Podcast Summary
From entrepreneur to holder: Alex Hermozzi's journey: Successful entrepreneurs like Alex Hermozzi keep learning and growing, identifying their competitive advantage, and providing value beyond capital and time to build and scale businesses.
Successful entrepreneurs like Alex Hermozzi continue to strive for growth and learning even after achieving significant milestones. After selling three companies and making liquidity events, Alex identified his competitive advantage in the business services and education world. He now aims to build a holding company to scale businesses quickly by providing value beyond capital and time. The value of information and knowledge is emphasized, as it is most valuable before it is widely available. The ultimate goal is to document and show the best practices of building world-class companies.
Focusing on growing existing companies and making strategic picks: Acquisition.com aims to expand their portfolio through strategic acquisitions and growing existing businesses, with a goal of reaching a billion-dollar gross portfolio revenue and potentially making it on the Forbes rich list.
Acquisition.com focuses on providing value to a large audience through social media while targeting companies with significant growth potential. Their financial goals include getting Leila on the Forbes list for women with a net worth of 250 million, achieving a billion-dollar gross portfolio revenue, and potentially making it on the Forbes rich list. Currently, they have 11 companies in their portfolio, with their largest company generating 11 million in revenue per month. They don't have a specific goal for acquiring new companies and instead prioritize growing existing ones and making strategic picks. The growth of their portfolio is driven by both acquiring new companies and expanding existing ones. Their approach is not about quantity but rather about making the right picks and waiting for the right opportunities.
Focusing on traditional information businesses for revenue growth: Build a diverse portfolio of info-based businesses, focus on marketing & sales, and find a passionate, technical co-founder for success.
Growing a portfolio of information-based businesses, whether traditional or e-learning, can be an effective strategy for increasing revenue without the need for building complex technology from scratch. The speaker shared his personal experience of struggling to build technology companies and losing significant amounts of money in the process. He found inspiration in the idea of focusing on simple, traditional information businesses, which can still yield high valuations and recurring revenue streams. Acquisition.com, the company the speaker is involved with, has a diverse portfolio that includes brick-and-mortar chains, professional services businesses, and e-learning platforms. The common thread is the provision of information as a service, where the company helps clients achieve specific outcomes through the use of a learning portal or other tools. The speaker encourages building a team with a passionate, technical co-founder and focusing on marketing and sales to increase the chances of success in this type of business model.
Building a valuable information business: To build a successful information business, focus on large markets, recurring revenue, and less founder dependence. Aim for predictable growth and transform into a service business for high valuation.
To build a valuable information business, it should have a large addressable market, a recurring nature, and be less founder-dependent. The business model should aim for predictable future revenue growth, making it attractive to potential buyers. Service businesses, which information businesses can transform into, are valued highly, often fetching 10 to 15 times EBITDA. Our goal is to build such companies and prepare them for a 10 to 15x EBITDA exit in the future. Currently, we are in the process of assisting a portfolio company founder in an exit, acting as minority stakeholders with a typical holding of 20 to 30%.
Investing in high cash flow businesses with low capital expenditures: Investment firms invest in cash flow businesses, provide equity for services or buy a percentage, and advise on founder removal from advertising and events for investability.
Investment firms like the one discussed typically invest in high cash flow businesses with low capital expenditures. They may invest through buying a percentage of the business or providing services in exchange for equity, depending on the deal. For businesses not yet ready for acquisition, advice often includes removing the founder from advertising and content creation, as well as events and workshops, to make the company more investable. The transition from founder-led to enterprise company can take around two years. An example of successful investment was the sale of Gym Launch and Prestige Labs as a bundle, where the investors did not speak at their own events or webinars. If you're new to the podcast, consider checking out the author's book, $100,000,000 offers, for insights into business growth and potential future partnerships.
Improving a business for a successful sale: Identifying weaknesses and addressing them through hiring, product development, and customer experience improvements can lead to a successful business sale without seller financing or consult back period.
Preparing a business for a successful sale involves addressing potential issues and demonstrating growth potential to buyers. In this case, the company GymnLunch went through a 2-year process to make their business more attractive. They lacked coaching calls, trainings, and a diverse leadership team, which were identified as areas for improvement. To address these issues, they hired a new leadership team, built a cold call team, improved customer experience, onboarding process, and product suite, and proved out an enterprise product suite. By executing on these improvements, they were able to sell the business for a clean exit, without any seller financing, earn out, or consult back period. This process took 2 years and required significant effort, but ultimately led to a successful sale.
Focus on niches with recurring needs and offer personalized solutions: Identifying and catering to the recurring needs of a niche and offering consumable solutions can help build a strong foundation for a potential acquisition by increasing the value of the business through reliable Monthly Recurring Revenue (MRR) and creating a valuable business model.
To build a business model that can be attractive for acquisition, it's essential to focus on niches with recurring needs and create a personalized solution. Strategically, identifying the needs of a business and offering consumable solutions like accountability and community on a recurring basis can help build a reliable Monthly Recurring Revenue (MRR) and create a valuable business. For example, in the personal development niche, where entrepreneurs may not have significant revenue, offering tools and services like website creation, tax services, or marketing software on a recurring basis can help build a strong foundation for a potential acquisition. By focusing on the recurring needs of the niche and offering consumable solutions, businesses can increase their value and make themselves more attractive to potential buyers.
From local service to licensable model: Gym Launch's success story: Identifying a local business's needs and providing a licensable solution can lead to enterprise value and significant revenue. Predict needs, deliver results, and build a strong customer success team.
Identifying a specific, successful local business and showing them how to build a licensable model can be a profitable venture. This was exemplified by the success of "Gym Launch," which started as a service helping gyms one at a time, and evolved into a licensable model selling a turnkey acquisition system. The product suite included a front-end with customizable ads, pages, emails, meal plans, and a back-end for customer success and future revenue streams. When Gym Launch was sold, the majority of the revenue came from the front-end product. The success of this model hinges on providing specific solutions to businesses, predicting their needs, and consistently delivering results to build a strong customer success team and enterprise value.
Effective back-end strategies for long-term business success: Design a business model with recurring revenue streams, accountability services, effective recruitment, and CRM systems for long-term customer relationships.
Building a successful business involves more than just the initial sale. The speaker discusses acquiring a business centered around selling fitness programs, and the importance of a solid back-end strategy. This included recurring revenue streams such as selling new ads to combat ad fatigue, accountability services, and scaling the team through effective recruitment and CRM systems. The success of the front-end implementation was seen as a strong indicator for the back-end success. The business model was designed to be turnkey, with various elements becoming separate revenue streams. The focus was on creating a long-term deal with customers, rather than just a one-time sale.
