$187m in rev and $119m EBITDA

An important note before we dive in…

Too many folks sleepwalk through life.

Even if their second car is a Porsche 911, they have 3 kids and make $250k+ a year.

Mega post on how NOT to be the one…

Because it’s not whether you follow your passion or not.

• It's not about the amount of $$$ you make….

• It's not that you're out of shape or have 6-pack abs….

• It’s not that you take 3-4 family trips a year vs doing none…

None of that…

Actually it’s quite the opposite, and something we can all do.

It ALL comes down to picking up small tiny wins in whatever you do.

You know that feeling when something goes really well, you almost like to surprise yourself.

It makes you so happy that you want to listen to loud music while driving and feel like it's time to celebrate.

The feeling you post on FB or Insta and Likes start coming in.

These small victories allow you to feel it — the power of "success events".

None of the grand things I mentioned earlier in this post matter if you don't get those little dopamine hits from small accomplishments.

It's very hard to be happy and excited when nothing really happens and you pretty much lose all the time (a bit harsh, but you get the idea).

So how to NOT to sleepwalk through life and how to achieve small victories?

I’ve seen it best when I’m setting small goals for myself:

• Daily tweets

• Posting a podcast for people to listen

• Sending weekly newsletter

• Raising additional round of debt for our company (could be as low as $10,000; the amount doesn't matter)

• Getting another 100 people to follow my journey on Twitter

You see, this allows me to win almost every week, sometimes even daily.

This makes it much easier for me to chase bigger long-term goals and being patient acquiring traditional $1-3mm EBITDA companies.

Because I get that dopamine hit so often that it doesn't matter if it takes a year or two longer to reach a BIG goal.

These are all work-related goals, but this is who I am and this is what drives me.

You have to find what drives you.

Yes, you can keep winning all the time, you just need to set right very short-term goals and achieve them like clockwork.

You trick your brain by doing so.

Big wins take longer, and achieving those comes down to your attitude and tolerance for instant gratification.

I believe all this is to be a recipe of how NOT to sleepwalk through life.

Doing what I've described makes life so much fun and goal setting, and eventually achieving these much easier.

Most importantly, you’re constantly happy—which your wife, kids and family appreciate more than anything else.

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Last week I talked to a very smart girl from Harvard Business School, the ETA (Entrepreneurship Through Acquisition) class.

Again, VERY smart!

Wants to keep working in a hedge fund for another 2-3 years and then acquire a "boring" traditional business (probably in the $1mm EBITDA range).

I said it was a great plan, BUT after 2-3 years working in a fancy office at a hedge fund, and BEFORE acquiring that traditional company, she should do another year or two in a messy manufacturing building.

Working at a hedge fund vs. chasing that sub-$1M EBITDA traditional business and then running it are two completely different animals.

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Talking to the founder of this shipping company 1-2x a year:

25 years in the business.

Year 2023:

• They invested heavily and bought 6 new ships.

• Revenue $187.4M

• EBITDA $119.4M

• Net profit  $57.3M

There's a lot of money in shipping…

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There is a Swedish holdco which trades at $12b and its business concept is to get rid of high-volume products and be as niched down as possible.

The best CEO they ever had lost 30% of the revenue but increased margins.

Their sole focus is on increasing margins, not sales.

-

They even said he should be the CEO of the year 😃

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LOSER mentality when growing traditional businesses:

Opening the door and waiting for a business to come through.

A WINNER and growth mentality when growing the same business:

Hire the top sales folks, send them out and tell them to bring the business to the store.

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A "virtuous cycle" in the world of small biz holdco:

1. acquiring $1-3mm EBITDA companies to generate cash flow;

2. reinvesting cash flow into more acquisitions and R&D;

3. add organic growth + add-on deals;

4. repeat

This strategy can be the cornerstone of your holdco’s performance and high IRR over a 10-15 year journey.

However...

At the end of the day, it all starts with making your first investment or acquisition.

- - - -

Early days, patience and first 3 deals averaging 10x multiple on invested capital.

(The latter being the ONLY reason you know him today anyway.)

- - - -

1. Do what you said yourself you were going to do

2. Tell other what you're building and working on

Repeat 1. and 2.

If you do it long enough, it shows that you're committed and serious about something, and brave enough to say it out loud.

As a result:

The right people will show up to help and support: send you leads, deals, make intros to 10/10 folks from the industry, and even commit capital if the terms are right.

- - - -

If you ever think of acquiring two, three or more companies…

Consider this mini-holdco approach:

Operate your main holdco as a collection of "mini-holdcos"; effectively scaling without spinning off divisions.

Each group manager oversees several units, each with a business manager responsible for profit growth and return on capital.

This structure allows you to scale without limits within its decentralized model. By dividing responsibilities between internal "mini-holdcos", it allows you to compound without requiring external restructuring.

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How has been the week in the small private equity world?

Traditional businesses

You never know if and when they want to sell their "boring" $1-3mm EBITDA business…

So... introduce yourself, ask questions, get to know them, try to meet them, share your plan, share what you're going to do.

There's nothing worse than them not knowing you even exist.

That said…

The same systematic and consistent work on building relationships with traditional business owners lead to Step 2:

I am so excited to sign a non-disclosure agreement this week and begin the DD process at a profitable brick-and-mortar company.

It gets even better — the owners are in their 50s; and the company's EBITDA is about $2mm.

I keep you posted!

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This week’s podcast:

Kjael Skaalerud of Skaling Ventures

“Selling B2B SaaS is great, but owning assets is better - that's why I went and built Skaling Ventures.”

A portfolio of profitable niche vertical B2B SaaS businesses:

• $1-3M with some ARR growth (10%)

• excellent logo retention (sub 95%)

• limited go-to-market (GTM) knowledge/investment,

• fragmented competition,

• and technical founders.

We discussed how he found the best deal among the 300 deals he looked at.

How he structures deals and what his game plan is 90 days after the acquisition.

How 75% of private equity buyouts are add-ons – and how he does the same.

And much more.

Btw, this is very important:

As an investor and entrepreneur you get to choose the game you play.

And playing on the right market is MORE important than your skill set.

That is why Kjael went from selling B2B Saas (CRM) to buying his first business...

Because if you combine his previously learned sales skills with B2B Saas product knowledge, the returns of this single decision of becoming a capital allocator are going to be wild for Kjael.

Here are the links to Spotify, YouTube and Apple Podcast.

That’s all for today.

Have a great rest of your week and thanks a lot for following the journey.

Take care,

Mikk Markus / PrivatEquityGuy