From $17m to $126.8m in revenue

A quick story before we jump in…

“You got to buy a ticket”

This is one of my all time favorite stories about entrepreneurs, business builders and high achievers — you have to create your own luck.

I read it 6-7 years ago and it still applies in everything I do.

This is from the late Sam Zell (real estate mogul):

“A story that I think is probably the most significant advice that I give young entrepreneurs. It’s the story about a Jewish man who lived in New York who started an appliance store in Brooklyn.

[He was] very successful, very observant.

He went to the synagogue every week, and life went on.

And then one day he went to the synagogue and after he finished his regular praying, he reached out to God and said 'God, I’ve never asked you for anything, I’ve always been traditional, I’ve always been observant, but I’ve really got a problem. And the problem is that the neighborhood is changing, the business is tanking, and God, I need to win the lottery.'

The next morning he gets up, checks the newspaper and he didn’t win. So the following Saturday he gets up, goes to the synagogue again and now business is worse. And he’s really getting worried again. He finishes regular prayers, reaches out to God again and says the whole bit: 'Business is worse, the creditors are calling every hour instead of once a week … I need to win the lottery, please. I’ve never asked you for anything.'

The next morning he gets up, looks at the newspaper… he didn’t win. So now it’s the third Saturday and now as he finishes his regular prayers he’s on his knees and he’s crying and [his business is] entering Chapter 11 proceedings. And he says 'God, I’ve got to win the lottery.' And at that point, from up high, comes a voice -- and it’s the voice of God — and He says 'Moishe, you’ve got to buy a ticket!'

I literally had a young entrepreneur in here ten days ago and I told him this story. And I said: 'You've got to find a direction, you've got to find where you can excel. What’s your skill set, how do you react to things, and how do you identify an opinion, a view?' “

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A lot of people want to own 100% of the business.

“I don’t want to give away equity.”

“I don’t want to share.”

“I don’t want to be a partner with somebody – I want to do this on my own.”

But my question..

If you had a rockstar team and you gave away half your profits.

But they are amazing at what they did.

Could you do twice as much?

Could you do 5 times as much? Or 10 times as much?

Of course.

With the right people and the right systems to manage those people.

You could do 100 times more than you can do on your own.

—

So who cares if you give up equity?

Who cares if you give up 80% of your equity and you’re a 20% piece of a larger machine..

You’re still doing more and having a fun time doing it than if you were to do it on your own.

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Twitter is the poor man's MBA, Ivy League School, whatever you want to call it.

One thing is education.

My personal favorite is the experience.

Take the guys who are building very large companies, investment firms, holding companies.

Sieva, Xavier, Cofounder Nik, Chris Powers, Eric Pacifici, M. Girdley, Rafael Quinn, Val Katayev, Andy Schornack, Sunny Desai, Ujwal Velagapudi, etc., etc. (not tagging them as it gets spammy.)

But here are the founders of multi-billion dollar companies, finance guys, world class analysts or investment professionals, presidents of NBA clubs, etc.

They are all there.

You can see how they think.

Trust me, someone who posts on Twitter doesn't hold back.

Their investors, partners, employees are watching and reading.

They only post things that make sense and provide value.

Your job is to learn and APPLY.

You see something, you learn something.

You then go and do it.

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Don’t forget… networking.

It gives you access to those right people who are DOING stuff.

Or the opposite, when they are following you and then reaching out introducing themselves.

Following them for a while, reading their written thoughts; then jumping on a call it looks like you've known them for a while.

Or vice versa, if they follow you and reach out to introduce themselves.

So, whatever you do or build – there are people watching what you do.

Get to know them, go from online to offline.

Travel if needed.

I’ve traveled to Sweden to meet them, 2 weeks later to London to meet them.

Few have traveled to Estonia to meet me.

Do what you gotta do to meet these people IRL…

Because whenever you need advice or a bit of help or guidance –  they will be your poor man's MBA.

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Few investment reminders for you to remind yourself:

Risk is the function of price (Howard Mark is an amazing investment thinker.)

A great business can be a bad investment at the wrong price; and a horrible business can be a great investment at the right price.

Looking at 100s of companies…

Very often it seems like it’s an excellent business, and must be a great investment, well, it really depends on the price you paid.

The huge part of successful holdco builders is respecting the price they pay.

Yes, there are a lot of great companies, but they want 10x Ebitda.

You probably shouldn’t pay that, because you’re not here to make 10% a year.

Because if you do, that means you need to grow the heck out of it, and operate it way better than they did to make your returns.

MOST people should not have that confidence, and probably do not have the ability to do that.

Here’s much better idea:

Respect your price multiples and continue moving forward to chase those great deals.

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Enterprise Value (EV) can be WIDELY different across industries!

Look at this bad boy for example.

Judges Scientific PLc, a UK listed holding company trading at a P/E ratio of 71X

2022 revenue $61.3M with adjusted pretax profit of $12.8M

($800M market cap, 100X return in 20 years)

They’re specializing in the design and production of scientific instruments.

Imagine if they add just $1Min pre-tax profit in one year… What that does to the value of the company is pretty crazy.

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How has been the week in my small holdco world?

Traditional business

Just finished a meeting with the founder of the business whose term-sheet we are working on.

VERY GOOD NEWS!

We are on the same page when it comes to valuation and everything.

Agricultural market leader in Estonia + smaller competitor in Finland + E-commerce store.

$4.5m + $500k + $500k

(Eventhough the revenue from E-commerce is small — $500k — it is very interesting because they already have orders from Japan, the US, and all over Europe. And all this is managed by 1 person.)

I will be sharing the details, structure and the rest once having a proper overview of everything.

Consumer loan company…

Growing… but… In June 2023, we turned off advertisement, since then everything has been organic.

You may be wondering why we stopped in the growth phase?

We do not have enough capital to finance the portfolio.

There is much more demand than we can support.

That being said…

If you’d like to become one of our investors (interest 12-14% per year), send me a message and I will share additional information.

I recorded a 41 second video in our office: https://modena.ee/et/mod-investor-private (it is in Estonian, but has subtitles) I added a comparison table with other bond offers on the Estonian market.

- - - -

Long term games with long term people.

We have had few purchase offers from local banks, we are not interested in selling. More interested in building a large company.

That being said, it would be great if you could get on board – supporting the growth – even if it’s a $10,000 ticket to start with.

Take care,

Mikk aga PrivatEquityGuy

Lastly,

Here is this week’s podcast episode with Rafael Quinn — a founder of Alternative Holdings.

Look at the growth they’ve gone through:

• 2020 $17.0m

• 2021 $44.1m

• 2022 $64.9m

• 2023 $126.8m

All this in a reasonably short period...

While spending tons of time with kids and family.

Today Rafael is 44 years old, but decades from now people will be Googling him to find out how he started this massive conglomerate.

He built a holding company from zero all the way to doing more than $100 million in revenue. (While having 1,000+ employees)

He shared the blueprint:

1. Reinvest as much as you can. Dividends are a killer because compounding really does work. My partner and I draw a salary that is built into Opex. We live good but not ostentatious lives. Our families are happy. Yet we still reinvest 80%+ of our yearly profits. We have been doing so for years.

2. Laser focus on cash production. You cannot reinvest profits. You need cash flow. Understand it, focus on it, and maximize it.

3. Always buy bigger. We wasted some time with smaller bolt-on style acquisitions. While most were accretive, we would have been better off hoarding cash and waiting for a larger transformative acquisition.

4. Focus on the CEO. A great CEO is your biggest asset. Find them, cultivate them, and then reinvest as much money into their operation as possible.

He didn't hold back, answering every question I had, even detailing how they make decisions and why they continue to focus on the US market.

(Links to Spotify Apple podcast, and YT can be found in the comment section below.)

Thanks a lot for following the journey.