$20m exit; can you predict it?

This week’s podcast guest Matthew Mathison sent me his book with a handwritten note.

A great gesture and an even better read.

(I have some wild guests coming on the podcast – I know, because by posting one episode each week, I got you covered until the end of May.

Still, I need a little favour from you:

Could you please give me recommendations of who you would like to see/listen to, because nothing is impossible, I have had 3 founders of public companies.)

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It seems there are an entire generation of people who no longer care about prestige, titles, work travel, fancy offices and lunches...

Instead, they're willing to put their ego aside and focus on what's important—cash flow, quality of life, and freedom.

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Feedback from a gentleman who has done MANY great deals to date, but a while ago started with his first one like most of us all.

So here's his take when it comes to the first deal:

1.  Don't worry about hitting a home run; getting the best economics possible

2.  Just make sure you get something, that way you build reputation

3.  You show you have high integrity, you're a prudent individual

4.  And make sure you make people money - it doesn't need to be a fortune but you're going to get a lot more shots on the goal in the future if you have the great outcome on the first one

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All you need to do is read and digest the information.

Wrong.

Last week I had a 1.5 hr meeting with a gentleman who works for a family office.

I learned a lot more about some of the structures, creative financing, and deal making than I did from many books. It’s important to do both.

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This same 1.5 hours went VERY fast.

Discussed all sorts of things.

One thing I asked was why more young folks in their late 20s early 30s don't leave and start their own companies where they invest and acquire companies.

"They get too comfortable and when after 4, 5 years you're making $200k + bonuses; it's hard to leave and take that risk. If you have a family, it's even harder"

He has this whole hunger to travel, talk to founders, invest, acquire companies because of his background (he has Eastern European roots).

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IMO picking one specific industry or skill is better than trying to catch trends.

Predicting where the next big opportunity or where the $10-20m exit will come from is hard -- it's more predictable to pick one thing and figure out how to win at that.

Where can you be a big fish in a small pond? Get momentum by winning in that small bond, then expand into the next bigger pond, and so on.

If you learn how to win at one thing, you’ll know how to win at your next thing.

If your current thing struggles, then learn and pivot, until you learn how/where to win.

Let go of knowing what the answer is ahead of time -- if you’re spreading yourself across multiple things, you’re just diluting yourself.

All this is VERY easy to say and write. VERY hard to do. That’s why you need to be able to ignore expectations of quick success. Just pick one thing and figure out how to win at that by taking small steps.

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How has been the week in the small holding company world?

Traditional company

The owner of the heavy equipment rental company called me.

The one with an EBITDA of $2 million per year.

He has never shared his desired "number," although he told me this during week.

Great news: On paper, what he wants is very doable, the only thing is that it would take 2 years longer to achieve.

Maybe I'm a little emotional about this deal because it could be 100% financed from real estate. The rest is financed by the seller and earnout.

And as the days go by, it seems more and more like they're totally fine with it.

That said, heading back to the drawing board.

Consumer loan company

A lot can change in 3-4 years...

In 2021 and 2022, I "begged" and convinced people to finance our loan portfolio at 13-14% interest rates. The company was losing money, but a few people still believed in us.

Today we are profitable, have thousands of customers, and have access to more debt that we could use at 8-10% interest rates.

The big lesson from my own experience is to just keep going and always find the few people who will bet on you in the very early days.

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This week’s podcast:

Quick note:

Two listeners of the Holdco Builders podcast - one from the US, the other from the UK - ended up buying a company together.

They met through the podcast.

How cool is that?!

So, here is my conversation with a former hedge fund manager who found the ultimate holdco model.

• No capital

• No risk

• Pure upside

(Not so simple, but definitely an interesting model.)

The old-school merchant bank playbook turned into a holding company of wonderful businesses.

Enjoy.

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

That’s all for today.

Thanks for reading and talk to you again next week.

Take care,

PrivateEquityGuy / Mikk Markus