$36m with 2% margin; $3.7m with 26% margin

A quick note before we jump in…

The worst thing in life is to get older and realize you got good at the wrong thing.

You get one chance on this planet.

If you optimize your life ONLY for your career.

• What about your health?

• What about happiness?

• What about love?

There are many high-achievers who are out of shape, and in an unhappy relationship with their wife and kids.

Imo they optimized for the wrong thing.

Nothing worse in life than getting good at the wrong thing.

- - - -

We need more Jimmys because they and their businesses run the world.

In April 2016, I decided to move to Australia to start a business. I had built teams in a network marketing company called Vemma. But after 18 months of building a team of a few hundred people, the company was shut down by the FTC in the US. I was 23, single, with no debt or responsibilities, ready to explore the world.

On the flight from Singapore to Melbourne I had googled the biggest Aussie entrepreneurs - James Packer (CROWN Casino), Mike Cannon-Brookes (Atlassian), Lindsay Fox (Fox trucking), Anthony Pratt (packaging and paper company) etc. I was curious to see where such people live, deep down hoping to meet some of them during their afternoon walks. Landed in Melbourne, headed for a walk in the suburb of Toorak (Australia's Bel Air)...

Magic happened!

I didn't meet the Packers, Cannons and Foxes, but I did meet the Smorgons and Abercrombies (Andrew Abercrombie, on the pic). Having a conversation with them… It isn’t so much about which opportunity someone would pursue - could be finance, manufacturing, real estate, insurance - but much more about how long that person would stick with it.

It’s 2024, and looking back on these conversations, they have been very important conversations in my life. I really started to understand what they had to say 4-5 years ago. More importantly, act on it 3 years ago, at age 27.

I’ve been incredibly lucky as I’ve talked with many traditional business owners. The reason they were able to “make it” is only because they stuck to one thing or one business model for a long time. Whoever started selling ventilation systems at the end of 1990 - he’s still doing it. Who started furnishing cattle farms in the early 2000s, he’s still doing it. Those who started writing software 25 years ago are still doing it today. What they started doing in their 20s and 30s, they are still doing in their 50s, 60s, and 70s. Even if they weren't the smartest when they started, they did one very smart thing, they kept going. They often don't know the latest trends when you talk to them - yes, they use Gmail and probably read the same news we do. But when it comes to website conversion rates, upsells, downsells and cross-sells. They don't know these sexy terms, they focus on the bigger picture while doing things on autopilot. That being said, when it comes to their industry, they can see through walls. They know absolutely everything and everyone. Plus, they've seen three or four market cycles and recessions.

The reason I am writing this is because many of us are not aware of all this – they are constantly changing companies, professions and even industries. Not allowing knowledge, expertise and luck to combine and really happen. So if you've been in business for years and you're struggling and frustrated and you feel like it's gotten boring; no growth; instead I should do it; I should do this…I want you to think about Jimmy. Jimmy has been selling cooling systems for large warehouses for the past 28 years. There are hundreds of different parts and pieces in the product range. Jimmy knows every detail by heart... and not only that, Jimmy knows by heart the 12-digit code on the back of each product. Not because he studied it, but because he has seen and written down that 12-digit product code for so many times.

Looking back on my 20s. Time flies and life is short.

So… less jumping and switching. And more commitment and focus.

In the end, we need more Jimmys.

- - - -

The late 20s early 30s have been the hardest.

Having this endless energy, trying to crush it at work.

At the same time finding it extremely hard to balance it with everything else.

The whole period is very much a journey to find out who you are.

- - - -

Small businesses seem to be much more efficient than large ones.

Speaking of small niche manufacturing companies versus larger ones.

That's about the ones I've seen and talked with.

Looking at two companies, both in the same niche manufacturing space.

Company A has 252 employees, $36 million in revenue, and $666,000 in net profit (2% margin).

Company B has 29 employees, $3.7 million in revenue, and $970,000 in net profit (26% margin).

The former could have higher enterprise value, but the smaller one is a great cash cow for the owner.

That being said, the owner of Company B called me yesterday. 

We have met 3-4 times and communicated for months. He said it would take a few additional weeks to value the business because of some of the ongoing projects.

They hired consultants. (I know that can be "dangerous" and so does the founder, even though he said his expectations aren’t very high. We'll see.)

• He is interested in selling the majority of the company.

• The good news: there is an extremely motivated operator. A lady in her 30s who is also the co-founder of this company.

• The gentleman told me that the lady is so passionate about business that the company is a God to her.

• They just moved to a brand new production facility (located in Estonia), but it has a great brand and exports 95% of its production to Sweden, Germany, France and soon to South Korea.

• They sell a premium product; according to the founder, they always aim for 20% net profit, but with different products they achieve 25% net profit.

• They sell to wealthy clients.

- - - -

Another very boring niche business…

Spoke to a gentleman who runs a manufacturing company and makes millions.

Doing what?

Sandpaper.

Our conversation was very brief as he was on vacation, but it's fascinating to see the types of businesses someone runs.

We have another call at the end of March.

- - - -

Those boring business owners in the 60s are the best.

Had a meeting with one gentleman.

He is 66 years old and managed the same company for 30 years.

• 2021   rev $5.6M      profit $609k

• 2022         rev $5.2M      profit $502k

What's next for you?

“I just want peace and silence”.

For the last 6 years I've made 5 trips a year. Each 3-4 weeks.

I visited every state in the US multiple times. All of Latin America, except Panama, I've seen it all. I used to love traveling...

Me: When is your next trip?

Well, I’m supposed to be in New Zealand at the moment but I canceled all my future travel.

I just  want to do three things:

• read and study history,

• spend time with my wife,

• go to the sauna with the boys every Tuesday evening.

That's when I'm happiest.

Even better, he is interested in selling the business.

Here are more details:

• Wholesale trade company

• Revenue $5.5m

• $500k in profit (been like this for the last 6-7 years)

• management team in place, owner very passive

• Paid $250k/year in dividends for the last 6-7 years

• $1.4m worth of real estate with no debt

The company has $3 million worth of stock at any given time.

*Travels A LOT and all expenses are covered by the company, so the profit margin is even higher.

*Last year he had 5 trips, each for almost a month.

*The company has a management team in place, when not traveling he visits the office once a week.

I made him a very low ball offer this week to see where he is with everything. Offered $2.5m to test the water.

He said it was too low, but we talked for another 45 minutes – he said he’s thinking for 2-3 weeks and then coming back to me with his expectations. We'll see, I'll keep you posted.

- - - -

Everybody’s favorite book is how to win friends and influence people.

When in reality it should be how to win friends and influence THE right people.

- - - -

As I mentioned books..

I’m a firm believer that reading 1 to 2 hours a day puts in the top .00001% in the world.

Two things came to mind…

First, most people don’t read.

Second, imagine being .00001% in the world.

I guess that's where the real secret lies.

- - - -

How has been the week in the small holdco world?

Traditional business

New calls for new companies. More conversations with business owners.

I found that the pipeline must be much better, and longer. When approaching business owners, they rarely sell their business unless they are motivated to do so.

Consumer loan business

Interestingly, I have had a long conversation with one investor for 2 months now. During the call this week, he said he could invest up to $300,000 in our bonds. Let's see how it goes.

January was like this:

Numbers for February 2024:

Portfolio is around $3,700,000

Revenue (estimated):

• Factoring – $10,500

• Credit – $71,000

• Payment services – $410

• Fines / late payments – $42,000

• All together – $83,910

That is all for this week.

Take care,

Mikk Markus aka PrivatEquityGuy

Lastly,

If you are interested in investing in our bonds. Book a call, or reply this email.

These are the terms:

We have 77 investors so far, with investment amounts ranging from $1,000 to $350,000.

We have been doing this for 3+ years, many who started with smaller amounts have invested more over time.

Today while writing this newsletter an investor called me with a very happy voice.

"Hey Mikk! I have exciting news for you."

Me: I'm a big ear, tell me...

"Yesterday I received the first interest payment of $312.5; you actually did what you promised. I'm about to invest more."

(He invested $10,000 in our bonds short 3 months ago.)

What a great call during the weekend.

Long term games with long term people.

Thanks a lot for following the journey.