$5m turned into $350m+

A quick note before we jump in…

You need an MBA and 3-5 years of experience to acquire a $579k+ EBITDA "boring" business.

WRONG.

Instead:

You can partner up with people who have all the experience in your niche.

You need that one business owner who is willing to sell his life's work at a deep discount. (You buying $10 bills for $3)

You need one person who believes in you, backs you.

There are no rules – go find these people.

Additional comment: This works for every field and industry. It comes down to people and you finding them.

Then you selling them your vision.

- - - -

Had a Zoom call to a family office in the US.

Billions and billions of AUM. Of which $200-500m is invested in PE funds. $30-50m tickets.

He showed me one particular fund which invests in the dental or vet industry (forgot which it was). They followed a roll-up strategy and turned a $25m investment into $300m+ in a reasonably short period of time.

The first few years were slower: $5 million -> $8 million -> $11 million. And from there, whoop. $30m -> $60m -> $170m -> $350m+

$100m+ EBITDA

All through acquisition.

The IRR percentage is in the 80s.

Simply remarkable.

Now the funnier part:

When I asked if they would ever invest in Europe (family office level?

He pretty much said there is no need for that. They have a small team and do not have enough information and knowledge about the European market.

100% understandable.

Finishing the sentence, he added that he knows some people and funds who do.

Overall a very good call. A great investor and an even better person. Very generous, both time wise, information wise.

- - - -

The more I talk to boring business owners in their 50s. 60s 70s…

The more I found this ONE thing to be true…

This almost 99% of the time:

Very rare if they don't have 3-4 houses, apartments or vacation properties across the country.

Not for rent, but only for themselves and their lovely families.

And I'm not talking about zillionaires... I'm talking about very simple folks who have been running the same "boring" niche business for the last 20-25 years.

Sometimes even longer.

Be it retail stores,

• Recycling

• Agriculture,

• Wholesales,

• Construction,

• Manufacturing.

Their businesses are profitable, earning anywhere from $500,000 to $3 million a year. Net profit. Varies a little by industry, a little by year. One for sure, 14 out of 15 never had an unprofitable year. Regardless of the economic situation.

And this is based on my little statistics – talked to more than 600 of them; met 75 of them.

This has made me realize: why gamble when you can win for sure?

Why come up with something new when there are many things that already work (only to be improved. Often not even that.).

The world is full of flashy-flashy, while old money is very quiet.

They want “peace and quiet”, as they say. They are tired of traveling because they have circled the globe three times. They just want to go hunting and fishing.

And play golf or tennis. Or just read and spend time with the children and grandchildren.

That's all fine and dandy, but what does that have to do with you?

Again, they have enough. Their kids have enough.

(Plus, kids are NOT interested in running their dad's niche manufacturing business. They're often too comfortable for that. They're not hungry.)

This is a reminder to go and find these people, meet them and talk to them, be kind, be creative, and see if they are willing to sell their business for you.

- -

Take Ian for example (I caught him while he was fishing):

Outside of business he used to spend his free time rodeo bull riding. He said he regretted it. Not an easy sport for the body but when he actually did it - "best time ever!!"

Any life advice?!

1. Mikk, remember. Drugs are crap, don't even try them.

2. Don't do rodeo and don't spend too much money on sports in general

3. Be smart with your money

4. They can't make land anymore, so think about it, the value of the land I live on has increased 100 times, it made me very rich (he laughed so hard we didn't see the next fish for 45 minutes haha)

Oh, and a fun fact Ian told me: Rodeo spots in bars are for p*ssies, you whistle and it stops, but not in real life.

- - - -

Although I don't consider myself the smartest investor.

I try to compete in markets where there is not much competition.

Secondly, I try to think and act not thinking about year 2027, but more so thinking about years 2032 and 2033.

• Farms still need ventilation systems 8-9 years from now.

• Same with gloves, try welding with bare hands — impossible!

Nothing sexy, but all this will be needed in the future.

That's why I like how Mr. Bezos has put it:

- - - -

16 hot takes from the journey of building a portfolio of traditional $2-10 million revenue businesses:

(All the things I wish I knew before I started 2 years ago)

1. A person with average intelligence can do it. Start with who you are. Don’t count yourself out. You can figure things out. Your new daily mantra: “I have the ability to figure things out.”

2. Everyone wants to acquire $500k+ cash-flow businesses. IRL it's very hard. How many people you know have bought at least one?

At the same time, don't believe your own mind which says, “This is what other people do.” No, no, no, my friend, that person is you and you can do it as well.

3. Forget the industry. Finding a company that has been established and consistently profitable for a number of years. Everything else. Garbage.

4. Meet your competitors to see who you compete with. At 27, I went to university in Switzerland to see the future of banking, finance, PE, hedge fund and family offices.

After spending months with them – studying in class, hiking for hours, partying until the early hours of the morning. I realized, "Yes, I can compete with them." And this gave me belief.

They are smart, but also lazy. They are focused but often need a smoke break. They work hard but you can outwork them. They are ambitious, but so are you.

5. No VC, no real estate. Pick businesses where profits and cash-flow are the main driver of value.

6. Being street smart will take you further than you can imagine. Cold calling. Being likable.

General soft skill, listening more than talking, asking great questions. Doing a follow up. Many don't want to do it, and most don’t know how to do it.

7. It's a numbers game. You need to talk to 100 average companies to find 4-5 great companies.

8. The goal is to decentralize your operations. Hire very smart people and leave them alone, let them get on with it.

9. Private market > public market. Because there is significantly less arbitrage… At the end of the day, it's all about how you can buy $10 million for $3 million.

10. VC is sexy; but old-school folks who run a cogs and gears manufacturing biz in their 50s are much happier. They make money every single day. Days become weeks. Weeks become months and years.

95% of them are seriously happy with zero debt and not much stress. Time for a wife, time for kids, time for hobbies, time to travel. No Forbes but they could care less.

11. Folks in their 50s, 60s, 70s – Emails are good. Phone calls are better. IRL meetings are the best. You can keep sending emails and not achieving much. You pick up the phone and get the job done. Most every time I start writing an email, I delete it all and give them a call.

Even better if you can meet with them.

12. An hour-long meeting that will last 2-3 hours. Take time and listen. This is their life's work. Very rarely does anyone go there and appreciate the work they’ve done. It’s their baby. It’s the company they have built. Be that person who listens.

13. Without brokers, it takes years. Getting a person who does not want to sell their business to actually sell it, takes ages. You really have to enjoy the journey. If it's a great business, you play by their rules.

14. Soft-skills. Forget the Excel and EBITDA. They barely use CRM. Talk in plain language: "How much money did you make last year?"

15. You get to practice negotiations, making offers. During the first call, the owner asked for $4 million. I said I'm not that kind of buyer. While it's a great business, he's been sharing stories from his personal life. He wants to sell the business. Today, our range is $1.5 million. All through difficult conversations and meetings.

16. Buy the ticket, take the chance. Investor DM replied to me on Tuesday: "Btw are you in London tomorrow?" Me: "Yes, I am." I bought a ticket and went to London. He is very keen to invest in our next deal.

After all, boring companies aren't so boring.

I hope this got you thinking.

- - - -

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

Traditional business

I had a very nice call with the owner of this company yesterday.

The terms we discussed are the following:

Price (without real-estate): $4 to $4.5M (Inventory** + 3 x free cash flow)

$1M payment on the day when signing the deal.

The rest will be financed by the seller over the next 5 years.

(I do the calculations at a price of $4.25m)

4.25m - 1m = 3.25m       3.25 / 5 years = $650,000 per year

• 2025. year $650,000

• 2026. year $650,000

• 2027. year $650,000

• 2028. year $650,000

• 2029. year $650,000

**Important note number 1: The inventory (purchase price; NOT market value) is valued at $3 million. He said he acquired so much because he didn't want to keep the money in the bank. On average, he needs $1-1.5 million to be prepared for the next 2-3 months.

*Important note number 2: Management will remain and the owner will continue to run the business. One thing we will do, get much more aggressive on the selling side. They have been relying on old customers for a long time, it's time to improve that.

The $1m payment on the day when signing a deal – to get the down payment even lower, I will talk to the bank. Ideally targeting this to be $300-400k. I hope it’s doable.

Consumer loan company

Few DD are going on with larger bonds tickets:

• One is interested investing $300,000

• The other is a local fund, they’re interested in $1,000,000 investment.

On top of that, there is a HNWI who has been our bond investor for some time and now he showed interested in equity investment worth $1,000,000

Take care,

Mikk Markus aka PrivatEquityGuy

Here is this week’s podcast episode with Priit Patrael from Conversion-Ninja, where I am also a proud investor.

Why invest in an agency? My goal over the years is to acquire many great traditional companies with a $2 million to $10 million revenue. Seeing 100s of those businesses, and when it comes to growing those businesses 20%+ a year — referrals part is great but the biggest growth will come from outbound sales.

Priit is not just a marketer, a SEO and funnels guy; he has built and run several “boring” manufacturing companies and other traditional businesses, he knows both sides of the business.

Looking for growth? Conversion-Ninja dot com

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

Thanks a lot for following the journey