$200 mill per year and 39% IRR

Just a quick book recommendation before we dive in…

• Leadership

• Recruitment

• Managing people

The 3 very important skills in operating and growing a business.

In terms of theory, the three absolute best books on these skills are:

• “First, Break All The Rules”

• “Topgrading by Bradford D. Smart”

• The Advantage by  Patrick Lencioni

All these books can take 8-10 hours, but MOST people won’t do it, most people don't read anything.

Don’t be like most people:)

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ITW is a fascinating company in the manufacturing space.

Produces engineered fasteners components, equipment and consumable systems, and specialty products

$14.1b in revenue with 20% net margins.

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I recently got advice from a serial acquirer that there is a lot more value-creation in fixing a $16-25 million revenue business than growing and doubling a business which does $2-10 million in revenue.

He said from his experience that it is easier to fix an inefficient larger business than to simply grow a very small one.

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My gf sent me this the otherday while I was in an office building the deal-flow of traditional $2-10m niche companies, talking to investors and clients.

Gf is happy, kiddo is happy, I am happy.

Life is good.

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How can you compete with someone who loves to look at deals every day?

Someone who can't wait to wake up and work on specific deals to find ways to improve companies post-acquisition?

And if for you it's a job where you just check a box.

That would be an easy answer…

I wouldn't want to compete with the person who is passionate and hungry for the next deal and the industry behind it.

Period.

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The good news:

It doesn't matter if it's a deal making or something else...

If you love something, you're a thousand times more likely to do well.

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95% of business folks still hate cold calling and door knocking and prefer people to come to them.

That's the nature of it.

Let me tell you, in the internet business world you can easily survive without it…

But in the world of very boring, very traditional businesses, you’re leaving so much money on the table when you or your team is not doing it.

Take a B2B space, selling gloves or other protective equipment — you can make so much money just by calling every manufacturing company in your city.

Just call them, introduce yourself, tell your story, offer any type of value (like sending free products - be creative with your packaging), do whatever it takes.

Remember, the goal is not to sell, but to get them to know you.

5 calls a day… for next year… you end up with a list of ca 1,500 businesses 

The first year is hard, then they already recognize you.

Add birthdays and anniversaries and some chit-chat follow up calls and you have 5-6 conversations a year.

Many of them will end up buying from you.

Now just imagine if they become repeat customers?

Pretty great return of investment… sorry, return of cold-call, isn’t it?

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The more I talk to people who went out, raised capital and then built a portfolio of companies.

The more it comes down to THINKING in years, and ruthlessly ACTING in days…without losing enthusiasm.

That is just what it takes.

What’s probably the best part is that the REAL work, the stress and execution, it all starts post-acquisition.

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I loved playing volleyball until I realized I could make a lot more $$$ playing online poker.

Then came poker…

I used to enjoy playing poker until I realized I could never be 0.001% and I could earn way more by investing in other (better) players.

Then came investing in poker players…

I loved investing in other poker players until I got to know the concept of selling products and services.

Then came the sales...

I used to love selling B2C telecom services until I realized there are people selling everything B2B and making twice as much as I do.

Then came B2B sales in the field of payment services.

I used to love selling payment services to ecommerce stores until I realized that there are people who acquire businesses for 5x earnings;  improve the business within 2-4 years; and sell it for 7-10 times earnings.

Keep learning, follow your curiosity and who knows where you might end up.

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A very rare and invaluable skill in the SME acquisition space:

Identifying high quality businesses

The more I learn and talk to very smart folks, the more I realize how much there is to learn.

The good news:

There are so many generous people out there with decades of experience willing to help.

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If you work hard, simply focus on the right companies with fair valuations, take care of your people, make them successful along the way, constantly look to learn and improve, don't complicate life in the most “common-sense” way possible – over time, both IRR and ROE tend to take care of themselves and go in the right direction.

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

Consumer loan company

A local company is interested in acquiring the company - since it's summer, things are taking longer than usual. We are in the DD phase.

I will keep you posted on how it goes.

Take care,

Mikk Markus / PrivatEquityGuy

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This week’s podcast:

Had a 45-min conversation with a gentleman who runs a holding company which does more than $200m in revenue.

• started in 2018

• portfolio of 10+ companies (all majority ownership!!)

• 39% IRR for majority investments over the last 6 years

Surprisingly, he said, there is not much competition for the deals they look at.

"What we are looking at is too big for an individual or too small for private equity, institutions"

If you care about running extremely profitable niche companies, a must listen!

Links to Spotify, Apple Podcast and YouTube.

Thanks a lot for following the journey.