If you want to build a business that you can eventually sell, this video is for you. I've built and sold nine companies; the last one I sold was for $46. 2 million.
I’m just drawing on my experience from selling those to different partners, competitors, private equity, and strategic buyers so that I can tell you the things I've learned, enabling you to get there much faster than it took me. There was a guy who had a rental events business. He started an event business where he would basically have a venue that he would rent, and he would host two to three events a week there.
He would charge whatever the day rate is for the event, which would be more than what his rent was, and that was the entire business. He had three locations, sold those, and then started a coaching business or an education business around helping other people find event spaces, rent them out, and do the same thing he did. He was like, “Hey, I want to sell this business the way that you sold Gym Launch.
” After talking to him, I was like, “Dude, I think you’re going about this all wrong. You're trying to sell the goose when you should be trying to sell the eggs. ” This will be a common theme throughout: most people are trying to sell the goose rather than the eggs.
You never want to sell the goose; you want to keep the goose and let it keep laying golden eggs so that you can keep selling them. For those of you who don’t know the story of the goose and the golden egg, I’ll read it to you. There was once a countryman who possessed the most wonderful goose you can imagine.
Every day, when he visited the nest, the goose had laid a beautiful, glittering golden egg. The countryman took the eggs to the market and soon began to get rich. But it was not long before he grew impatient with the goose because she only gave him one egg a day.
He was not getting rich fast enough. Then one day, after he had finished counting his money, the idea came to him that he could get all the golden eggs at once by killing the goose and cutting her open. But when the deed was done, not a single golden egg did he find, and his precious golden goose was dead.
There’s something that creates value, and then there’s the thing that is valuable. Figuring out which of the things that you have in your business is the goose and which of them are the eggs is one of the highest leverage things that you can do because you can build towards the exit intelligently. In this business, I was like, “Hey man, you’re getting all these people using your systems, processes, and price points.
You’re doing all the work that a roll-up would have to do if they acquired a bunch of these businesses, except you’re doing it up front. So why don’t you know this ahead of time and say, ‘Hey, I want to build so that I can have the 100, 500, or 1,000 of my students who are using my system for doing event spaces’? I should use all of those guys and set it up ahead of time saying, ‘Hey, use these colors, use these systems, and use these price points.
In the future, if you're successful, if you're in the top 10% of the students here, I have an opportunity where you can roll up and sell with me in a group of 20 or 50 of these. ’” Here’s the thing: if that's the business model, then you can roll up 20 to 50 every other year and have a massive exit while you still keep the goose that brings those people in. The thing is that the goose is often incredibly valuable but not sellable, and that's the difficult part about this.
I’ll give you a counter-example. For me, Acquisition. com is my goose.
Am I going to sell Acquisition. com? Not really.
There are some things that I’ll talk about in a second regarding transactions you can have at the goose level, but what really makes sense for me is to sell the eggs, to sell the subsidiaries, to sell the companies that Acquisition. com invests in. So the big picture is understanding what is your goose and what are your eggs.
I’ll give you a different story: I had a dude who was saying he had a couple of Amazon stores. You'll notice this recurring theme; he had a couple of Amazon stores, did well with those, sold the Amazon stores, and then started teaching people how to sell and build Amazon stores. I was like, “Okay.
” He said he wanted to potentially sell this company. I replied, “Well, the thing is, this business isn’t very recurring; it’s not very sticky. It has huge key man risk with you being the face of it.
Not a lot of investors would A) want to buy it or B) if they did, they wouldn't pay a lot of money for it. ” I said, “So why don’t you think about a way to get all these people that you’re helping start Amazon stores bundled together so they become a sellable asset? ” Because the thing is, just like the.
. . Event business: that guy had already sold three of the event venues.
We know they're sellable businesses; they're very straightforward, they're faceless, and they're relatively turnkey. The same thing goes for Amazon stores: they're faceless, and another investor can say, "Okay, how much does it cost? What's my, you know, what's my yield?
What's my return going to be over time? " These are very sellable things, and so it takes a lot less effort to take something that is already very sellable and just think, "How can I do way more of them? " or "How can I make them bigger?
" rather than try and take something that inherently has a ton of key man risk, isn't recurring, and has a lot of volatility in terms of acquisition. All of those things make it not very attractive to a potential investor. Real quick, if you want to sell your company or make it into a sellable business, acis.
com just started our workshop division for companies that we don't own, which is just walking through the process that we do to build significantly more valuable companies at an accelerated pace. We have it here at our headquarters in Vegas. So, if that sounds interesting, you can go to acquisition.
com, hit "scale," and follow the steps. If you qualify, our guys will be in touch. Let's get to it for a second: how do you figure this out with your business?
The first thing is, is there something that's dependent on you? If anything is dependent on you for the business, it's inherently going to be significantly less valuable. Number one.
Number two, is there a component of your business or of your customers' businesses that’s very sticky and recurring? For example, gyms and micro gyms—like Gym Launch—intrinsically, they don't get sold very often, so there's not a market for small service-based facilities like personal training studios and things like that. A lot of people don't want to buy that.
Why? Because they have key man risk at their level too, right? Whereas if I were helping franchise chains of restaurants, like Subway, you know, improve their profitability, then there would be a clear exit path because franchises that are existing trade all the time.
The same goes for accounting firms because they have high revenue retention. So, basically, if you look at all the different things that exist in your business—whether it’s your customers, different service lines that you offer within your business, and then the overall watching business itself—one of those things should have some level of revenue that’s sticky and that doesn’t require a face. There are a lot of other factors, but if I had to pick a couple, those would be two that would be really important that I’d be trying to pull apart to figure out what is the egg and what is the goose.
The easiest way to know if you're right about this is by looking for M&A activity—so, mergers and acquisitions activity for that type of business. If you look, if you Google "coaching business M&A activity," it will show you how much there is. If you don’t find a lot, then you’ll be like, "Okay, maybe there isn’t a big market for this," number one.
Number two, if you do find some, what is the difference between those businesses and my business? Then you’ll be able to bridge the gap and say, "Oh, these are the things that these buyers like, not these other things," and then you can start orienting your effort and your business model around the things that investors have proven that they like. What I don’t want to do is try and sell a product to a market that doesn’t exist.
So, you have to zoom all the way back out and think of your business as a product and an investor or potential acquirer as a customer. Somebody might listen to this and say, "Okay, well, what about Gym Launch? Like, Gym Launch was that type of business.
" Well, the one thing is that Gym Launch was really dangerously close to being a franchise, and so I knew what franchise laws were. I purposely named the system fee by the way—what you need to be a franchise: a name system that everyone uses with the same systems, and there’s a fee associated. If you have all three, you have a franchise, and if you don’t have a franchise but you’re doing all three of those things, you have an illegal franchise, which means you’re actually subject to getting sued and all that kind of stuff.
So, if you're in the business of helping people do a specific type of business, you either have to pick a name and system with no fee (which most people don’t do), or you could do that; you could go name and fee—like CrossFit, for example—they have a name and there’s a fee, but they give no business systems. Or you go systems and fee but no name, which was Gym Launch; we didn’t tell everyone that they had to unify under one flag. Now, one of my potential ideas that I was thinking about for Gym Launch in the future was, maybe I will start a franchise on the side of it, and with the best people, I’ll plug them in there.
Now, that will be covered under franchise law. But the reason that Gym Launch was sellable is that the big things that everybody needed, which was that key man, was removed. I was no longer involved in the delivery; I was no longer involved in the ads; I had a leadership team in place.
Of those things, the recurring revenue is a recurring revenue business. We did have relatively good annual retention of customers, and we had multiple acquisition channels. Over time, I grew Gym Launch to be bigger than me.
Here’s a nugget that people don’t get: you see me now and you see Gym Launch, right? The thing is that this dynamic of the size of me and my audience influences Gym Launch. I am bigger than Gym Launch now, but when I sold Gym Launch, Gym Launch was much bigger than me.
So, that's the big thing that people miss—if you're bigger than the company, you will always be keyman risk for the business. In that instance, you can sell the goose if you are bigger, but you usually have to sell a minority. What that means is that people aren't going to take the risk that you're going to leave, but you're saying, "I want to take chips off the table," or "I want to either fund an acquisition or I want to expand in this way.
" An investor will happily bet on you by investing in your business. That's what raising money is fundamentally. So, if I had Acquisition.
com, I probably can't exit Acquisition. com, nor would I really want to because I'm associating myself so strongly with it for such a long period of time. But what I could do is raise money off Acquisition.
com and say, "Look at all of our holdings, and I’m going to sell 5% or 10% of Acquisition. com at a monster valuation so that I can either take chips off the table if I wanted to, or more realistically, I would say I want to go buy this massive company, and I want investors to help me do that. " Look, it will add value to all the other holdings that we have, so we'll get a disproportionate return on it.
That, me doing that, isn’t really an exit; it’s a transaction or a liquidity event, but it’s not me leaving the business. You look at Beast Industries, right? With Jimmy, Mr Beast raised at the Holdco level, which means that Beast Burger, the software he has—Feastables—all of them are under that big thing.
He can’t exit his YouTube channel, but he can sell a portion of it to fund more growth, which is what raising money is. He’s been able to do that. If you look at Elon, right?
Elon is heavily linked with the companies that he has. His way of doing that is that they’re mostly public companies, with the exception of SpaceX. By doing that, the public participates, but he’s not leaving; he’s the owner of the business, he’s still running the business, but he allows other people to participate in the growth of the company overall.
So, back to smaller businesses. I had a media company that reached out to me and was like, "Hey, I'm trying to figure out how I structure my media company to become sellable. " He had a number of stars or talent in his stable.
If you're in that business, you basically need to pick one of two directions: either you get all of the guys in the stable to support a product, so they’d be like, "Hey, this is our hair gel, this is our dip, this is our whatever," and ideally, you want that consumable to be a recurring thing. When I say recurring, it doesn’t have to be subscription-based, but it can also be reoccurring, meaning if I use hair gel, I might not want a subscription for it, but when I run out, I buy more of the same thing. I’m not on a recurring subscription for Coca-Cola products, but I do buy Coca-Cola stuff on a reoccurring basis.
If you get enough exposure, then people will buy that. The idea here is that he either has to have a product, or he sells advertising space, and the impressions that he’s able to consistently generate become the product. If you’re a media company, it’s one of those two things: either you’re pushing all of those impressions that you’re getting from your stable into one product you own, or you’re saying, "I’m going to let any advertisers come in as long as it makes sense for our brand or the brand of the talent," to place ads on there, and I’m selling media space itself.
Those are the two ways that business would work. Now, if he wanted to exit that business, he can’t exit the stars; the stars are what generate the impressions. If he's not a star, he could exit the business if he has the stable of stars and he’s selling advertising space.
But if I were him, I would say, "Well, I would rather just have this incubator where I could just blow up products. " And again, which one’s the goose and which one’s the egg? In this instance, having all this massive media and impressions—that’s the goose—and then the eggs would be the products that we’d sell through that distribution.
Using the strategy I was saying before, he could raise money by saying, "I’m going to sell 10% so I can front all the capital for this massive launch," because if you have a ton of impressions, that’s one of the big issues. A lot of creators have is that their impressions and their fame far surpass their wealth. So, in order for them to accommodate the demand that they have, they'd have to basically have a ton of money they don't have to buy inventory, um, and get, you know, logistics set up, and like all these other things up front to do it right.
Right? Because you want to do a good job. You can only have one reputation, and so they have to front all this stuff, and if you don't have money, it gets very hard.
Right? And so that's where sometimes having—like, you're not exiting your brand before you have the product—you take a tiny bit, you give it to somebody else so they can bet on you, and then you can put that money towards something that will make everybody more money. Now, um, I'll give you a fourth example of this.
I had an accounting firm—kind of like a coach, consultant, whatever you want to call it—reach out, and he was like, "Hey, I'm trying to think about the ultimate version of my business. " Now, his business was a business roll-up. It made a lot of sense because there's a lot of M&A activity in the accounting space for a variety of reasons.
But one of them is that the book of business is just worth a lot of money. There's usually high gross margins or net margins in the business; it's incredibly recurring and sticky. People don't normally switch who they're doing their taxes with year to year to year, and so they have massive LTVs.
The hardest part of the business acquisition is getting customers, but keeping customers is actually not too difficult in that business as long as you do a good job. And so he was like, "How do I sell my accounting firm, coaching, consulting thing? " And I was like, "Well, that's not what you want to sell because no one's buying that.
But what people are buying is accounting firms in a roll-up together. " So the top version of your business is having a roll-up of 10 to 20 accounting firms that you can exit every one or two years, exit for 100 million bucks or whatever, and you take your slice and you say, "Hey, I'm the one who's putting this deal together, and I get 20%, get 30%, whatever. " And if you're thinking about this, and you're like, "Well, why would somebody give up that kind of percentage?
" Well, here's how it works. So, when you buy in bulk—right? When you go buy toilet paper at Costco as a consumer, when you buy in bulk, you get a discount.
Like, the more you buy, the less you pay per roll. That makes sense. What's interesting is that in investing, it's a volume premium.
So, basically, the more profit you have, the bigger the company is, the bigger the roll-up is, the more you get. And it's because big money is lazy, and so they will pay a premium to not have to do as many deals because deals are costly—it costs a lot of time, a lot of attention. And so, if you have to do 100 deals versus doing one deal, you'll pay a premium to only have to do one deal.
And so, if those individual accounting firms could sell at, call it, four times earnings on their own, right? If they can sell in aggregate together for, call it, 12 times earnings, then even if they give up 30% of the 12x, they're still double as good as they were before, and so everybody wins. The thing is, I spend a lot of time trying to find those types of situations in business where it's like literally everyone wins.
It's like if we work together rather than be competitive. If we can collaborate—and I'm telling you, all the guys that I know who make gobs and gobs and gobs of money—like, it's so rare that you're actually competing against people. Like, I used to say this in the weight loss world.
I was like, "We're not competing against each other, guys," like because I had obviously a big community of gym owners, and we had tons of gyms that are on the same market. I was like, "Guys, we're competing against the couch! We're competing against Netflix!
We're not competing; like, we're competing against chocolate! We're not, we're not competing against each other. " Right?
It's only, I think it's like 11% of Americans have a gym membership—it's still a tiny percent of people who go to the gym, and that's having a membership—not even using their membership. And so, I mean, just look at how many overweight people there are. Like, it's not like the problem doesn't exist.
Right? And so people get really obsessed about their competition rather than just thinking, "Okay, how can we collaborate and we can all get better? " Because the thing is that the private equity buyer, the ultimate person at the top of this food chain who aggregates fragmented industries, those guys don't think like small business owners.
They just think, "Oh, this is really fragmented. I'm going to roll all these together and make a much bigger thing. " They don't care that you have some sort of animosity because they just remove both founders who have egos and say, "Cool, these two work well together, and I can see some synergies in terms of cost, and I can get more profit and own more of the market.
" They just don't think about it like that. And so all the richest guys I know are just like. .
. like, it's so funny because there's. .
. These blood feuds that exist between local businesses are interesting, but the guys who you eventually sell to—if you know, succeed and do a good job with it—don’t care at all. They just roll everything together anyway.
So, we have this whole obsession about competing, but the reality is that if you collaborate, you end up making a lot more money. I'll tell you another quick example of this. There was a dental association that we were looking into really heavily.
They had about 700 dentists in their association, and dentists have to buy floss, toothbrushes, toothpaste, and whatever other supplies they need. They spend about $20,000 to $30,000 a year on consumable products that are necessary for their practices. So what they did was establish a co-op for group buying.
They said, “Hey, let’s all come together. Rather than be competitive, let’s collaborate and buy as one. ” By doing that, they were able to negotiate significant discounts on rates.
The savings those dentists achieved by buying together exceeded the cost of the annual membership, which, by the way, is a brilliant model. As long as you plan on being in business, why wouldn’t you want to have savings that exceed the cost of an association? If you ever have the opportunity to do this, it’s a great model, especially in a niche market.
They took the top 11 dentists, rolled them up, and sold the group for $120 million. However, the private equity group that bought them was extra smart. They were bidding against us for the business and said, “Hey, you know what?
We’ll buy your business too while we’re at it because we’ll buy your goose and the eggs. ” All they saw was, “Wait, you have 700 other dentists here? Well, that’s our egg pipeline for the next five years.
” So they thought, “Cool, we’ll do this roll-up and we’ll pay you a premium on your revenue,” which was actually recurring. This is why the business was sellable; they understood that they would do this roll-up, and next year, they could grab another 20 or 50 of them and keep adding to it. The most valuable version of that business wasn’t actually the business itself—it was the eggs of that business.
By understanding which is the goose and which are the eggs for the business you’re building, you can orient your whole business to produce as many of these eggs as possible. By doing that, you have a goose that lays golden eggs, and ideally, you hold onto that goose and nurture it for as long as you can.
