I had an

unlimited checkbook and and I could grow

my business at the fastest Pace possible

and so you know I I think that when we

truly understand private equity and and

how it works and we think of it like a

tool you know it's a tool with a lot of

money it can solve a lot of problems for

us but it can help us accelerate the

growth trajectory of our Empires and I I

usually sit down with an entrepreneur

you know and I'm thinking about buying

his company and and trying to convince

them to join my buy and build and be a

rollover investor and get multiple bites

the apple and I usually build a

spreadsheet and I'll build two rows

across and on one it'll be okay Mr

entrepreneur Mrs entrepreneur what's

your Revenue today what's your your ebit

do your earnings and uh what's what's

your growth rate and so let's roll tape

forward five years how big are you what

kind of multiple do you think you'd sell

for how much do you think we're worth as

an Enterprise then let's roll tape

forward five more years how big are we

you know let's see what we think we

would sell for then and I do that

exercise and then I go up top what if

you sell me your business today and for

every dollar I give you you take 70

cents home you're going to have to pay

some taxes and then you invest it

elsewhere we'll track the return you get

on this investment but you've also got

diversification of your your assets now

you know you're not all invested in a

company you've got some in the company

30% rolled forward and you've taken 70

cents off the table you've invested it

elsewhere Now with an unlimited

checkbook what kind of a growth

trajectory could we achieve well let me

show you what I'm actually doing and

because you get to be a rollover

investor in this thing I buy another

seven eight companies 15 companies

whatever that number is is over the next

5 years this is how big we are now this

is the multiple for which we trade and

here's the return on your rollover

investment oh isn't it interesting how

the second check is bigger than the

first and so now we roll over again 30

cents on a dollar we get another

liquidity event and we grow again using

somebody else's capital and growing as

fast as possible roll out forward

another five years and get another bite

of the Apple third one's bigger than the

second second one's bigger than the

first each time you Diversified you

invested elsewhere we got those returns

as well every time I build that

spreadsheet using their own assumptions

I have never yet done this exercise and

had an entrepreneur make more by staying

100% shareholder and staying independent

the the growth and the the the increase

in the growth rates that happens when we

partner with unlimited Capital you know

with a private Equity Firm really juices

up our own personal returns and so there

is another way to to do this we we just

have to understand how it works know how

the game's played and then and then play

the game that's it boy that was a long

diet Tri I didn't mean to do that on

okay so let's let's kind of boil it down

a little bit right so let's say that you

know myself or my listeners or whoever

they go man Adam I've never heard

anything like this first of all buy the

book read the book buy the book read the

book buy the book read the book and go

see Adam live in February have one more

opportunity to do that just putting that

plug in there rinsky Unleashed is

powered by profit Max did you know that

93% of businesses overpay on their taxes

do you pay too much in taxes a recent

study showed that businesses are

overpaying between 34 and

71% PR Max is proven legal tax strategy

solutions to reduce your tax burden I'm

not only a client but I even join the

team to help other business owners just

like me pay only their fair share and

nothing more go to profit max.co that's

profit max.co profit max.co to find out

more you can even connect with me there

as you should and I'll help make sure

that your tax bill is legally as low as

allowed profit Max keep your catch but

let's say that we want to do this and we

do not have that that uh unlimited

checkbook yet okay so we want to begin a

an initial rollup and we want to go with

something that is guys with trucks that

that do or guys with trucks that

fix that is your concept and let me

just tell you from my own

experience in business you're right I've

been wrong you're dead right and I can

see why now let's say it's going to be

either um you know Landscaping Pest

Control HVAC something like that

right how do we as the the beginning

stage get in enough to create that

platform experience get the financing in

today's day and age in world and begin

to get that that one rollup started so

we can finally get into a swim lanee

within private Equity well so that that

these are great questions so let's

unpack all of that and uh and and let's

remember so I've been doing this on at

an Institutional shareholder level

building big giant Empires that sell for

hundreds of millions of dollars even

billions of dollars and and I'm now

teaching so after 21 years of doing this

I just got bored of of building one

company and all the Tactical execution

responsibilities I wanted to help the

masses so I started working with small

business and it's been a lot of fun you

know working with people like you and uh

people in the crowd at JT's events and

really helping them learn the advanced

tools that the big boys use and applying

them in a small scale and getting the

same kinds of results just magnitudes

different because of the amount of

investment that that's taking place so

so yes you can do this it works small

just like it works big so now let's

start by unpacking all of this if I'm

going to start one of these Adventures

if I don't own a business today h h how

do I stack the deck in my favor how do I

how do I increase the odds that I'm

going to be successful when I want to do

this and so you know you can be

successful starting any business you

want or buying any business you want but

I want you to be successful so let's

just unpack some quick data 33 million

small businesses in America defined by

the SBA as being 500 employees or less

they employ 99.9 or they represent 99.9%

of all companies in the country they

employe 50 % of the country's Workforce

34 million small businesses lots of them

out there right so only 7% get to a

million only 4% of those get to 10

million only 40% are profitable so a lot

of businesses fail you know five about

50% fail in the first five years how do

I avoid all that risk well first of all

don't do a startup when we do a startup

we've got all this risk you know risk of

can we build the market can we attract

customers did we make good assumptions

did we plan correctly and I need a bunch

of capital to be a startup so I can

avoid all of that by buying a

pre-existing business of whatever size I

Choose You know I like to Target if I'm

an entrepreneur let's buy a company with

$1 million in earnings so it probably

has4 million to five million of Revenue

million in earnings you know that would

be kind of a target range for me and I'm

probably going to have to pay five times

so I'm probably going to pay about five

million for that company let's let's

come back to that for a minute so right

I'm going to buy a small business why

because it's got a history of Revenue a

history of earnings it already has

customers and I can look at its

financials I can see how it's performing

I can apply this thing I call the 302010

rule to make sure it's healthy does it

have at least 30% gross profit are sgna

or customer acquisition and back office

expenses less than 20% am I generating

at least a dime on a dollar in profit

and if I am I can scale that company to

a bill ion Dollar business and the work

that I need to do is very different

because it's not about getting it fixed

or making it right it's simply about how

do I grow how do I grow the revenue and

make this thing bigger and and make it

more profitable along the way so i'

rather buy than build but now when I

think about what kind of companies could

I buy you know there's so many different

companies out there so many different

Industries so I like to apply some some

of my my my atom coffee isms and in my

filters into how we pick this you want

to be successful write this down out

there people let's start by investing in

needs not wants so we want a company

that focuses on providing for a

something that's a need not a want

what's the difference well if I got a

hole in my roof and it's raining outside

and there's water pouring on my head I

have a need to fix that roof but if I'm

going out to a concert on Friday night

and I'm taking my wife and my wife wants

a new purse and she wants a new outfit

um that's a want it's not a need she

doesn't have to have it you know I do

need the roof fix I don't have to have a

new purse you know for my wife you know

I want to give her the new purse she may

argue with that she may find a need just

well you know but if the economy goes

south she doesn't need it and the market

crashes I get laid off I got no money I

still gotta fix the roof still got to

fix the roof but I don't have to buy the

purse you know or buy the new outfit or

buy the the the truck tires for my

monster truck you know out in the

driveway and so it's like needs versus

wants why because as an entrepreneur if

I invest and I focus on a company that

has that takes care of needs I'm going

to be less cyclical when the economy

goes south consumers still need my

product I may slow down like the rest of

the economy but I don't fall as far as

companies and industries that focus on

wants so we want to invest in needs not

wants next up we want recurrent Revenue

not project-based revenue and again I've

made money on any kind of company I'm

just trying to stack the deck in your

favor so needs not wants and then we

want recurrent Revenue you know

contracted Revenue not Project based why

is that important well if a part of my

sgna expense is acquiring a customer

once I get one I want to keep charging

them I want to have an ability to

monetize them over and over and over

again versus a project-based business

where once I take care of the immediate

need then I got to go find a new

customer to take care of a new need you

know for a new customer I want regular

current Revenue so you talked about

Landscape Maintenance you talked about

Pest Control let me use those as two

proxies I have a crew you know and

they're out there and they're they're

they're they're spraying pest you know

they're spraying chemicals around the

perimeter of my house I live in Texas I

got giant bugs here you can put saddles

on these things and ride them around no

bugs get in the house mama's orders you

know make sure we got good Pest Control

service so I sign a contract they

acquire me as a customer and then I give

them my credit card and I forget about

them and they charge me every month I

don't even look at my statement I just

paid a damn bill it's like I it's going

on but it's a need I gotta have it so I

just keep paying it and they can they

can continuously bill in me and they

they show up once a quarter they spray

the house but they bill me monthly they

do that so psychologically the payment's

low but they're only providing service

you know on a quarterly basis and

they're they're they're getting me every

month on my credit card and you buiness

have cash flow in that situation and you

know on the first of the month that

company hits all the credit cards and

the only things they have to worry about

is about every four or five years when a

credit card expires they got to track

down that consumer and say give me the

new credit card depending on which

credit card they're using sometimes even

when they expire the con you know they

see that the credit provider sees it's a

regular recurring Bill and they just let

them to continue to build it even though

the number on the cards changed you know

American Express does that as an example

and so the point of the ex exercise is

I've got all of this revenue and it

comes to me on the first of the month I

don't have to go looking for it and so

if I've got a business focused on needs

and it's got a contract that never

expires never ends then I've got when I

acquire a new customer the revenue is

additive rather than replacement revenue

for a project I just completed so again

we're trying to help your your listeners

stack the odds in their favor needs not

wants contract versus Project based you

know we want we want businesses that are

low capital expenditure um and this is

important because you you know we talked

about how we're going to buy this thing

we got to get back to that now so if I

have a business with low Capital

expenditures so most service businesses

I don't have to go out and build a plant

I don't have to have a bunch of

Machinery you know or a bunch of bunch

of equipment you know essentially if I'm

a Service Company I'm buying trucks I'm

buy pickup trucks and I buy sprayers for

my my pest you know pest control company

and I fill it with chemicals now do you

do you do you do you buy buy the trucks

or do you lease the trucks well so I I I

I buy the trucks not lease them because

it's ebitda friendly to buy things

rather than ex you know have expenses

hit my p&l you know I'm selling ebitda

in the future so I need to learn about

ebitda and I need to learn how to

maximize eitas potential so I don't want

to lease stuff you can do a capital

lease and and and get some similar

benefits to buying but you know

essentially we want to buy things own

things not lease them when I lease them

the payments you know are going to hit

my my operating expense when I own the

asset um you you know it's below the

epot doline where I buy the capital

equipment and so it's epit do friendly

you know that's a a whole I will ask

though does because I mean in some sense

you you're buying a business and you

want C private Equity to buy a business

do you do you buy property or do you

just lease the property as far as oh

private Equity doesn't buy um you so

another good question so you know I I

nothing wrong with you as a business

owner owning the building that you that

you occupy in your business I'll just

tell you that before you sell your

business you want to separate your real

estate from the company put it in a

separate entity and put in place a fair

market lease between your entity that

owns the building and your entity that's

the operating company that's inside

because private Equity firms don't want

to buy real estate you know it's a mix

of asset classes and it requires a great

deal more diligence and and they're it's

not Capital efficient for them to buy

the business so that's one particular

area where they would prefer you know

that you you have you if you own the

building separate it out separate entity

and then charge a fair market rent to

the operating company and then when you

sell the company if you if you don't

stay with it or even if you roll over

and do stay with it you're also going to

have a secondary income stream from the

building yeah from the rents as long as

it's fair market lease in a fair

reasonable term you know then you're

going to have revenue for you know could

be five to seven years you know what

whatever the case may be on your

property which is always good if you're

a landlord so you know at any rate just

going back to this so the the the key

about guys trucks broken stuff guys

trucks fixing things guys trucks doing

things plumbers electricians HVAC you

know Pest Control power washing I mean I

can come up with just Roofing flooring I

can come up with all kinds of different

companies they're not all needs wants

they're not all contracted Revenue but

you know just there's a lot of companies

out there that have low Capital

expenditures they essentially just have

a fleet to pickup trucks and you know a

a small office and you know some

computers and desks and what have you

and and if you find something that's

capital efficient then you have a lot of

free cash flow so if you're buying a

company then you're paying a multiple of

earnings on a million dollars of ebitda

ebitda in a service business is usually

close to what the free cash flow is

which means I now have a million dollars

you know and I can use that million

dollars to service the debt that I need

to buy that business so let me just tell

your listeners real quick how to buy

that $5 million company so first of all

you know million million in earnings I'm

paying four to five times um I'll say

five maybe fair market I'm looking for a

good company maybe I'm looking for a

good company that I can get a little bit

cheaper four four and a half but if I

had to pay five times so I pay five

million for this business how am I going

to pay for this well the first thing I'm

going to do is I'm going to ask the

current owner to become a rollover

investor in this buy and build that

we're talking about doing and so I'm

going to try to convince them to roll

over 30% and so out of that 5 million

1.5 million is rolled forward so I only

need three and a half million now to buy

the business and again if I think about

the just general math if I've got a

million and a half rolled forward this

seller doesn't necessarily know it but

he just became my equity and the SBA

which is probably the easiest it's not

the fastest but it's it is fast I've

done that one yeah probably one of the

easiest ways to do this but I I I'd

start with a Commercial Bank you know

see if I can get a commercial loan lower

interest rate maybe maybe no personal

guarantee SBA I'm going to have to do a

personal guarantee guaranteed um and so

I know but I'm looking for now I need

three and a half million and I've got a

company that has a million dollars in

free cash flow well if I'm borrowing

three and a half million and I'm paying

10% interest and I'm I'm I'm trying to

service this on a long life advertised

loan um you know and and so I probably

am going to need you know just pure

interest I'm going to need 350,000 you

know if it's at 10% um if it's at 12% or

a little bit higher if I get a minimally

advertising loan where where I'm paying

principal back but I'm I'm not paying

being a great deal principle at any rate

I'm probably looking at about

$500,000 a year in payments to buy that

you know to get that and service that $

three and a. half million loan and I've

got what's called a two to1 debt to

equity ratio because I've got a million

dollars in free cash flow and I'm only

needing half of that to pay the debt and

so plus I've got recurrent Revenue low

capital expenditure contracted revenue

and so I can convince you know banks

that hey I've got a very Stable Company

here look at it over the last 5 years

you know and look at how stable it is

it's growing you know it's uh it it's

got a recurrent Revenue stream you know

and I can get some favorable treatment

chances are I can use the cash flow

within the business to borrow against

you know to to service the money that I

need to buy the company once I buy the

first company now I've got 70% Equity

the former owner has 30% Equity now I

buy the next company

and when I repeat this exercise the 30%

the second person rolls over buys less

stock because I value it at the new

company which is now 2 million in

earnings and at a five times it's worth

10 million and so now now a three you

know or A1 and a half million dollar

rollover against a $10 million company

buys a smaller percentage than one and a

half against a $5 million company and so

as I buy this thing it gets easier I

guess my point I'm trying to make is the

hardest company to buy is the first

after the first it just gets

exponentially easier and I can keep

buying companies put them together you

know and so let's just do some some

round numbers just to excite people how

much money could I make doing this and

how long would it take me let's assume I

buy four companies they each have a

million dollars in earnings and I pay $5

million for each company five times so I

bought four million in earnings paid

five times I need 20 million so it's a

service business you know I'm doing Pest

Control I'm doing Landscape Maintenance

I'm doing HVAC whatever I'm doing you

know I'm buying a business that's

healthy that's run good that takes care

of customers that delights customers got

recurrent Revenue low Capital

expenditures High free cash flow it's

growing business you know a lot of the

companies like this that I I work with

you know they grow anywhere from I'll

just say 15 to 30% a year you know and

so I'm putting four companies together I

paid 20 million with a small reasonable

growth rate very quickly 4 million

becomes 6 million you know 4 million

becomes 5 million let's go with six so 4

million becomes 6 million of earnings

you know I now sell that company for

about eight times and I get 32 million

or six times eight I'm sorry 48 million

I got to pay back the original 20

million so I pay back the 20 million

that I owed and I make 28 million

profit H how fast can I do this well and

my last bu Bill years yeah I I bought

eight companies in three years and then

I bought 15 companies in two years so

you know if I have an unlimited

checkbook I can do this really fast if I

don't then I have to work one company at

a time and it takes a little bit longer

not not terribly much longer I just have

to solve for the capital so my my point

in this is I don't have to waste 20

years of my life to generate wealth I

don't need to start something where I've

got a 50% chance of failure I can start

by buying a successful small business

and in today's world I got a news flash

for you right now this is the largest

wealth transfer in human history as Baby

Boomers are retiring selling their

businesses you know or literally dying

and not even even continuing their

business or attempting to sell it 80% of

people who own a business never actually

find a buyer or sell it 34 million small

companies they're a dime a dozen so

while everyone's looking at all of these

companies you're sorting through all the

chaff real quick needs not wants

contracted Revenue you know recurrent

Revenue not Project based you're already

like light years ahead of the rest of

the people out there who haven't heard

this podcast haven't heard me speak

about this before and they don't know

the secret to how to ice it and make

sure that you're successful we go by our

first it's the hardest but we can do

this you know there's Capital out there

that's going to help us and we get that

first deal done the second deal becomes

easier the third deal becomes easier and

and as we put these together quickly we

bought good businesses that are healthy

that are growing and we're helping these

entrepreneurs Escape you know and and

we're we're taking over now the business

we're using our our business Acumen that

we've got from the Fortune 500 world or

the ink just dried on our MBA and we're

ready to now go out there and kill it

and and so we get these businesses to

grow you know at a at a good Pace you

know using the tools that I talk about

in in my books or or teach at the

seminars and you know you can do this

really quickly and and it doesn't take

you know it doesn't take 20 years to

have a net worth of over 10 million or2

million you know and uh en Joy kind of

the decamillionaire club or in this

country over 30 million is how we Define

ultra wealthy and so people who think

that's a pipe dream you can do this in a

matter of just a few years well based on

your math you're talking about anywhere

between three to six years you're

already well into that club correct and

and the great news is you can either

keep going or do it again or while

you're building the first and getting

success start the second oh and then

become a become a Serial entrepreneur

that always has one two or three

companies I got to change my my my math

a little bit my my mentality you know

the profile of the first business I buy

might change now instead of looking for

someone who's 60 years old or older who

wants to retire I'm looking for someone

who's in their 40s you know or 50s and

they still got lots of game left and I'm

going to back them as my CEO and they

are going to be as a rollover investor

going to get that second bite of the

Apple they're still going to be highly

interested and intrigued I teach them

what about what we're going to do I get

them engaged and now i' I call it I've

got my horse and I'm riding my horse and

now while that company is growing I can

double down and look for another one to

do and I can get two or three of these

going at the same time talk about seed

there Adam I mean listen to what you

just said you're basically saying yes

you know you get the first one going and

and and maybe youve finally sold the

first one into private Equity it's now

in its next swim Lane but you kept 30%

and so now you get another bite of that

Apple down the road but while you're

sitting there as a minority investor in

something you can also go back start

another one and now have two things

growing at the same time sure and you

could be in one as a CEO growing it the

second one needs to be a different

industry because we can't compete you

know and I'm going to need a you I'm

going to need a horse you I'm GNA need

somebody that that I can can ride who's

going to go with the business and and so

you can choose how to play this I'm

going to step in take it get to the

payday be a rollover investor put a

bunch of money in the bank and keep

building it because I know it now and I

know to do how to do it and now I've got

an unlimited checkbook so I'm going to

keep going in that industry where you

can be Oz behind the curtain and the

profile of the first company is in their

40s in their 50s still got a lot of game

left I buy that company I teach them

about the buy and build and what's in it

for them they are the one who rides

forward with the company and when I sell

to private Equity hey private Equity

guys I'm just the money you know he's

the guy he's the magic she's the guy or

she's the lady she's the magic I mean

she's guy these days Adam you know

guy these days you

know you said maybe you throw out a

Zinger there it's like I'm in trouble

I'm trouble

already people so so you know but but we

could be Oz behind the curtain and so

the profile of the first company I buy

is I need an entrepreneur who wants to

continue to go with the company they're

going to be the person that actually is

the the front person when we sell the

business and the profile of the second

third and fourth is going to be some

someone who's in their 60s someone who's

approaching you know in their 70s and

they want to retire and they don't have

a a succession plan and and our horse

and that first company becomes the

succession plan they know the industry

they're our expert so they can

assimilate the larger business you know

and we then buy companies two three and

four while that's going I go back to the

next find the next you know industry I'm

going to tackle and I get two or three

of these going at a time and after I get

the first payday Thomas you know so now

I can sell

fun you know and and maybe not 100% of

My Equity because I still like to use

other people's money but if I don't now

do a 30% rollover see when I bought the

first company it was a 30% rollover

because I needed that Equity to pacify

and I didn't have the money and so I

used their Equity to become My Equity

because once they roll over we're

partners and so between us we have 30%

Equity we have a 30% down payment and I

need to finance the rest so I did that

to be shrewd because I end have Capital

once I got Capital maybe I only let them

roll over 10% or 15% and then the other

15% becomes My Equity you know at the

beginning I get the first company done I

still want to use leverage it's

efficient but I can selectively use some

of my War chests that I've just built up

and I can build a model and I can see

boy if I put in an extra I just did this

with an entrepreneur I'm working with

right now just in this week earlier this

week you know so so yesterday and uh and

I I we were doing this exercise and I

said look if you put we built a model if

you put just an extra 750,000 in cash

into this deal instead of zero if you

put 750 instead of the entrepreneur

rolling over 1.5 million let him roll

over 750 you put in 750 extra at the end

of the model you made an extra five

million and on a 750 investment you know

of your Equity is a selective strategic

use of your Equity you get an extra 5

million in return and if you don't you

let that person roll over 30 they get

the extra five million so do you want

that five million you know or not well

if you don't got the 750 you're going to

give it away but if you've got the money

because you've done this now once you've

got 10 million you paid some taxes you

know you got 18 million whatever the

number is that you made on the first go

round I guarantee you it's healthy

because needs not wants contract you

know it's like I I stack the deck in

your favor

when you do this now you know subsequent

times and you selectively insert your

equity in the right spot you can really

juice up your Returns the second time

you do it and so the first time is kind

of your bike on a training wheels and

you're you're you're doing it at a

minimalist fashion because you don't

have Equity but once you're successful

once and you create the equity now I go

to my next bike and I can I can I can

take the training wheels off selectively

Infuse my Capital at the right strategic

points and now I'm juicing up my returns

on the second one and I go back and do a

third and it's like this is a a

reiterative process and once once you

know the mechanics of how to do this

there's no limitation as long as the

companies meet my criteria and as long

as you're doing that you know I you can

do this quickly you can do it often you

can do it repetitively I just spent 21

years doing it and so for someone who's

in their 30s or or 40s

especially focusing on this and trying

to take this concept it will literally

give you generational wealth and then

some because you've got a long enough

Runway to do it or

conversely you can save money and put it

in mutual funds and eventually when you

go to retire you'll have an estest egg

but you will not have what you can

generate over the next 20 to 30 years

based on investing because that

essentially this is this is really what

you're talking about is is is taking

money and investing money very very

wisely you could become a wildly

successful incredibly successful multi

multi multi multi-millionaire you can

become a nine figure entrepreneur nine

figure entrepreneur I mean starting at

30 you might be able to make it to

billion you don't know yeah so you

listen you know I I I tell people all

the time you know a lot of people get

very comfortable in a job you know I

work in a fortune 500 company I like the

big logo when I go to cocktail parties

you know who do you work for I work for

GE or I work for you know Chevrolet or

Ford you know General whatever it's like

you know and and I I I've got a title

you know I've I'm a vice president I'm a

you know I'm a this I'm a that general

manager and you know a lot of people get

very comfortable with that but I I'll

tell you that the true path to wealth

Never Comes by working for someone else

it just doesn't you know how many is a

percent of the entire Fortune 500 world

how many people make a million a year

you know it's almost none and and so I

I'll tell you that you can earn a good

living and you can you can be a

productive member of society working for

someone else but if you want to generate

wealth you know true wealth you want to

fly around on private jets you know you

you you wanna you want to not worry

about balancing a checkbook ever again

in your life you know or or worry about

where where money is going to come from

for my kids' education or my grandkids

education or their kids education it's

like generational wealth comes from

being an entrepreneur and it comes from

being involved in in business and and

buying and selling companies is one

vehicle that we can use and

entrepreneurs you know over the

generations you know have uh you know

for the the last you know few hundred

years here in this country you know

those who started businesses they were

the ones who created something and

something from nothing and they they

became the wealthy families and you can

do that you can still do that in this

country people are doing it every day

and I I kind of feel like I've been

seeing a Resurgence of entrepreneurial

activity I think more and more uh young

people especially are recognizing that I

don't want to work for the man you know

I don't want to you know it's like I

don't want that path that my parents had

you know or my grandparents had I want

to do something different you know I

want to own a business and so I'm seeing

a Resurgence of young people getting

getting involved you know in in doing

things like this and so yeah you know we

can get lucky lightning does strike and

we find our way through this but you can

stack the deck in your favor you can

build a formula that almost guarantees

your success or at least raises the odds

tremendously your favor yeah yeah I mean

you know yeah you you're talking about

young people and I mean one thing that I

find a lot of young people talk about

and I'm not exactly out there in the

college campuses you know polling them

um you know I I do end up talking with a

lot of young people periodically through

my travels and you know they they like

to talk about well you know I'm going to

put this into crypto you know and it

it's

like that it could

work it could you know or you could do

something that probably has a much

better chance of working what you're

suggesting what you're what you're

preaching is something that has a a very

proven track record with a high degree

of uh liability a high degree of um

success and it's not always sexy right

look at the businesses that I've run you

know HVAC commercial laundry I mean

that's not sexy on the top of anyone's

sex I don't know because women like a

man in

uniform my medical service company that

was pretty sexy um you know so you I I I

I'll tell you that you know true wealth

you know doesn't have to be sexy it

doesn't have to be the newest thing you

know there there's a rage going on

around Tik Tok at least I I keep seeing

videos JT keeps sending them to me it's

like you know here's someone with a

master's degree lamenting how you know

how much they make and how much you know

her husband makes who's a plumber right

you know or here you know here you know

plumber makes more than a surgeon you

know over over a 10-year period and you

know it's like you don't have to

reinvent the wheel I don't have to

create the next new tech platform or app

you know or I don't have to experiment I

can go to something that's not sexy

that's been around for a thousand years

get in that industry and I can sexy it

right on up until I'm a decamillionaire

or or an ultra wealthy person and so

it's like sometimes simple is better

simple's easier you know but I do run

people through an exercise so if you

want to also don't forget my filters but

if you also want to then decide okay but

but really I I don't want to do a

laundry company so what what can I do so

I tell people get out a piece of paper

put three columns First Column what are

your skills what are you good at you

know and it's like hey I'm analytical

I'm great at spreadsheets or I'm very

good at at inspiring I'm a great closer

I can sell people you know it's like

what are you good at and then I go to

the next column and I say what are your

passions what do you like to do and then

I look at the third column and I say

what companies what industries would

take advantage of your skills would feed

your passions because life is so much

easier if you wake up in the morning and

you're passionate about what you're

doing you know and it it ties together

what industries what companies would fit

that bill then apply my filters needs

not wants contracted Revenue you know

recurring Revenue not Project based

Revenue run through those iterations and

at the end of the day what you're going

to find is your path you'll find your

your industry of choice and you'll be

have a higher probability of success

you'll have fun doing it and you'll make

a lot of money now how do we begin those

stages so let let's just say

hypothetically you know someone's done

the column they've you know they

understand the the the 302010 rule

they've checked the phone book to make

sure it's you know fractioned enough uh

and and and they know I want to go into

X

industry what is the next step I mean do

they literally just start picking up the

phone or they walk into people's

businesses and say I can to talk to the

owner got to build a funnel so great

question so I I've Got My Chosen

industry I used all my little rules we

just talked about I walked that road I

found my industry and now I have to

build a funnel and so I could build a

funnel many different ways um I could do

if if I'm doing it on the cheap I could

just do Googling I could go to state

websites and try to find out so every

company when they register

create an LLC or an es Corp any company

that registers with the state uses a

nacis code an s i code it's like this is

the industry I'm in it's number 6523 F

right you know whatever whatever that

case is and and it's like they uh you

know I've got my necis code written down

here because I need it all the time it's

541611 that's my necis code and I can go

online and I can buy a database I want

to know every company in the United

States or at least in this state that's

registered under neis

541611 which is Consulting you know you

know business Consulting and and if I if

I buy that database now I've got the top

of my funnel filled um I could go to Dun

and Brad Street I could pay 2500 bucks

for a license to this thing called

Hoovers and I could do the same thing

there you know and um I I I have a

geography in mind I want to get started

close to home I'm in Dallas so I want to

find how many companies have the neckest

code in the industry I'm looking for and

then I got to do some shoe leather type

work I I I need to get on Google I need

to go to companies with websites and try

to figure out are they really doing what

I want to do or did they just use the

knis code it's so broad that it could be

you know any different kind of company

multitude of different companies out

there and so I start then qualifying my

funnel if I got a little bit more money

I might spend 10 grand on a tool called

grata you know and now maybe I'm getting

ownership information this is who owns

the business this is our estimate of the

revenue you know for that business and I

start to then kind of filter my leads

and now at some point I got to start

doing Outreach to people and and I'm

either going to be cold calling them

sending them emails reaching out to them

on LinkedIn you know I have to build the

funnel and then and then sort the funnel

get to a Target you know I typically

would start with thousands of companies

at the top and I'm probably working with

about a hundred that I think are in my

wheelhouse and I'm going to start doing

our Outreach and and start trying to

contact these people and uh so there is

some sales element if I don't want to do

that if I really stink at that I could

hire this thing called a buyid advisor

and I could pay somebody about 55500 a

month to go out and do it for me and

they'll serve me up worm leads I'll pay

them a commission at close because I

bought a company that they brought in

the door and I still have to do

diligence and I still have to build a

relationship but they'll do all the cold

calling stuff that I don't like to do

and I can pay to Outsource that I can

use a tool like grata you know or done

in Brad street you know or just just

trying to find databases online at

government websites and and you know I

can I can this is how I go about doing

this I always develop a filter you know

and my set of filters what does good

look like we don't want to buy fixer

uppers Life's Too Short we only want to

buy good companies that have good

reputations you know and so I'm looking

for Revenue at this size earnings at

this size a profile of who the owner

probably is they're probably in their

60s 70s retiring you know or they're in

their 40s 50s or younger still got some

game left but they understand their

industry and I'm going to show them the

benefits of doing a buy and build and

being the president CEO of the company

that I'm going to build buying three or

four small companies putting them

together and selling them off to private

Equity um and so we developed that

profile you know but that that's kind of

it in a in a nutshell you know we we we

won't I don't have enough time to go

into any more detail really than that

here but you know as we're approaching

the top of the hour here it's it's uh

you know these are my thoughts we can

stack the deck in our favor and and we

can apply some basic rules and tips that

I've learned over my career to

drastically raise the odds of success

for the people out there who want to do

this but you know to those you know to

those who are willing to take the risk

you know come the come The Spoils of of

success you know we get some failures

too but that's why we stack the deck in

our favor all right well Adam as you

said we are coming to the top of the

hour I thank you so much for coming on

the show I would love to be able to do

this again sometime maybe even deeper

level and God willing I'll be able to

discuss some things and and and dig in

areas because I'll be involved in

something like this and and really have

some fun with it but I thank you so much

for coming is there anything else that

you want to tell the audience before we

uh end the show well hey look um my

podcasts if you hear me on an episode

like this they're free uh my books are

cheap I donate my royalties to charity

somewhere up there there they are I got

some books um and you know I teach the

seminar coming up here in February you

can join me there you can work with me

oneon-one a lot of different ways but

reach out to me on LinkedIn LinkedIn is

where you'll find me um and I I'm very

active on on on on LinkedIn so people

reach out to me there all the time you

can go to my website adom

coffee.com um and that's it I look

forward to hearing from your your

listeners good luck to everybody out

there stay safe be happy take risks that

are calculated and enjoy en the ride

boom thank you thank you thanks for

having me