From $6.5m to $84m in five years

Just a quick note before we dive in…

Some time ago we spent an afternoon on a boat in Oslo, Norway with a family that is doing well in the music business.

A yacht 5x bigger parked next to us.

A guy on our boat:

“Oh, I know this guy, he’s the owner of a plumbing company.”

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There's a traditional company I wanted to invest in/acquire 1.5 years ago that had $6.8 million in revenue and $605,000 in free cash flow.

Pharmaceutical goods space.

Since then, a young CEO came in, and in 2024 they will generate ca $8.2 million in revenue and $1.2 million in free cash flow.

Not crazy growth, but if you can acquire a company like this at 5-6x earnings, double the earnings in 2 years, and sell for 6-7x earnings, that's a very attractive return.

Nice to see that deals like this exist.

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The reason why I didn’t invest??

I didn't know what I know now… and I couldn't raise capital…

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“Oh, poor you, it’s a blue sky and 27 degrees, and you have to work on Sunday.”

Words from my older sister while sitting on the balcony on the weekend…

My response:

The philosophy of living your best life today and later in life is to surround yourself ONLY with the things you are most curious about.

And being an investor and business acquirer is as good as it gets.

Whether it's Sunday, Tuesday, or the early morning of Midsummer day…

Eventually, you want to be an old-man in your 70s who still wants to work 5-6 hours every day.

Sounds extreme??

But what else do you do when you're not working…

I mean, you have your wife, kids, grandkids, a couple of mates, hobbies and daily 10-15k steps to stay healthy.

After all this, you still have plently of free time after that, so spending it working – investing, acquiring and managing portfolio companies is a 10/10 way to do it.

A true recipe for happiness… at least that's how I feel about "having to work on Sunday".

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I’d add here two lessons David Senra from Founders Podcast learned from a lunch he had with Sam Zell. 

1. Go for freedom

Freedom allows you to control what you work on. 

If you control what you work on then you can work on what you love. 

If you love it you will do it for a long time. 

If you do it for a long time you will get really good at it. 

Money will come as a result. 

2. If you love what you do the only exit strategy is death

Sam will be doing deals, building businesses, and sharing everything he learned until he dies.

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A daily game-plan to get better as a small business investor & operator:

I genuinely follow the exact same plan (because of these 8 reasons mentioned below)…

And that game-plan is this:

Keep doing the work – keep talking to business owners, keep meeting with clients, keep talking to investors, keep selling and making offers each and every day. Be curious and chill and ask others why they make such investments and what makes this or that company a good or a bad. Keep learning, read and soak up all the knowledge you can, keep an open mind when someone shares their experience and advice. Not the most original and sexy advice, granted. And it doesn’t even matter if you’ve made 1, 12 or 44 investments. Keep showing up, keep doing what you said you were going to do. And just stay in the game – even if you don't have any results yet. Along the way, you'll develop skills, experience and a network that will be valuable for future partners, employees and transactions.

There are many reasons for this:

1. You get better at finding and recognizing really good companies.

2. You will gain a better understanding of different industries.

3. You will become a better communicator and negotiator.

4. You get better at pitching ideas, expressing your thoughts, selling and raising capital.

5. Ideally, you make some moves that lead to opportunities you never knew existed.

6. If you do the work, in my experience, partners, companies, and clients are much more likely to work with you.

7. Yes, again, I know this is all very basic, common sense advice, but the more you learn, the more you see that people run the best teams, investment firms, companies, are clear thinkers and have clear minds.

8. Finally, you'll have a better understanding of your strengths so you can put more (ALL!) of your energy into your strengths and work with people who are 10/10 at what you're not good at. This leads to a dream team.

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All this requires muting the world around you and then building your own.

Narrow your focus to your most important dreams and tune out everything else.

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Meeting and speaking with many business owners who run traditional businesses in very boring (but profitable) industries.

They live their best life.

• No dramas

• No problems

• No fancy lifestyle

• No confusing schemes

• No public presence or interviews

They eat what they kill and have been doing that for the last 20+ years.

Responsible, honest, hard-working people just work, take care of their family and employees, pay taxes and sleep like a baby at night.

They just live and enjoy life.

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One of the biggest lessons learned after making 1,000+ cold calls to business owners asking them if they are interested in selling their business:

Use pauses. Lots of pauses.

The more the better.

It's often an unexpected call and you really made them think.

After each question, be silent, and every time he finishes a sentence, be silent again.

Have trouble keeping quiet and want to fill the quiet moments with talking?

Try to count to three in your mind.

They often give you very valuable information about what they think about their company, the overall market, and opportunities. Sometimes even their family.

But only if you let them talk.

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

Consumer loan company

I lost about $150,000 in debt investments because I completely forgot to follow up.

In May the gentleman said he was very interested and would let me know when he had the liquidity.

I didn't want to bother him in the summer, so no follow up for 6-8 weeks...

Today, I sent a follow up and he said he invested in another company.

"Mikk, you weren't following up so I thought you weren't interested..."

Lesson learned:

In the future, it's better to over communicate and not wait for things to just happen.

Take care,

Mikk Markus / PrivatEquityGuy

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This week’s podcast:

Follow your curiosity, be a student of the game of private company acquisition and you'll eventually attract like-minded people.

This is so awesome and very kind of the listener.

That said…

Imagine starting a holding company in 2018 and one of your portfolio companies has already grown from $6.5 million to $84 million in revenue.

And not only that, you have 8 more companies in your portfolio.

Here is my short 24-minute research of Chris Rolls who went through the journey of building and selling his business, then starting a private equity fund, and then starting a permanent holding company.

Fascinating lessons, I hope you enjoy listening as much as I enjoyed doing the research.

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

Just finished my evening walk where I decided to listen to this episode all over again.

I am still amazed at what a massive company one can build in a short 6 years if you are dialed in, focused and reinvesting most of your free cash flow.

This also reminded me of a quote from Naval — “The really smart thinkers are clear thinkers. They understand the basics at a very, very fundamental level.”

Doing research on Chris provided a great insight into the importance of being a clear thinker.

Thanks a lot for following the journey.