E.P.I.C. Challenge
Business Acquisitions for $0 Out-Of-Pocket (OPP)
Contents:
Overview graphic and written explanation ...................................................................................................... 1
Day 1 Training: Become an EPIC Investor – Turn Crisis into Opportunity ......................................... 4
Day 2 Training: Find the Deals............................................................................................................................. 11
Day 3 Training: Acquisition Targets, Part 2 – How to Source Deals.................................................... 21
Day 4 Training: What to Say ................................................................................................................................. 24
Day 5 Training: Deal Analysis and Deal Stack ............................................................................................... 28
The following is a written explanation of the EPIC Acquisition Challenge graphic.
Roland Frasier’s central promise was that you can acquire businesses and assets for $0 Out-ofPocket (OOP), if you know how to structure the terms. This allows a person to not be limited in the
number of businesses they can acquire, and he said acquisitions are the fastest way to create
wealth - from making your first acquisition, to doing adjacency acquisitions (explained later) that
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increase the multiple and creates economies of scale.
Each training day can be summarized by the following words:
Training Day 1: “Why” is this a great opportunity, and why should you develop these skills now?
Training Day 2: “Who” should you target for adjacency acquisitions and who should you target to
acquire the assets that have the aggregated ‘eyeballs’ of your Ideal Customer Profile?
Training Day 3: “Where” can you find the best deals grouped into Personal, Online (non-personal),
and Business categories?
Training Day 4: “What” are the expected results from your outreach activities, and what should
you say, write and do when you do the outreach?
Training Day 5: “How” do you do the Deal Stack?
Below is a written explanation of the points on the graphic:
Training Day 1: “Why”
• $10 Trillion opportunity with baby boomer business owners ready to retire. A major turnover
in business. (From the research I’ve done, 80% of businesses don’t sell, and with the pandemic
it will even be worse. Many of these owners would welcome another option to transferring
ownership vs. just closing the doors.)
• The “unsophisticated" SME has an average 2.5x multiple (this is the majority of the Small-toMedium-sized Enterprise owners that work “IN” their businesses).
• This increases to a 3.7x multiple when the owner buys or turns the business into a
“sophisticated” SME by adding SOPs, systems and developing external community relations.
This happens by working “On” the business, which in turn frees the owner from having to be
involved in day-to-day operations.
• The next higher level is to work “Above” the businesses, and this happens when the owner
realizes that the Product IS the Businesses. Through continued improvements on internal
systems, and external integrations, and what Roland called “bolt-ons” it can increase the
multiple up to 12x.
• Roland doesn’t prefer to deal with the businesses at the IPO stage, even though they have
much higher multiples.
• Roland named several reasons (listed in the graphic) why Buying is much better than Start-up
businesses.
Training Day 2: “Who”
• This session was a real mind-expander for me and many of the participants. Roland talked about
doing ‘adjacency acquisitions” by identifying the types of businesses listed in the categories
below that interact with your core business. By acquiring these businesses, an investor saves
money and adds value to the core business. Often, these acquired businesses can share
assets, reduce payroll, and create economies of scale.
• He also said to also acquire assets that have the “aggregated eyeballs” of your ideal customer
profile (ICP). This included things that most people don’t consider as an asset or business to
buy, such as meet-up groups, Facebook groups, blogs, podcasts, etc. These will not only
benefit your business from greater exposure, but they can be leveraged to create additional
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profit centers.
• To find the types of adjacency acquisition, he gave the steps below. Crunchbase.com was
recommended as a site where you can find what publicly traded companies in your industry
are buying, and also learn what companies these corporations are investing in, because they
will often invest in a company prior to acquiring it.
Training Day 3: “Where”
• This session focused on the many places where business deals can be found. Roland doesn’t like
to use business brokers. He felt that most of them are lazy, don’t facilitate a deal other than
wanting to get full cash payment because they want their commission.
• Roland doesn’t sign personal guarantees or put money into escrow to show he’s serious about a
deal. He creates a SPV (special purpose vehicle) that is used to acquire each business. This is
simply a LLC, S-Corp, or C-Corp that protects you from personally liable. Worst case, you can
walk away from the business and give it back to the owner.
• He recommended the different ways listed in the graphic to find deals (the full list is in the
notes).
Training Day 4: “What”
• On average, for every 100 outreaches a person can expect to ultimately acquire 1-3 deals. He
said his average is 50%, but that is unrealistic for us now. As we do more deals and develop a
reputation, those percentages can go up.
• He went over several ways to reach out to potential sellers, including LinkedIn, phone and
sending a letter. He provided several scripts for letters and speaking on the phone.
Training Day 5: “How”
• This is where it all came together. He has 159 different strategies that can be used to make $0
OOP acquisitions. This is called a “Deal Stack”, which is the different ways you can structure a
deal to get the right terms for an agreement from the seller and buyer. This lists 18 Deal
Stacks (more explanation is in the notes.
• The first step is to determine a reasonable price for the business. Many times, a seller will just
pick a number out of the air. He had a list of multiples for different industries that could be
used to determine a price based on earnings, times the multiple.
• The second step is to gather information about a business that will allow you to structure a deal
and determine what elements of the Deal Stack would work best to appeal to a seller.
• He gave a scenario that we used for homework to determine what Deal Stack we would offer. At
another session, he went over it had multiple ways to structure the deal for $0 OOP, and
even walk away with cash in your pocket. This was like gold.
• He doesn’t ever spend any of his own money to acquire a business because it gives him greater
options. Cash is king.
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Day 1 of EPIC Business Acquisitions
Training Day 1: “Why” is this a great opportunity, and why should you develop these skills now?
Ethical Profits In Crisis Challenge Day 1 – 9 April 2020
Roland Frasier
For questions, contact Deanna Rogers: Deanna@digitalmarketer.com
Matt Swan is the director of marketing.
Workbook 1 password: EPICChallenge2020-1
Day 1: Become an EPIC Investor –
Turn Crisis into Opportunity
There is no faster way to create wealth or grow your
existing business buy acquiring an existing
profitable business. Once you do it you will have a
portable skill that you can take anywhere in the
world and use.
The average business has only 27 days of cash flow,
so there are many businesses during this time that
will not make it through the pandemic. By acquiring some of them up and learning the
strategies to grow those businesses you’ll be able to save the jobs of people working there.
Roland wants us to take away:
1. Target 5 opportunities that you could eventually acquire. It’s not just about businesses,
but also ASSETS, which can include FB & YT accounts, websites, and anything that help
generates profitable income.
2. Who to talk to.
3. What to say. Use scripts as an outline, and put it in your own voice.
4. How do we do these deals and pay for them. This is about buying a business with no
money out of pocket.
Ethical Profits In Crisis – EPIC Challenge
Prework
Pre-work 1
COVID-19 has started a recession in the US. That’s the best time to acquire companies because
prices and multiples drop, buyers tend to disappear and nervous sellers scramble to sell.
https://www.themiddlemarket.com/news/viral-impact-how-covid-19-is-affecting-m-a-andprivate-equity
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Multiples are low when recessions start and increase steadily thereafter. Median ration of deal
value to EBITDA is higher overall, but multiples were lower during downturns.
Pre-work 2
It’s important to position yourself to act and acquire quickly before confidence returns (as it
always has) and prices for those businesses rise. If you buy on the low side and sell on the
higher side, you will make more money when multiples go back up.
https://www.bain.com/insights/recessions-can-present-rare-ma-opportunities-mint/
Pre-work 3
Despite a downturn in the overall economy there is plenty of cash for M&A deals, meaning
plenty of cash to buy you out when you exit.
https://www.bcg.com/en-us/publications/2019/mergers-and-acquisitions-report-how-tomaster-indownturn.aspx?fbclid=IwAR0E4Aq3COvxD662DZoTDJR0d4qlRIXoxkbKjuV6BJb_5CFzAIJJk9k
SEN0&redir=true
https://www.nytimes.com/2020/03/15/business/economy/coronavirus-economyimpact.html?fbclid=IwAR09QrbaGxynHUqDDKM8bQX1ysGM2B6ovoYU479kYU2GVgPmdJ66OZXvgA
Private Equity is sitting on “dry powder”,
which means money that they have to
spend. They don’t usually pay cash. They
put a down payment and then leverage
the rest with borrowed money. They are
sitting on $2.4Trillion. There’s never been
lower tax rates.
Background of Roland. He has owned, built and sold businesses with
sales from $3M to $3B+ in 24 different industries. He has done 3 exits
and 3 acquisitions in the past 12 months. All of the businesses were
done for $0 out-of-pocket.
Crisis comes from the Greek word “Krisis,” which means turning point in a disease that
will result either in recovery or death. COVID-19 will result in a recovery of a business or its
death.
There have been 17 recessions since the 1929 depression. Every one of the recessions
resulted in an upsurge in the economy.
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Post-Recession GDP Change
1920-2008
There is a $10 Trillion opportunity, prior to COVID-19.
• 4.5 million businesses worth $10T will transition over the next 10 years – EPI
• 50 million Baby Boomers will retire over the next 10 years. – Insured Retirement Inst.
• 12 million Baby Boomers own businesses. – Wealth Management Report
• Only 20% of businesses that go to market end up selling – BizBuySell Insights 2019
• 96% of businesses fail, to continue for 10 years or more – Inc. Magazine Report
• 420,000 Boomer businesses/year will transition for the next 10 years. GenEquity
Insights
• SME EBITDA sale multiples = 2.8x. – DealStats Value Brief
• PE EBITDA buy multiples average 12x – Pitchbook US PE Report 2019
• 15,000 US & 30,000 global M&A deals closed 2019. Decline 15%/12% - IMAA Report
There is money out there to buy businesses.
There is a giant opportunity here.
Let’s look at return…
Why Buy vs. Start-up?
1. Less risk. It’s shocking how
much less risk.
2. Financing options
3. Brand recognition. This comes
with the brand.
4. Instant Customers
5. Instant Sales
6. Instant Profits
7. Instant Contacts
8. Instant Systems
9. Instant Employees
Why Start-Ups Suck
90% failure rate
10% fail in Year 1
70% fail in 2-5 years
75% of VC Deals fail
Why they fail
42% did no market research and no market demand
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29% runt out of money
23% not the right team
19% get out-competed
18% pricing/cost issues
17% user-unfriendly
17% product w/o business model
14% poor marketing
First time founders have a 10% rate of success.
Previously unsuccessful founders have a 20% rate of success.
VC funded founders have a 25% rate of success
Previously successful founders have a 30% rate of success.
Acquisition vs. Start-up
Cash Invested
Leveraged Funding
Valuation
Profit Margin
EBITDA/SDE
Risk of Failure
Acquisition
$50k
$950k
$1M++
10%**
$375k
2%
Start-up
$50k
$165k*
$199k++
10%**
$71k+
90%
Source: *Experian **Invevestopedia +Payscale ++DealStats
Mindset-wise: The “O-Myth”
Really wealthy people work
ABOVE their business. Investors
and Acquisition specialists spend
little to no time IN the business.
Focus: The product IS the
business, and Internal
improvements and External
integrations are made to
increase the equity value.
Entrepreneurs, as described in the
E-Myth work ON their business to develop systems and process, so they can eventually hire
Operators to run it without them, or have a business that requires less of their time. Focus:
Internal operating systems and processes so the business runs more effectively, and
External community to build better relationships with customers and the community to
gain a competitive advantage.
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Owner-Manager describe how most enterprises are run. The owner starts or buys a business
and spends most of their time IN the business as an Operator. Focus: Internal operations to
sell more products and services effectively so that the bottom line is improved.
Deal Lifecycle – What it takes from the start to actually closing the deal.
Arbitrage: The
practice of taking
advantage of a price
difference between
two or more
markets: striking a
combination of
matching deals that
capitalize upon the
imbalance, the profit
being the difference
between the market
prices at which the
unit is traded.
Arbitraging Multiples
On average the SME multiple is 2.5x earnings (SDE).
More sophisticated businesses with an operator in the business sells for 3.7x
Price/Earnings ratios has a PE multiple of 24x
If you build a company up to about $10M sales and $2M profit, this is of interest to Private
Equity firms and it will be worth more, 12x.
Roland buys companies in the Blue box for 1x and turns it into the green and red box.
Top Reasons for Closing A
Business
1.
2.
3.
4.
5.
6.
7.
8.
9.
Money issues
Retirement
Relocation
Burn-out
Health
Shiny object syndrome
Up-cycle
Partner challenges
Death. The owner died and it
was an owner-operated
business.
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Finding motivated sellers is a huge opportunity if you can buy for 1x Earnings.
COOP – Cash Out Of Pocket
How can we not pay the money
upfront and let the business
pay for itself.
Jumped to the 4th deal – Equity
Deals
When you find a rocket science
business and you don’t need to
be a rocket scientist to buy that
business. All you need to know
is how to add value.
Earn-In to Equity
1. Advisor 1% to 5%
interest in the company
2. Growth assist, get 10%
to 50% by showing
them how to grow the
company
3. Exit Assist, 5% to 10%
by helping them go
through the process
Warrants (option issued by the company – you have the right to buy the company for $X)
Phantom Equity to avoid taxes, by getting distribution when the business is sold.
Getting paid:
You can do stuff for companies and they will give you a piece.
To get people interested in working with you, be the thing that they want the most…
Barter in exchange for equity or value.
First Assignment: Position yourself as an Investor.
Go on your different social media and add that you are an investor. Talk to people about how
you can help their business grow through acquisitions.
Always use an SPV – Special Purpose Vehicle, which is any limited liability entity that you
form to use for a deal, especially an acquisition, spin-out, split-off, carve-out or joint venture.
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The magic of the SPV
What it’s called: Special Purpose Vehicle or SPV
What it is:
Why use it:
When to form it:
How much does it cost:
EPIC Challenge Action Steps:
Reposition yourself as an investor: Add “Investor” to your linkedIn and social media profiles,
about page, bio and email signature.
Form an SPV: Use a service like LegalZoom or BizFilings or file one yourself.
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Day 2. Find the Deals
Training Day 2: “Who” should you target for adjacency acquisitions and who should you target to
acquire the assets that have the aggregated ‘eyeballs’ of your Ideal Customer Profile?
EPIC Business Acquisitions Day 2 – 10 Apr 2020
Roland Frasier
Handbook Day 2 password: EPICChallenge2020-2
Step 5: deal Target Types
How to Find What To Buy
First way: Find a public company in your industry.
1. Google “[company name]” + “Acquisitions”
2. Review the list of acquisitions the comparable company
made and note the types of companies it acquired.
3. Make a list of the types of companies the public
company acquired that might make sense for you.
1. Use Google to find the biggest and/or public company in your industry.
Example:
Google [publicly held] + [category]
“Publicly held accounting firm” was Googled and there were 31.8M results.
If you don’t find a publicly held comparable,
then Google [largest] + [category]
“Largest accounting firms” and there were
60.9M results, with the Big 4 accounting
firms of Deloitte, Ernst & Young, KPMG, and
PricewaterhouseCoopers. The big players
have the sharpest people: attorneys,
accountants, investment bankers, CEOs, and
CFOs advising them how to expand, so piggy
back on them to see what they are doing to
expand.
2. Identify Key Comps
• Once you find a company in your industry
• Google “[Company Name]”+”Acquisitions”
o For example: “Deloitte
Acquisitions”, which had 6.59M
results. Looking at one of the
sites, it had their “Investment
Focus” to acquire companies
that will significantly
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accelerate their growth and profitability.
o They also state the types of market areas they are looking for.
o Also, they state their Strategic alignment they want with their acquisition, with
a list of questions.
o Corporate development department is a good place where investment bankers
go when they are looking to acquire your company.
• Review the list of acquisitions the comparable company made and note the types of
companies it acquired.
• Make a list of the types of companies the comp company acquired that might make sense
for you.
3. Identify Adjacency Acquisitions made by the companies you researched.
This provides you with a range of companies that you might want to consider for potential
acquisitions.
• Sign up temporarily for CrunchBase.com, which will tell the different acquisitions that
were made and tell something about the acquired company and how it fits with the
company. When you are looking at expanding your existing businesses, you might ask
these questions that bring up potential adjacency acquisitions:
o What are all the different things I can sell to my client?
o What are all the things my client is buying in terms of products and services?
o Does it make sense for me to acquire those companies so we have crosspollinations and can do cross referrals from our existing company to theirs and
vice versa?
• You may want to consider similar companies for acquisition. For example, Deloitte made
these adjacency acquisitions:
o Terrace Initiative – uses private cloud-based platforms to help companies
implement change.
o Oxala Consulting – specializes in CRM and sales force integration.
o Well Placed Cactus – an Australian entertainment and content-creation studio,
so they could produce quality content.
o JKVine – A technology consultancy specializing in new or upgraded computer
systems.
o BMR Advisors – Offers these professional services: tax risk and M&A advisory
for businesses of all size.
o Plenary Networks – Specializes in networking and providing networking,
software defined networking and cloud networking solutions.
o Integrity-Paahl Solutions – Canadian managed security service provider.
4. Review “Investments” made by your comps. This can be found in CrunchBase under
“Number of Investments”
Usually what precedes an acquisition by a big company is a small investment. This allows
them to get a better understanding and evaluate a potential acquisition.
Identify Key Category Comps (comparables)
•
Continue researching each category of your business to find more comps.
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•
•
•
Repeat the Google/Crunchbase.com search process for each comp you identify to find
acquisitions that they made.
Make a list of the acquisitions for each major comp.
When you are done, you should have an extensive list of the ideal types of businesses
to acquire to grow your business.
Easiest types of businesses to buy if you have an existing business
Here are 7 categories of companies that you might want to buy:
1. Core Business. List direct and indirect competitors of your business. If you don’t have
a business, it’s the ideal business you think you want to buy.
2. Media. Everyone who aggregates the eyeballs of your ideal clients or ICP (Ideal
Customer Profile or Avatar). Determine the ideal media that targets your ideal ICP. You
may have 3-7 Avatars, so then you find media that is attractive to all of those avatars
and they would be an ideal acquisition. This could a company or a traffic asset, such as
a FB group, blogspots, Instagram, etc.
Here is a Customer Avatar worksheet:
https://www.digitalmarketer.com/blog/customer-avatar-worksheet/
3. Team & Resources. Companies that have a sales force, software development team or
other type of team that would benefit your business.
4. Service Vendors. Whoever is providing services to your Core Businesses or their
customers is another prospective acquisition.
5. Product Vendors. Providing products to your company, Core Businesses or their
customers.
6. Supply & Distribution. Who’s providing any kind of supply, such as paper or raw
materials? If you sell through other websites, buy them. Look at all the distribution
channels that your business, Core Businesses or customers are using. If you’re a
company that sells stuff through other websites, such as Amazon, Shopify, or affiliates,
you can buy affiliates. When you own the affiliates you can stop selling other people’s
stuff and focus on selling your stuff, and squeeze out your competitors.
7. Intellectual Property. If there is IP that could benefit your business and give you more
stuff to sell through your existing customers, you can buy them also.
Buying up businesses that are adjacency acquisitions could give you 7x growth rate by
integrating them. There is no faster way to grow your business than by buying these different
types of businesses that support your core business.
This is an example of the different types of
businesses that Roland acquired to support
their core business, Idea Incubator – which
was recently changed to Scalable.
For media they bought a FB group for $1,500
that had 250k DIY members and merged
them with their 250k DIY members and then
had FB merge them. It was done in a way that
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they did not have to pay the $1,500 out of pocket.
When they wanted to go into software and acquire a team of software developers, they
purchased TruConversions, a vendor to them. This was a Hong Kong corp. owned by Danish
citizen living in the UK, and the physical company was in Pakistan.
For Service Vendors they were referring a lot of people to use this direct mail company. They
acquired an interest in their business since it made sense because they were referring a lot of
business to them.
For Product Vendors a 28-year old store in Austin, TX by the name of Banana Bay was
acquired so they had the ability to get all the dealerships that the store had in place. They
were also able to get another distribution channel because Banana Bay was a store already
selling to their market. And, Banana Bay was selling a product that they could sell to their
existing customers. So it fit 3 things: Dealerships that Idea Incubator didn’t have, a Resource,
and Distribution chain partner.
On the Supply side, a water filter company was bought and the name was changed to
ColemanFilter Company.
For IP, BusinessBookSource.com was acquired for a company they had called Startup Jungle,
they wanted to provide business plans for “mom & pop” business, and BBS had 198 plans that
were already done, and 128 spreadsheets. This could be sold to business opportunity seekers
without having to spend millions of dollars duplicating what BBS had.
Assignment: Brainstorm the different types of direct & indirect competitor companies that
you can buy, as well as media, resources, services, product, supply, distribution and IP
companies that would support your Core Business.
For example, these are the different types of businesses that you could consider in each of the
categories:
Core Business
• Direct competitors
• Indirect competitors
Media
• Advertising
• Broadcasting
• Print publication
• Digital media
• Production studio
Team & Resources
• Affiliates
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•
•
•
Customers and customer lists
SOP (Standard Operating Procedures)
Development team
Service Vendors
• Financial
• Business
• Publishing
• Advertising
• Brokerage
Product Vendors
• Related to the products you buy
o Go to Amazon and let their recommendation engine tell you what are the best
sellers in a specific niche.
• Upsell/Downsell
o What can you sell them that can help them even more.
o Or a less expensive product you can sell.
• Cross-Sell
• Substitute
• Complementary
Supply & Distribution
• Manufacturer
• Supplier
• Distributor – any middlemen
• Retail site – physical stores
Intellectual Property
• Patent or inventions
• Customer lists
• Trademark
• Software/SaaS
• Copyright
Each of these Meta categories will have subcategories of dozens and dozens of potential,
specific companies you can acquire that will feed your core business and make it more
valuable.
For Media, don’t think about only buying companies, but also traffic assets. You need to own
the traffic assets, not rent them.
Your goal is to create “Zero dollar traffic”
In Real Estate the people who make the big money are those that don’t rent, but they own.
Now we’re talking about buying specific assets that have the aggregated eyeballs of
your ICP.
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Google and big corporations go through this same process and ask: Who owns the media, the
services, resources, product and supply and distribution channels, and intellectual property
that would help our business?
Group Grabs
• Meetup groups
o One client was in the RE business selling software and training products, so he
bought RE investment groups and now he has this media he controls.
• Masterminds
• Networking groups
• Slack groups
• Newsletters
• Associations
Social Siphons
These are the places that have aggregated the eyeballs of your ideal customer profile. Once
you own these things you have huge leverage to become an influencer yourself.
• FB page/group
• LinkedIn groups
• Instagram accounts
• YouTube channels
• Pinterest
SEO Swipes
Find the sites that rank at the top for your product or key word.
• Blogs
• Vlogs
• Website
• Videos
• Images
• Shopping lists
• Tools
• Guides
List Lifts
• Customer lists
• Affiliate lists
• Supplier lists
• Lists of Pixel people
• Newsletter subscribers
• SOP (Standard Operating Procedures) lists
• Opt-in
• Coder lists
• Subscribers
• Email lists
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Product Picks
These can be distribution channels for your products, and the customers already exist.
• Amazon listings
• Etsy
• Ecom landing pages
• Brand stores
• Google shopping
• Ebay store
Show Sales
Where in terms of shows are your customers’ eyeballs/feet aggregated?
• Trade shows
• Conference
• Podcasts
• Summits
• Radio
• TV
• Events
• Intensives
• Expos
• Syndicated shows
IP Integration
• Patent
• Copyright
• Trademarks
• URLs
• Domains
• Trade secrets
• Processes
• Brands – these are trade assets
• Logos
• Code – Code that helps you with your existing business. Google bought the company
that had invented the AdWords technology and changed the name to AdWords.
This gives you 14 different Meta categories, and if you identified 10 businesses in each of
these categories, it would give you 140 prospects you can then boil down to what you think
are the best that will increase the value of your existing company and work synergistically
together to grow your overall value.
Start with Categories if you can’t think of specific companies. Each category will have dozens
and dozens of sub-categories that you can list.
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How to buy a Facebook Group
Tools: Asset purchase agreement + Escrow.com
Seller actions:
1. Make the buyer a member of the group.
2. From newsfeed choose “Group” under the “Explore” tab on left.
3. Choose the group you’re selling under “Groups You Manage.”
4. Chose “Members” from the tab on the left.
5. Click the three dots to the right of Buyer’s name.
6. Click “Make Admin”
How to buy a Facebook Page
Tools: Asset purchase agreement + Escrow.com
Seller actions:
1. Have the buyer like the page.
2. From the newsfeed choose “Your Pages” on top right.
3. Click “Page Settings” from the top right menu bar.
4. Choose “Page Roles” from the list on the left side of the page.
5. Enter the buyer’s name in the “Assign a new page role” box.
6. Click the “Editor” drop down next to their name.
7. Select “admin” to make them an admin.
8. Click the “Add” button.
9. When you leave as Admin they now own the page.
How to buy a Facebook Ad account
Tools: Asset purchase agreement + Escrow.com
Seller actions:
1. Go to “Business Manager” settings in Facebook Business Manager.
2. Click on “Ad Accounts”.
3. Add the Buyer to the account as an Admin.
4. Remove all the other existing Admins.
5. Buyer now claims account from their Business Manager Account.
6. Buyer enters Ad Account ID.
7. Seller accepts ownership transfer request from notification they receive to accept the
transfer request.
[Buying a FB Ad account is a huge thing because you’ll get all the data and all the ads and
information of what’s worked, and just run ads for your company.]
How to buy an Instagram Account
Tools: Asset purchase agreement + Escrow.com
Here are complete instructions: https://viralaccounts.com/transferring-ownership-ofinstagram-accounts/
Note that it is safest to transfer the original email that established the account in addition to
the Instagram account if you want to be sure that you have complete ownership.
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How to buy a LinkedIn Group
Tools: Asset purchase agreement + Escrow.com
Seller actions:
1. From the group homepage, select Manage group.
2. Click “Admins” to see group owners + managers.
3. Add Buyer as a Manager.
4. Click “More” to the right of Buyer manager’s name.
5. Click “Transfer Ownership.”
6. Click “Confirm” in the pop-up confirmation box.
How to buy a Meetup Group
Tools: Asset purchase agreement + Escrow.com
Seller actions:
1. From the Meetup group home page, select Manage group.
2. Choose Step down as Organizer.
3. In search box, find the buyer name (must be a group member) and check the box
beside their name. Then hit Next.
4. Click Select “Ask Selected Members.”
Buyer actions:
1. On Meetup group home page click “About”
2. Scroll down to “Organizer”.
3. Click “Accept Nomination”.
How to buy an Amazon product
Tools: Asset purchase agreement + Escrow.com
Seller actions:
1. The Owner of the account needs to change the information on the account to that of the
buyer of the account, to include:
a. Charge method (credit card)
b. Deposit method (bank account)
c. Tax information
d. Account name
e. Email address associated with buyer
[By doing the above, all customer ratings and reviews will be transferred and this is to include
services such as FBA.]
Other Paid Research Tools
You can just use Google for your research, but here are some paid research tools you can use.
These come from Business Valuation Resources (BVR). You don’t need these right now, but
later you may want to know about them for your use.
DealStats Value Index – Helps to identify comparable companies, and what they were sold
for and industry classification code, size by number of employees, size by revenue and profits.
For example, if you wanted to buy a digital marketing company, you can put that in DealStats
and it will give you a list of other digital marketing companies, what they sold for and their
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stats. It has both public and private companies. Public companies can be researched through
SEC, but private companies are difficult to find information. They talk to business brokers, dig
into the deals, do independent research, etc.
BizComps – Provides sold business descriptions by SIC codes, or NIC codes. This has
information for Canada and the US.
BizMiner – Provides financial information on businesses industries in specific areas, like
percentage of payroll to sales ratio, the percentage of COGs. This allows you to see if a
potential acquisition is outperforming or underperforming compared to industry standards. If
for some reason, your target company is outperforming the industry you can see how it could
be an advantage when you go to buy other companies. If it is underperforming against
industry standards, it tells you areas that are opportunities for improvement.
Additional Resource
YouTube channels for sale: https://www.trustiu.com/en/buy-youtube-channel
Trustiu.com allows one to buy digital businesses like Websites, YouTube channels, and
AdSense. https://www.trustiu.com/en/search/
EPIC Challenge Action Steps
1. Google category M&A: Find what comparable companies like yours are buying.
2. Get CrunchBase.com trial: Research your category. [Trial is for 7 days, get it and cancel
immediately.]
3. Complete the related businesses worksheet: Find related businesses in the 7
categories.
4. Complete the $0 Traffic Assets Worksheets: Find related media to acquire.
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Day 3. Acquisition Targets, Part 2
Training Day 3: “Where” can you find the best deals grouped into Personal, Online (non-personal),
and Business categories?
EPIC Business Acquisitions Day 3 – 13 Apr 2020
Roland Frasier
Handbook Day 3 password: EPICChallenge2020-3
How to Source Deals
Few deals come from listing sites, but they are good for practicing.
Sample search: San Diego
BizBuySell.com
Looked for service businesses in San Diego, CA, for under $200,000 cash, and not homebased.
It returned 14 businesses.
Looked at a Pest Control company with cash flow of $596k.
Analysis of the Pest Control Co.
Purchase price
$1,850,000
ROI
Seller finance
(200,000)
106.5%
SBA 7(a) @ 75%
(1,387,500)
Down payment
262,500
Install $84K manager
Cash flow
596,000
10% Int. 7-yr 100%
(316,253)
Free cash
279,747
ROI 74.6%
Monthly free cash
23,313
Negotiate stretching out the down payment over a longer period of time to get more monthly
free cash flow
#2 Business analysis: Full-service fire sprinkler system contractor
Roland would pass on this business because if high liability. When the sprinklers go off, it
ruins computers and equipment. If it doesn’t go off in a fire, can get sued.
Analysis Listing #2
Purchase price
Seller finance
SBA 7(a) @ 75%
Down payment
Cash flow
10% Int. 7-yr 100%
Free cash
Monthly free cash
$925,000
(138,750)
(693,750)
92,500
380,000
(165,845)
214,155
$17,847
ROI
231.5%
Install $84K manager
ROI 140.7%
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The best place to find good deals are from:
Friends
Family
Phone contacts
Instagram friends
LinkedIn contacts
LinkedIn search/SN
FB friends
Email signature
Vistage*
Competitors
Distributors
People you meet
Networking groups
Messenger contacts
Angel networks
Financial planners
Direct mail
Trade associations
Customers
Suppliers
Masterminds
Contractors
Employees
EO ??
Young Presidents’ Org.
Hoovers
Trade events
Same information as above, organized into these categories:
Personal
Friends
Family
Phone contacts
People you meet
Networking groups
Masterminds
Non-Personal
Instagram friends
LinkedIn contacts
LinkedIn search/SN
Facebook friends
Email signature
Direct mail
Business Contacts
Customers
Competitors
Distributors
Angel networks
Financial planners
Trade associations
Contractors
Hoovers
Young Presidents’ Org.
Vistage*
*Vistage is a peer mentoring membership organization for CEOs, business owners and
executives of SMEs.
Build your list of specific target candidates from research network outreach.
How to Find the Players
!
!
!
!
!
!
!
!
!
!
Call the company and ask who the owners are.
Check SecStates.com for state business information. Find out the companies registrar
and owners.
Check ZoomInfo.com
Check “about us”, “team” and “contact” on the website
Google “business permits” [city], [state]
Google “certificate of occupancy” [city], [state]
Google “business licenses” [city], [state]
Google “license inspections” [city], [state]
Search the company on LinkedIn.
Check Hoovers
Source using LinkedIn Sales Navigator
22
This is a great research tool, that is separate from LinkedIn. You can search by keywords,
seniority level, industry, titel, company headcount
Additional Resources:
SRDS has a huge list you can draw from.
NAICS & SIC Identification Tools: https://www.naics.com/search/
EPIC Challenge Action Steps
1. Search BizBuySell.com and look at several businesses in your area by category.
2. Analyze each for good and bad. Get familiar with the terms and what to look for in
listings.
3. Identify the players worksheet: Complete this for each target principle you have
identified.
23
Day 4. What to Say
Training Day 4: “What” are the expected results from your outreach activities, and what should
you say, write and do when you do the outreach?
EPIC Business Acquisitions Day 4 – 14 Apr 2020
Roland Frasier
Handbook Day 4 password: EPICChallenge2020-4
At this point you should have identified specific companies you are interested in. Your
assignment is to have some conversations with businesses you have identified. If you have
difficulty talking to others, you
How to make contact
1. Get a warm intro – Query your network. Have someone who knows the person you
want to contact connect you via phone, email, or text.
2. Make a phone call – Call the person you want to contact and follow the phone script
that follows.
3. Write a letter – Write a letter to the person you want to contact using the letter
template that follows. The meet, call or Zoom.
4. LinkedIn – Find them on LinkedIn, make a connection request or InMal (paid), then try
to move the conversation to meet, call or Zoom. Even though Zoom isn’t in person, you
get nonverbal information.
5. Reach out on social - Find a message them on social media, then move to Zoom…
It’s a Numbers Game:
100 Outreaches > 60 Responses > 10 Conversations > 5 Offers > 1-3 Deals
(about 1-3% success rate.)
Rolands success rate is about 50% because he has a network, gets referrals, and people know
and have higher trust in his company.
It’s important to outreach a lot. You’ll get better at it as you do it.
When using scripts, make sure you are authentic.
Use this LinkedIn Connection Request
This would be on LinkedIn chat.
#1 – As an investor
“Hi [their name],
I’m an investor looking to invest in a [industry] company, located in [geography] with $X to $Y
in top line revenue.
Your company came up in my research, and since you are a [title] there, I’m requesting a
connection to see if you might like to chat about the possibility of working together in some
way.
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If so, please connect and let me know a good time to chat.”
[$500k on the low-end; $200k if it is strategic and could be folded into something he already
owns.]
#2 – As someone who could refer their business
“Hi [their name].
I own a [industry] business and am looking for a [their business niche] business to refer
[customers/clients] to.
Your company came up in my research, and since you are a [title] there, I’m requesting a
connection to see if you/we can set a time to chat to see if there is a fit.
Please connect and let me know a good time to chat.”
Phone Contact – Cold: Not related to your current businesses
“Hi, my name is [your name].
I’m a private investor looking to invest in a [type of company], located in [location] [OPTION
#1] with between [$X] & [$Y] in top line revenue [or OPTION #2] with profits between [$X] &
[$Y]. I’m looking to complete a transaction within the next 3-6 months.
Your company came up in my research, so I’m touching base to see if you might like to meet
and chat about that.”
[In Corona times you might say ‘reach out’.]
Phone Contact – Cold: Related to your current businesses
Phone Script #1
“Hi, my name is [your name].
I own a [Business Type] company in [Location] called [Company Name], and from time to time
I have customers who are looking for [Target Business Products/Services].
I’d love to schedule a time to grab lunch next week to learn more about [Target Business] and
see if we might do some business together. What does your schedule look like for next [Day],
[Date] at X o’clock?”
25
Phone Script #2
“Hi, my name is [your name].
I’m a private investor looking to invest in a [type of company], located in [location] [OPTION
#1] with between [$X] & [$Y] in top line revenue. [or OPTION #2] with profits between [$X] &
[$Y]. I’m looking to complete a transaction within the next 3-6 months.
Your company came up in my research, so I’m touching base to see if you might like to meet
and chat about that.”
Phone Contact – Distressed Businesses
“Hi, my name is [your name].
I work with a group of wealth investors who provide capital to companies.
We typically invest in, merge or acquire the companies we work with.
If this sounds like something that might interest you, I would love to set a time to discuss it in
more detail.”
Letter Contact – Cold: Not Related To Your Current Businesses
“Dear [their name],
I’m a private investor looking to invest or acquire a [type of company], located in [location]
[OPTION #1] with between [$X] & [$Y] in top line revenue [or OPTION #2] with profits
between {$X] & [$Y] within the next 3-6 months.
Your company came up in my research as a possible investment opportunity, and I’m writing
to see if you might be interested receiving an investment in [Company Name]. I’m writing to
you at this address, which I found in the company public records, to maintain confidentiality
of our discussions from your employees.
If this is of interest, please let me know and we can set a time for a call to explore the
possibilities. You can call me at ###.###.#### at your convenience, and I will touch base on
[Day], [Date] if I don’t hear back from you before then.
Sincerely, [Your Name]”
[If there are 4 directors, send the letter to all of them. Maybe one of the partners doesn’t know
how much trouble the partner is in. You’ll get perspective from all the players of the company
and that will open up different options.]
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Letter Contact – Cold: Related To Your Current Businesses
“Dear [their name],
I own a [Business Type] company in [Location] called [Company Name], and from time to time
I have customers who are looking for [Target Business Products/Services].
I’d love to schedule a time to [chat on the phone/grab lunch] next week to learn more about
[Target Business] and see if we might do some business together. What does your schedule
look like for next [Day], [Date] at X o’clock?
Sincerely, [Your Name]”
Letter Contact – Cold: Distressed Businesses
“Dear [their name],
I’m a private investor, looking to invest or acquire a company like yours that might be able to
use a capital infusion. Many great businesses have challenge getting traditional bank financing
and I provide a faster, easier alternative to do that.
Your company came up in my research as a possible investment opportunity, and I’m writing
to see if you might be interested receiving an investment or even selling [company name]. I’m
writing to you at this address, which I found in the company public records, to maintain
confidentiality of our discussions from your employees.
If interested, please let me know and let’s set a time to chat on the phone to explore the
possibilities. You can call me at ###.###.#### at your convenience, and I will touch base on
[day], [date] if I don’t hear back from you before then.
Sincerely, [your name]”
EPIC Challenge Action Steps
Before doing any of this read the templates and rephrase it in your voice.
Overachievers 5S the numbers below.
1. Send 1 LinkedIn Connect request.
2. Send 1 LinkedIn InMail (if you have InMails}
3. Send 1 message to a Zero Dollar Traffic Asset
4. Make 1 phone call
5. Send 1 letter
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Training Day 5. Deal Analysis and Deal Stack
Training Day 5: “How” do you do the Deal Stack?
EPIC Business Acquisitions Day 5 – 15 Apr 2020
Roland Frasier
Handbook Day 5 password: EPICChallenge2020-5
Revenue Multiples by industry 2019
This document shows the Enterprise Value (EV) /
Sales. This is a guideline that Roland put together to
help give a general valuation of a business you’re interested in acquiring. For example, the
first example of an Advertising Company, if it has $1M in net sales (not gross sales), then you
multiply $1M x 1.71 Revenue Multiple = $1.71 Enterprise Value
This can also be used to identify how you could increase the value of an acquired business by
moving it from one industry category to an industry with a higher Revenue Multiple. For
example, Real Estate (Operations & Services) has a 1.61 multiple, and by transitioning it to
Real Estate (General/Diversified), it increases the multiple by 4x to 6.72.
The highest multiple on the chart is Financial Services (Non-bank & Insurance) at 31.81
multiple of sales.
EBITDA Multiples by industry 2019
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This chart takes Earnings Before Interest, Taxes, Depreciation & Amortization and applies a
multiple based on the industry category. Some categories have sub-categories with the
multiple changes in those categories.
For example, Business Support Services has many sub-categories that range from 7.37 to
11.07 multiples.
If you don’t see your industry, you can Google trade associations, trade publications or
industry association and call them up to see if they have any kind of guide or averages they
use to determine a multiple in their industry. You can go by Standard Industrial Classification
Code to see what average incomes are.
Use this as a guide to look at the sales for the chart above or the profit for the chart below to
determine if the asking price is reasonable.
Templates to analyze the deal
With the information from the following two templates (#1 & #2) you can determine the type
of funding techniques you will need to make an offer #3.
Template #1: Use this as a gauge to determine how reasonable the price is.
Is ___x SDE/EBITDA* Price Reasonable
Asking
Real Estate**
Net Ask
$__________
($_________)
$__________
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/SDE-EBITDA $__________
Ask Multiple = __________ (Compare to Industry Multiple from the chart) ________***
* SDE (Seller’s Discretionary Earnings) is EBITDA without all of the owner’s income and
benefits. For the above chart, you should take the SDA and include the expected salary for a
general manager and any other benefits, so that you can apply the EBITDA multiples. The
multiple for the EBITDA is normally much less than for SDE.
**Roland likes to separate the Real Estate from the business so that he can determine the real
asking price without complicating it with the Real Estate.
***Compare your calculated multiple with the multiple from the charts and ask: Is this a
reasonable multiple? This gives you a starting point to negotiate.
Watch Shark Tank/Dragon’s Den to get an education on buying a business and hear the crazy
valuations that the sellers come up with. Watch a couple of your favorite episodes before
going in for negotiations to get you in Shark Mode!
Template #2: Your Target Analysis Profile
Use this as your information-gathering device, and to have a conversation with the Seller to
make sure you cover all-important elements.
You may need to sign a Non-Disclosure Agreement (NDA), which means that you are not going
to disclose and share their private information with anyone. You will then ask for four
financial documents for the past three years to complete this information:
1. Income statement or Profit & Loss Statement – shows revenue, expenses and profit
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2. Balance Sheet – shows all the assets, liabilities and owner’s equity
3. Statement of Owner’s Equity or Shareholder’s Equity
4. Statement of Cash Flows – shows the actual cash flowing in and out of a business
A business might be profitable, but it’s cash flow could be negative because of the Accrual
Accounting method that accountants use to record expenses when it’s billed and revenue
when it’s earned, not necessarily when money changes hands as in Cash Accounting.
After you get the financial statements, you can use the information to complete the Target
Analysis Profile sheet.
Key for the Target Analysis Profile
Pluck out these bits of information from the financial statements on the left-hand side:
Cash – What is the actual amount of cash the business has available.
Accounts Receivable – What the business has earned (but might not have been paid yet)
Notes Receivable – Promissory note from another party expected to be collected with a year
CD=Certificate of Deposits
MM=Money Markets
TB=Treasury Bills
Securities – A certificate having monetary value and that can be traded; e.g. stocks & bonds
Raw Materials – First determine the cost – not market value – of the raw materials, then make
sure it does not have a short shelf life, and would soon be thrown out; e.g. fish for a
restaurant
Work in Process (WIP) – Anything the business is in the middle of building; e.g. for a computer
program, WIP would be the coding while the program was being created
Inventory – The finished goods after a production process, or items bought to sell
FF&=Furniture, Fixtures & Equipment [Sometimes called PP&E=Property, Plant & Equipment]
Vehicles – Cars and trucks
Real Estate – Property consisting of land or buildings
The following is information you’ll gather for the right-hand side of the profile:
Ask – How much is the owner asking for the company?
SDE$ or EBITDA$
M=Multiple. The Ask$/SDE or EBITDA$ = Multiple
$ Sales is Net Sales, preferably in the last 12 months. Gross Sales minus all returns, allowances,
discounts, charge backs = Net Sales [Income Statement]
ARR=Annual Recurring Revenue; MRR=Monthly Recurring Revenue x 12 months = ARR,
which is sales you don’t have to go and make again. The Churn Rate will tell how much of
that amount is going away every month or every year, so you can budget out so you know
how much you can count on. Anything else you can sell is a bonus on top of that.
AP=Accounts Payable [Balance Sheet, under liabilities]
RE NP= Real Estate Notes Payable [Balance Sheet, under liabilities]
Def. IP=Defensible Intellectual Property like copyright, trademark, patents or trade secret
[Buyers like IP because it is a soft asset that can give a competitive advantage.]
Runs – How many runs per day
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Shifts – How many shifts are they doing? Are they doing 8 hour or 24 hour shifts
% capacity – The goals is to determine how much more in productivity or sales could you
increase by before needing to add more machines, equipment, labor or other stuff. This
allows you to determine the additional capacity available to use or lease out.
Mkt via – Marketing process, via Adwords, Social media or traditional ads?
Sell via – How are they generating leads and closing sales?
CEO (or manager), COO (or supervisor), CFO (or bookkeeper) – Who’s doing each of these?
What’s the plan for them? Are they staying or going? Smaller company owner may be
doing them all.
Customers – How many are currently active?
Prospects – How many prospects do they have in the pipeline?
Seller RFL=Seller Reason for Leaving [This will help you know how you’re going to present the
offer, and how much does the offer need to be.]
Wants – What’s causing the seller to sell? What does the seller want to do with the money?
The more you get them talking, the more you can get them thinking about the future
(future pace) and the happier you’re going to make them feel about selling, and the better
you can structure the deal to meet their wants.
#3 The Deal Stack: 19 Ways to Acquire Businesses for $0 Out-of-Pocket
[Roland has gathered 159 creative ways that he has done deals for $0 OOP.]
The generals that win wars are the ones that have the most options. Now you will
have 19 options to structure deals to outwit, out-bid and out-smart someone
competing with you to buy a company.
This is a tool kit of ways to acquire a business, and they can be combined in multiple
ways:
1. Carve Out. When you make a list of all the assets in a business, you don’t need all
the assets to do what you want to do, and you can carve out certain things out of
the deal to reduce the purchase price. Some things you can ‘carve out’ include:
! Cash required to operate the company is called Working Capital. You may be able to
reduce this. For example, if WC is $200k, and you can get it down to $100k, the
additional $100k would be a carve out to reduce the purchase price.
! Inventory can also be another carve out.
! Equipment or other assets could be a carve out.
! AR Financing – What do customers owe the company? You can carve these out and let
the seller collect on the AR. That will be cash flow that you won’t get, so make sure you
have enough Working Capital.
2. AR Factoring – Sell the Accounts Receivable and get 80% of the total amount that you can
give to the to the Seller. If you can carve out $100k of the working capital and $100k of the
AR that you can factor, you will have $200k to pay the seller. If it was a $1M and the seller
was willing to carry back 80% (seller finance), then you found the other 20%.
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3. R.E. Sale/Leaseback – If the deal was $2M and $1M was in RE, you could: #1 carve out the
RE, or #2 go to a commercial real estate broker to sell the building, which gives you the
money to pay off the lender, and the equity goes to the seller, which reduces the purchase
price of the business. Then cut a deal with the buyer of the RE to work out a market rate
lease or favorable lease. You’ve taken that asset out of the company, but you now have
cash that is the equity you’ll have in the property when you buy it, that you can give to the
seller to reduce the purchase price.
4. Earn-In – Provide services, such as consulting or growth, to a business in exchange for
equity. Roland had a deal with a mail house where every additional $1M in sales brought
into the company; he earned an additional 2% in equity (an Earn-In with a milestone).
5. Owner Carry – Seller financing. The seller is carrying back the note, usually between 40%
to 90% of the business in a promissory note.
6. DDP=Deferred Down Payment – One of Roland’s favorite ways because it lets the seller
check a box on getting a down payment. It is literally a deferred down payment in a
shorter period (30, 60, 90 days, sometimes up to 6 months); whereas, a Seller Finance is
usually for longer periods (3-10 years).
You will then have 2 notes: 1) Owner financed (like a mortgage) and 2) DDP short-term
payment (note payable).
[Roland told the story of giving William Shatner a deferred advance (oxymoron) for his
$500k advance on his book, by paying him from the sales from the book.]
7. Baseline – Determine a baseline profit from which you can get a percentage split (50/50)
of the increase in profits. The magic of Baseline is to negotiate that when you get to 3x
profit, the entire profit will just be split (50/50).
[Roland told about a company making $2M in profits and the owner (a celebrity) wanted
to keep some equity in the company. Roland negotiated to determine a $2M baseline on
the business and then do their magic and get a 50/50 split on all the additional profits
from the $2M baseline already earned. When it earns $4M profits, the additional $2M is
split so each gets $1M. When it did $6M, 3x the profit, then 50/50 was $3M each, and on
everything in the future.]
8. Earn Out – When you can’t agree on a price, because the seller is basing the valuation on
future growth that may or may not happen (hockey stick projections), not its current
historical value. You tell the seller you want to pay them on what the business has done
historically, not what it MIGHT do in the future.
Tell them we have a couple of options: 1) Wait until the future and see if what you are
saying actually happens, or 2) give them option to buy it at your price, and if it earns what
the seller believes it will earn, an additional amount will be paid down the road. It defers
you paying the full purchase price at a later time. Roland has seen 100% earn outs.
9. Pipe Wrench – You’re in an existing business and you’re sending 10% or more of the sales
to another business. You say, “I’m not going build someone else’s brand so we’re either
going to do this on our own or acquire another business, or you can give us part of yours
and we will continue sending you customers.”
10. Inventory Consignment – If there is $100k of inventory, you can carve out that amount
and you have the seller to hold it physically so the seller still owns it, but as it sells you will
pay for the inventory at the value cost, not the price it is sold for. The buyer takes the
$100k off the purchase price, and keeps physical possession, then as it is sold the seller is
paid for the inventory
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11. ABL=Asset-Based Lending – You fund the deal by financing equipment or other assets
through a third party lender.
12. Supplier Loan – Go to the supplier and ask for a loan from them as part of the acquisition,
in consideration of a guarantee that they will continue to be the supplier for 1, 2, or 3
years.
13. Revenue-Based Financing – Companies will fund you based on revenue. As you earn the
revenue they take the amount from the revenue at an agreed upon rate. Credit Card
companies like American Express that will fund you based on your revenue. What you’re
doing is getting paid now as a loan for the future sales of the company, and the company is
getting a loan based on what it has sold in the past. Then you give that money to the seller
so it doesn’t come out of pocket. Lighter Capital will give you unrestricted capital for
growth in return for a small percentage of monthly revenues.
14. Integrator Equity Sale – Find someone who will run the company and offer them to buy a
piece of the equity, usually at a valuation higher than what you negotiated to buy the deal.
15. PPM=Private Placement Memorandum – You can use a PPM to raise funding for the deal.
Roland didn’t explain it more. Google search: A legal document that discloses everything
the investor needs to know to make an informed investment. It describes the company
selling the securities, the terms of the offering, and the risks of investment.
16. Sponsorships – Sell sponsorships to businesses that would like attention or access to
your list for a one-time or MRR basis. This does not give up any equity. Roland sold a $50k
1-year sponsorship to a mortgage broker for a RE FB group he acquired.
17. Credit Card Cash Advance – Get an advance on your credit card to help fund a deal. This
has a higher interest rate, but it can be used if paid off quickly.
18. Split Equity deal – Split the equity with the seller so they continue to own a part of the
business and can sell their equity at a higher rate when the company grows.
19. PL-Private Loan – Find individuals who have money, and want to earn more than what
they could if it was sitting in the bank. Roland worked out a 3-year deal and paid them
10% interest only on their money, and no warrants, meaning no options and no equity.
Case Studies –shared a few examples using the tools
$250k FB Group for $0 OOP
! $250k ask for 253K member FB Group (they wanted $1 per member)
! $1.5k offer with DDP=Deferred Down Payment
! $1.5k paid in 30 days from cash flow (selling stuff to the group).
Don’t be afraid to ask how their valuation was determined. They were asked how much it
earned them in the last year and the answer was nothing, so only $1,500 was offered as a DDP.
$125k FB Group for $0 OOP
! $125k ask for 53k member FB group (Robust and active RE group.)
! $75k purchase price agreed
! $70k RBF=Revenue Based Financing - first funds in from Cash flow
! $50k 1-year Sponsorship sold to a MB=Mortgage Broker
! $20k 1 year Sponsorship to a training
! $5k Split equity for the person who owned part of it, and a CC Cash Advance
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$5M Mail House for $0 OOP
! $5M 28-year old mail house
! 10%+ Revenue from our referrals from the RE company
! 20% Acquisition using the Pipe Wrench method = $1M value
! 2% Earn-In for every additional $1M in incremental sales brought into the company.
$300k SaaS for $0 OOP
! $300k ask for a 3-year old SaaS vendor (True Conversion) sold to DigitalMarketer
! $100k purchase price
! $90K - $10k per month for 9 months as an Owner Carry
! $10k DDP funded in 1 week from 1st email sent out (had 30 days, but earned it in 1
week)
$3M Publisher $3.9 Asking
! $3M publishing house ($1.3M EBITDA)
! $2M acquisition price negotiated (1.5x EBITDA)
! $1.6M 80% Owner Carry. 3-year balloon 0% meaning there was no interest and no
payments, just a 3-year balloon at the end.
! $400k 20% DDP in 30 days. (If he couldn’t get the $400k in 30 days through his SPV,
the worst case is he doesn’t get the deal.
! $400k 3PL=Private Loan for 3 years 10% interest only, no warrants (meaning no
equity and no options)
! $800k Integrator Equity Sale where 2 people earned a total of 20% of the company at
3x the valuation. Roland still owned 80% of the company for $0 OOP, and had $360k in
cash when everything was paid ($400k PL x 10% = $40k - $800k = $360k.
How would you analyze and fund a deal
Determine the
tools you would
use to acquire Bath
Bomb
Manufacturer.
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EPIC Challenge Action Steps
Answer the following questions using the Bath Bomb Mftr example:
1. Hypothetical deal stack: How would you fund the purchase of the Bath Bomb
company?
2. How would you do a $0 OOP deal? How can you fund the deal with $0 OOP?
3. How much cash? How much cash could you put in your pocket on this deal?
Answers later!
[Below is what Roland shared during a separate Q&A session and the answers.]
Acquisition Scorecard
This was used by Clarion to evaluate a potential acquisition.
Goal: Increase EV
Strategy: Acquisition Scorecard Improvement
1. Sector. Does the target deepen an existing (prioritized) acquirer position? Or, operate
in a market with attractive fundamentals and can it be easily added to the acquirer’s
group?
2. Geography. Priorities US and Asia based deals (or large transformative opportunities
with multi-geo).
3. Scale. Does the target make a significant impact on group EBITDA?
4. Growth. Does the target outperform group growth rate?
5. Margin. Does the target outperform group margins?
6. Quality. Is clear ROI being delivered? Does the market served have attractive
fundamentals?
7. Resilience. Does the target have positive (and improving) customer feedback and KPI
performance? Is the target market leading? How would it perform in market
downturn?
8. Management. Is management capacity and capability sufficient to support growth
plans? Is cultural fit appropriate? How easily can the target be integrated?
9. Ops model. Is model sustainable? Is model like existing acquirer models (doesn’t add
more noise/complexity to portfolio)? Can ops model differences between target and
acquirer be easily reconciled?
10. Technology. How does the target utilize technology to underpin management
decision-making? What systems are used and how would they be integrated with
acquirer?
11. Integration. Post-deal ops to align with group approach to financial and KPI
management, etc. Must be well managed and provide visibility of KPIs and financials
which can be consolidated easily.
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