Boring biz $36m in revenue and $6mm in net income

A quick note before we dive in…

Treat each day seriously, you don’t know what tomorrow holds.

There are changes that can be made and must be made, literally at every day in your life, there are cross roads every single day, because that’s the way you think about life, you never know what’s gonna happen tomorrow. So treat each day seriously, it’s all about the fun as well, but being serious too, there is a balance for that - Be serious and fun.

Think about Kevin Hart, the comedian, who is doing his show. The show part is all about fun and jokes, but the other part of the show is about money, finance — these are serious things. You want your life to be the same.

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Second, an even more important note that I will never forget:

As an old man in the construction business told me:

The real magic of staying in one industry starts to happen 10+ years later.

So hang around.

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Wanna see what real product-market-fit and tailwind looks like in NOT so small business*:

• 2021      $316k in rev -$57k net loss

• 2022      $6.9m in rev $2.03m net profit

• 2023       $30.4m in rev $8.89m net profit

The CEO said they will generate $100M in revenue in 2027

*Produces autonomous and mobile surveillance and anti drone systems

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Talked to a business builder and serial acquirer.

$200m in revenue and 5+ acquisitions

"Founder doesn’t talk about luck and market timing enough. IMO there is A LOT of luck involved.

I know many top 0.001% performers, but they chose the wrong product in the wrong market. And they failed.

At the same time, there are less smart people who make $100,000 to 200,000 a day with their business in the first year. They got lucky as they chose the winning product."

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The clearest way to know you made a right or wrong decision when it comes to investing and acquiring companies:

1. If you make a mistake, you don’t get any returns, which means you destroyed it.

2. And in order to find out if and to what extent you were right in your thesis, ask yourself:

Did the money grow?

Did you create value?

Did you make people's lives better?

To make sure compound interest and capital formation happen, you must be right and have good ideas for a long period of time.

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Business plans are over hyped and I don't think entrepreneurs need to plan too much.

What they do is build things out of necessity and instinct WITH the desire to push something forward.

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Totally forgot myself when reading about a private equity firm called New Mountain Capital.

Started in 2000, since then invested in 80 businesses.

These are the THREE most notable deals which generated over $13-14 billion in gains.

Unreal deal makers.

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You will learn 100x more about small business and investing by talking to an actual small business owner than reading about Jeff Bezos, Elon Musk or Steve Jobs.

These guys are swimming in much different waters than you when buying and building traditional $5-15m revenue businesses.

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I believe when looking for the traditional small $1-3M EBITDA companies – and actually acquiring 1,2, 3 or more such businesses – is more about grit and toughness than prestige or anything like that.

The owners of these companies don't care too much about what school or university you attended.

At least that is my experience.

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FYI, I'm not anti-university, I'm a graduate myself, but I can see they don't care about it that much

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"So I began offloading businesses, selling telecom companies and Bulgarian banks in 2007 at fantastic prices.

We made a profit of €400 million alone on the sale of the Bulgarian telecoms assets to the equity arm of AIG, a US insurance Group."

Next, I talked to banks and ended up doing a deal with Deutsche Bank to take Activis private through a €5.3 billion buy-out.

Looking back, its huge leverage, with debt representing 80% of the total, was a kind of totem for the times.

There was no problem at all in raising the debt; everyone seemed to want to provide it."

What a story!

What's even better is that these kinds of dealmakers share these stories. And we can read about it.

Also their thoughts during these deals, as well as their fears (they're all normal people like you and me).

Good stuff and great book.

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What an absolute banger from the Chairman of one of the largest banks in Europe.

“If you don’t have a boring life, you're gonna make tons of mistakes. If you have a boring life you probably don’t make many mistakes. Then maybe your life is a mistake..."

Lesson: You don’t wanna live a boring life.

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How has been the week in building my own small holding company?

Consumer loan company

Launching the fundraising page on January 20 (to give you an idea how it looks, see below.)

Our target is retail investors, mainly from Germany.

Traditional businesses

Talked to the traditional business owner:

Manufacturer of forest equipment and machinery.

$36mm in revenue and ca $6mm in net income (depends of the year)

A long history and a great brand.

Where do you invest your profits?

"Whatever is needed in the company remains, the rest is being invested in real estate."

Nothing new in this world -- most of the manufacturing company owners I'm talking about invest their profits in real estate.

Eventually that is the case 95% of the time.

That said, the $12mm heavy equipment seller and rental company I’ve talked about — they’ve invested tons in real estate by owning all their 5 buildings — I have another meeting next week with the owners. Another one to discuss terms of structure and financing.

I will keep you posted.

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This week’s podcast:

“Here is my story of buying two small businesses. If I can do that, you can do that.”

Santino was very honest about the financial situation of professional fighters and life after that.

Topics which aren’t discussed enough. Forget in public.

You can also see his enthusiasm for investing and buying small businesses.

Please enjoy this conversation with Santino DeFranco—former UFC fighter, coach, and entrepreneur.

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

That’s all for today.

Thanks for reading and talk to you next week.

Take care,

PrivatEquityGuy / Mikk Markus