260407 SCALEit Method Podcast Tom Shipley 1

Sometimes you're at the top of the mountain and everything is perfect. You have that wind at your back and it is amazing and nothing can go wrong. And then a brick wall falls on your head. And so that happened to me. Our brand went from 3 offers to buy the business for $55 to $75 million from great private equity firms. Fast forward 90 days later, our $600,000 a month profit turned into a $600,000 a month loss. And the bank threatened to break, said they're pulling their note. Everyone said we were done. And this is what I learned from entrepreneurship is when you're standing over that 10,000-foot cliff and you're looking down and everyone says you're done with, there are always options out there. It's never as bad as you think it is. And every time a year later you're looking back saying, I thought it was bad, but really there were options out there. Never as good as you think it is, but it's never ever as bad as you think it is. We just got the call from the bank that basically said, Tom, We're pulling the plug. If they pull the line, 1,000 people in our ecosystem will lose their job and then probably lose our house, maybe our cars and everything we've saved of our ways for our whole life. 5 years from now, we'll be selling our next business for $50 million. So what are you worried about? Let's get to work. Building businesses from scratch is kind of like being dragged through asphalt and glass. Acquisitions can solve almost any business challenge.

Hi everyone. Welcome to the Scale-Up Method podcast. I am your host, Allison Maslan. I'm the CEO and founder of Pinnacle Global Network, where we mentor CEOs all over the world to grow and scale companies that change the world. And I am excited to introduce you today to a world changer, uh, who is a genius at building and scaling businesses. extremely creative, quite the visionary, and I'm excited to learn myself. So let me introduce to you Tom Shipley. He is a serial entrepreneur, M&A strategist, and creator of the Add a Zero growth philosophy, which I love that. Helping founders 12-time their business through strategic acquisitions. From IDF's special forces operator to building brands generating over $2 billion in revenue, Tom's journey is defined by bold thinking and execution under pressure. After scaling Atlantic Coast Brands to $100 million in revenue by acquiring a $15 million company during a cash crisis, I can't wait to learn how that, how that happened, Tom became a pioneer in programmatic M&A for mid-market companies. He has raised $100 million in revenue for Foundry Brands, launched ABA to acquire performance agencies, and now leads a direct response growth equity platform. At his DealCon CEO summits, Tom teaches 7 to 9-figure founders how to scale fast, plug capability gaps, and engineer premium exits All through acquisitions. His core belief, nearly every business challenge or exit can be solved with the right deal. So welcome to the Scale-Up Method podcast, Tom. Thank you for being here.

Absolutely my pleasure. I get a lot of energy every time I talk with you, so I'm excited to talk to you and also your community. Which is what you've curated over the years is something very, very special.

Well, thank you. I appreciate that. And I'm excited to learn from you. So, let's just dive in. So, your story goes from Special Forces to building billion-dollar brands. So, that is quite 2 very different sectors, but I'm sure there's a lot that you learned. Uh, from being in the Special Forces that you probably apply that discipline in your, your business. But what do you think that experience taught you about operating under pressure, uh, that most entrepreneurs maybe, uh, are missing?

Yeah, it, it's a really, those, that's a really good question. I'll just say this just for context. Um, I'm a kid from Cleveland, Ohio who was at Florida State University. And I got to a fork in the road of life is fun, but what drives me is always a life of adventure and a life of meaning and impact. And so while it was fun, it did not serve either purpose. And I saw the opportunity to move to Israel to help this very young country. And there started my journey into— I mean, in spite of the fact that I told my dad what my plans were, dropping out of university and moving, First, he laughed. Then he said, what, you don't know the language, you're athletically— and so at best case, since you don't know anything about the Army, at best case, they'll allow you to come in and you'll be pushing papers. And Allison, you tell that to a kid with fire in his belly, wants to really change the world, who's 20 years old, and all it did is stoked the fire. And I look at my life, and I think everyone does, is you don't understand your defining moments when you're in them. You look back over your life and say, what were those defining moments? And me standing up to my dad respectfully and saying, this is my life and I appreciate your opinion, but this is my life. I'm taking control and this is my choice. And just, uh, again, turned out to be one of those defining moments.

Yeah. I look at her.

And so if you look at, you know, from, from, you know, getting into Special Forces, is that really difference between A journey as an entrepreneur. And I say that is that in getting into Special Forces and the unit I got into, and it was a unit, one of the top 4 Special Forces units, this one was dedicated for rescue, period. Rescuing civilians or soldiers across, whether it's within the borders, whether people fell off a cliff or across, if there is some natural disaster. We were just trained to rappel out of helicopters, jump out of helicopters, rappel. It really didn't matter from where. And we can say that my, my unit has been very active over, over even outside countries and what's going on. So just for context.

Um, and I would imagine like you, you had to, you know, your decision-making, you probably really honed that in because you had to make quick decisions, quick, life-impacting decisions.

You're so correct. And we're trained as medics at corps, as we say in the United States military corpsmen, but we're trained as medics. And so, there's the first lesson I learned, which is in medic courses, when you're in a mass casual event, you'll never have the right tools, the instruments, or the time available to save the lives you need to. So, a good medic is one who improvises. Now, let me turn this into entrepreneurship. A great entrepreneur will never have the resources we need. It's all about being resourceful. And if we're resourceful and we just improvise, we can solve— if we think outside of the normal conventions, or some people say outside the box, we can solve almost any business challenge. Again, what lessons did I learn? I learned about teams. And just from a numbers perspective, 10,000 soldiers try to get into my unit. They go through a series of tests over a couple of months and they pick 1,000 of us for Hell Week. And at the end of that Hell Week, which they tested everything for, not only strength, tenacity, do we ever give up, but also our integrity, which was a big component that people were bounced out. They had some incredible psychological games and tests. It was all testing us because they picked 25 of us to go through an 18-month course. At the end of 18 months, there were 14 of us. And their goal of all that testing was to identify who can actually successfully complete 18 months of training. Now, Allison, let me flip it. Is what's the probability that a business is going to scale to $5 or $10 million and be able to sustain for over 5 years? You're talking about a similar percent.

Yes.

We as entrepreneurs don't see ourselves and associate to almost everyone who's going to fail. We see ourselves and we envision ourselves that we will be the exception and we will have impact and we will Basically, identify opportunities that no one else does, and we're going to lean in all the way. Yeah.

Well, I mean, you have to. I always— people ask me, how is it that your companies have been successful? And I always say, because I've decided that they would be. And I think there's just such a big part of that. And I I would imagine that you learned a lot of that resolve in the military. But, you know, you're going to have so many ups and downs that you face as a business owner. So, being resourceful—

We are forged by fire.

Yeah.

And we just get— the more fire we have, the more tribulations we have in the Army as well as in business. We also developed that— something that a friend of mine told me as I was going into the process. Tom, remember, you can always take another step. And I said, define that for me. He said, when you're going through trying to get in the unit, and even when you're in, he said, you're going to look to the left and the right of you. You're going to see people that are a lot bigger than you, stronger than you. And you look at them as, oh my God, I can barely take another step. And they are just forging ahead like nothing— like this is nothing. And believe me, they're looking at you saying— This guy will just not stop. He's just not quitting. He said, you can always take another step and, uh, and then another step, and pretty soon you cross the finish line. And in business, we're gritty, we're tenacious, we're entrepreneurs. We don't give up. We don't give up. We'll, we'll figure out a way to get through a brick and a concrete wall.

Yes.

And this is something I also learned, is that— and this is something that you probably relate to and all entrepreneurs relate to— is Sometimes you're at the top of the mountain and everything is perfect. You have that wind at your back and it is amazing and nothing can go wrong. And then a brick wall falls on your head. And so that happened to me over and over again. I'll share a story that happened to us with the— with our brand, where it went from 3 offers to buy the business for $55 to $75 million from great private equity firms. Fast forward 90 days later, our $600,000 a month profit turned into a $600,000 a month loss. And the bank threatened Brexit. They're pulling their note. But again, these things happen. Now, let me say, at that period of time right then, everyone said we were done. Our advisors, everyone said you're done. Our bank ever said you're done. And this is what I learned from entrepreneurship is when you're standing over that $10,000 foot cliff and you're looking down and everyone says you're done with and just to quit, there are always options out there. It's never as bad as you think it is. And every time a year later you're looking back saying, I thought it was bad, but really there were options out there, whichever ways it goes, is there's always options. So I would say it's never as good as you think it is, but it's never ever as bad as you think it is. That's for— it's about resourcefulness and about tenacity, and we keep on going as entrepreneurs.

So in that moment though, Tom, like that was the defining moment. And I know there's so many founders that I talk to all the time that have those moments where they're facing something so big. And here you were, you think that you're at the finish line with this massive payoff, and then it ended up being the opposite. What goes on in your brain? Like, what do you do personally to make that shift? From going, holy crap, to, okay, let's figure this out, or this is what we're going to do, or holding your vision?

Is I never— well, first of all, I guess whether this was before the Army or the Army, whenever there's a crisis, I don't get plugged in. I basically handle things extremely neutral. I look at the information, I look at the facts, and I basically get alternatives that are out there. And try non-emotional to take the best option. Now later on, I'm going to say the physiology catches up with me. I get those weak at the knees moments, and I feel it in my stomach and my thighs, just the nervousness because normal. And then I try to put things in perspective. And just to give you an idea, so imagine this: it is on the way out to one of my first masterminds I've ever been to in Boise, Idaho. Here we are, and and I was supposed to be this you know the biggest. biggest company that's there. And we just got the call from the bank that basically said, Tom, we're pulling the plug, we're liquidating, and we're just basically taking whatever we can get, pennies on the dollar, by selling the brands and the business. And we're just going to move on. And we've just given up. And I got that call as I'm going to this great mastermind and I'm in Boise, Idaho. And my wife and I, who's joining me for that, were running along the Boise River. It was one of those days where the rain, where the mist was so thick I could barely see her in front and next to me. And I said, can we go to a very dark place? And she said, let's go there. What's happening? She knew everything that's going on, but it's a process we go through. I stated $600,000 a month loss, $600,000 a month negative. We basically had our main— our FDA manufacturer, only one in the world that can do this product. They went out of business. It took us 90 days to get that product out of bankruptcy. So we're manufacturing again, but we lost most of our auto-ship customers and takes years to build it back up. So Everyone says we're done. And she said, so what's going to happen next? I said, if they pull the line, 1,000 people in our ecosystem will lose their jobs. She said, then what? She said, and then we're going to probably lose our house because we're personally guaranteed on the next line down. And what? I said, maybe our cars and everything we've saved of our ways for our whole life. She said, and then what? I said, there are other implications because the way we're structured that may happen. She said, and then what? I said, well, she said, where are we living? I said, we're moving to a— we're renting an apartment. She said, and then what? I said, well, then we start next business. She said, where are we in 5 years from now? And I said, well, 5 years from now, we'll be selling our next business for $50 million. She said, so what are you worried about? Let's get to work.

Wow.

Like that.

So incredible.

And it's a paradigm shift. I take business very, very seriously. It's a game I don't want to ever lose, and it's the greatest game there is. However, relative— the most important thing to me is, is I have my wife and my girls. I can start again. I can do anything again. We have the tools and residual. So understand, the deck of cards may be stacked against, against us, but this is where you get a chance to show your creativity. It's what is our mustard. It's about the greatest stories in entrepreneurship. Every movie we've ever seen. It's when all hope is lost when we pull it out. And sometimes we will and sometimes we won't. And if we actually lose and don't get it over, we've got some incredible skills that we will leverage for our next business.

1,000%. 1,000%. And that is really the gift of entrepreneurship because all of those skills that you use to get to where you were before that happened, You still have them. None of that changes.

That's it. Now, I'm going to give some just practical advice is what did that actually mean for us is I went to that mastermind group. And for the first time, again, I'm social forces. I keep everything. I keep everything with my team, but nothing gets out externally. And I went the opposite direction. I shared all my problems exactly where we were. And I started getting advice from everyone. And some of the advice I got was, Absolutely crap. And by the way, but inspired some great ideas and I got some great advice and I started creating a list. I talked, I then called some other friends from Pierre Belcher, Ryan Deiss, like, here's my problem. And I was no longer keeping it in. I was open because what would I have to lose? So give me the list of ideas. I brought it back to my team and we started rank stacking everything as far as from a probability of success, the impact and the resources it would take and just Rank them accordingly. And those things that were high probability of success, easy to implement from resources, time, and money, and had the biggest impact are those that we went after. And we just looked at, tested, looked at data, tested, looked at data. And over half the ideas did not work. But again, they were tests. Those that did work, we leaned into, changed our business model, and evolved. And one year later, we got back to $600,000 of profit. Fast forward years later, we sold to private equity. We eventually got the business to a $9.5 million EBITDA. But again, and we had some breakthroughs because we had breakdown as the context to breakthrough is because we had the breakdown. We learned so many things afterwards and those were the gifts. That one year was the best year in business in my life, period.

Wow. Wow. Yeah, I think, you know, we are so afraid of failure, but it's so true when you look back and I know for myself, In decades of business, that's where the biggest growth has happened on the other side of that, um, you know, that wall that you hit. I won't even call it failure because it really is a stepping stone to what's next.

Allison, let me ask you a question. Um, and again, we'll get into the tactics and my strategy for adding zero in acquisitions that I think every entrepreneurship should do. But the one thing that, that I think that is the biggest fear of most entrepreneurs and that actually takes successful entrepreneurs after their losses or failures and puts them into hibernation for a long period of time is shame.

Yes.

And so, how have you worked with people to actually help them get through that shame, which it only— shame just is the biggest time killer. You can lose A month, 6 months, 3 years getting over the shame. So, how do you work with entrepreneurs on that?

Well, I mean, like you were sharing, when you went to that mastermind, you got some great input. I'm sure that nobody was judging you there. They were just wanting to help. And the power of that was that you were with other people that got you. And so, I think that's for the founders that we work with, the community of CEOs, we hear it all the time like, wow, I've never experienced being around people that really understand me. And I think that helps with that feeling of shame or embarrassment because everybody else has been Through their version of it. And they start to see, that's just part of the entrepreneurial journey. It's like the training to climb Mount Everest. Lots of falls and lots of altitude sickness and all of those things that are going to happen. And I think when you try to do it alone, that saying, it's lonely at the top. And you're in a silo, you're going to stay there and you're going to beat yourself up. And so it's just so important to find your community. And I really think it's the smartest thing you can do in your business is not do it alone.

I think that also that people think that people care so much and they're going to hold onto it for years when really is they might have a quick opinion on what happened, but A month later, a week later, they're not even thinking about you, or you're just carrying it and you think that it's this your reputation and therefore it holds on to you. And I admire the most the entrepreneurs that have a great epic failure, and then they they come back for the next business. They come back with just confidence, certainty, and they just go for it. And that's all that's the greatest stories that we often see. So I love on you know entrepreneurs that fail. It's part of the game. It's part of the nature. And if I can change anything in our society is that. That acceptance and the ability to just not care about what people's opinion of you are and just live your life. Yeah.

And you admire the courageousness that they have. To me, that's the way I see it. So, well, let's get into some of the strategies that you are implementing over the years here. I am very curious. So you said that Acquisitions can solve almost any business challenge. Can you break that down for, for the entrepreneurs that are listening right now?

Yes. And I want everyone to understand a couple of things. First of all is I am so passionate about scaling organization and marketing strategies, tactics, and data. And I've been able to accumulate a lot of knowledge in that area through experience of trials and errors. So I love talking about it. However, when it really comes down to one thing is I made a decision 6 years ago that building businesses from scratch is kind of like building, being dragged through asphalt and glass versus acquisitions can solve almost any business challenge. And therefore, I decided that I'm leaning into it. Now, let me give you an example. In my first business was it was an online business, plus we mailed out catalogs for those people who remember catalogs and we got to a dozen pages in SkyMall magazine.

Yeah.

And everything was great until there was a recession and consumer confidence went down. Basically, we started losing money and we were out of cash. And opportunistically, I was speaking to an— I was making phone calls because you lean in. And I talked to an investment banker in New York who said, Tom, I've been trying to reach you for a couple of days. I have the perfect acquisition for you. And I said, OK, I'm game. So again, I knew we couldn't make our payroll in about 30 days, but that's OK. Let's go for it. And then he said, yeah, we're representing— Now, this is a really good lesson. He was representing Boise Cascade. They were selling off a division. They had a buyer for their $750 million division, but that division had a $15 million division that the buyer did not want. And it was blocking the sale. They needed a home for it. And it was a perfect complement to my business. And lesson one in acquisitions, if you have a motivated seller, you can find terms that will work for you because they didn't need the cash to close. Again, they're such a big organization. And so fast forward 90 days later, We closed on that business. Fast forward 12 months later, I exited that business. Okay. And again, that it doubled the scale and gave us new opportunities. Fast forward, Allison, 2 years later, my partner and I are taking my blueprint on building iconic brands using direct response marketing. And here's the absurdity. 2 former Special Forces guys living in Richmond, Virginia, said we're going to build the first $100 million beauty brand using direct response marketing. With that level of certainty, fast forward 12 months later, is that we went financially all in. Not only the business credit card, maxed out personal credit card, second mortgage on our house, 401s, and even we found out that to feed our girls— we both had 2 small girls at that time— we can actually take loans out against our cars. But we were quickly eating our way through both bumpers. And what do you do? So my partner said, What are we going to do? And I said, well, last time this happened, I bought a business. So, but what was our challenges? We not only had no cash, no cash flow, we had $331,000 business with a slight loss. The metrics on lifetime value and customer conversion were great, but we didn't have an infrastructure. We couldn't do A/B testing on our website. It was just us and we needed everything. So we found a $15 million business in Hoboken, New Jersey, throwing off $1.5 million in cash.

Okay.

They were growing every year. It was owned by a very young couple who started it when when they were 20 and they're both 25. And so we ended up buying that business. It basically not only gave us cash flow of $1.5 million a year, we can pay ourselves our salaries, our wives were happy. But more than that is it gave us a great tech platform because you couldn't buy it off the shelf back in 2005. Internet marketers, designer, developer, fulfillment, everything we needed. We put our little $331,000 brand on this $15 million platform. Within 3 years, we did $100 million. And that's the skincare brand we did our first billion dollars on. So it's— that's why I said acquisitions can solve any problem. And remember, it's not about— you don't have to have cash in the bank to do deals. Again, I— what are you looking— we can go into that strategy.

Yeah, I'd like to— like, when you're— what are you looking for when you're looking to acquire a business? Like, what are those main bullet points that are, you know, these are have-tos. It has to have this, it has to have this, and then what are the, what are the ones where you go, oh my gosh, no, absolutely not, this will not work?

It's a really good question. First of all, I have to have a business thesis. Why? What am I looking for in an acquisition? Because typically, I have my thesis, I have my buy box, what would be ideal, and then I basically do an outreach campaign just like we do any marketing campaigns. where I outreach to potential prospects. I get calls on my calendar. So hopefully I'm driving a buy-side process where I'm having 3 to 5 calls a week with sellers. And those once-in-a-lifetime deals come up on a regular basis. So that's really the goal overall. So it has to fit my thesis. Why am I buying it? Is it as a platform or is it incremental to my business? Is it another service I want to offer? Because if I start a new service, I have to invest in people and take risks that'll be successful. Versus I can buy a business. And if I'm buying a profitable business, there is hundreds of ways to finance acquiring a profitable business. So, when it really comes down to it is that's— so, I look for, does it fit my buying criteria? Number 2 is how confident am I about the future of this business? Are all the customers concentrated so it's 70% of their revenue?

Yeah.

Is one is one customer? Is there one person in the company could be the owner that is reliant on that if they leave the business goes to zero? I look for things that put the business at risk. Some people, Allison, are really good at buying distressed businesses, businesses that are in trouble, that are losing money, and turn and turn them around. The only distressed business I will buy is a good profitable growing business that has a bad balance sheet. They might have just. Borrowed too much money and they're financially in trouble and can't service it. Well, I can fix that if there's a good profitable business. So my— for me personally, I will not, you know, I'm 99% sure I will not buy a business that is in trouble again. I didn't say 100%, I'm 99% that's in trouble.

And then the diversification, right? So you don't have all their eggs in one basket as far as their clients, customers, and also their team.

Correct. 100% correct. And then again, what can reduce the risk of it? Do they have good SOP? You know, their SOPs, are they in place? Are they clearly documented? Do they have a moat around this business? How risky is their business model? And I look at their customer history. Is, is, are their customers, you know, if they maintain the same amount of customers, but there's no concentration, but they're churning their customers. Well, again, that's a risky business if they have bad fundamentals. I look for business that customers love them and they're sticky. They stay forever.

What about the company culture? How much does that matter in your decision?

Huge, huge, huge, huge. Because I have to understand why I'm pulling him in, but I also look for conflicts as far as the way— and I'll give you an example. When we bought the business we did back then, as far as the $15 million business, Urban Nutrition, they had a different culture than myself and my partner. And again, it was It took a while to evolve to our culture because their culture was the founder and his wife were brilliant, period. But the way they wanted their people to work is, I will tell you what to do and you will do that. Okay? Mine is a commander's intent. Here's general parameters, but I want you to learn everything you can about the business, about how we make money. And I need you to think and I need you to challenge, ask questions, and question everything. So, to break that culture. Now, if I was to bring a business that's half my size into my business, now suddenly 50% of my employees is new and we have a different culture. It creates some challenges. So, I like to understand what's the culture, how they operate. There's cultures that are run like Amazon and that's the management team, which is high pressure, high expectation. Okay? And therefore, people are driven hard. I don't work well in those environments. So, why do I want to acquire one? I work really well with high expectation, low pressure, and people and a culture of people, employees that can work great in high expectations. They like to raise the bars themselves and low pressures. You don't have to micromanage them. It's the type of people I like to buy. But everyone's different. Some people might say, I want a culture just like Amazon, high pressure, high expectation, high metrics on OKRs. I want that and I'll adopt it in. So it all depends on Right. But cultural fit. And as important as cultural fit, Allison, is understand that when you acquire a company, the day you close is the wedding day. The most important thing is the marriage. So as you're learning about this company, as you're going through the due diligence process to identify what are the red flags that either need to be cured before the close or planned against, what you're really doing is developing a— your 90-day plan for the business. And understanding that everything starting from the day you close is critical. How do you win the hearts and minds of the team you just acquired? How do you get them comforted? If you don't give them enough information, they will fill in that blank information with the worst possible stories in their head. And then undoing that is going to be very, very difficult. Same thing with clients. Uncertainty is not good.

Yeah.

It's part of the playbook.

That's such great advice, really. But the power of acquisitions, I mean, you really are leveraging Their years and years of building their audience, their team, their products, their vendors, their reputation, all of that would take years.

All the failure, all the mistake that they did over the year, you're walking in like nothing. Now, let me just share with you a number. We talked about 10 or 12x, but here's a basic number on here is that if you have a really— if you have a mature business and you're shooting for 20% growth every year, do you really ever hit it? Is there such thing as a bad year? So I'm saying most businesses that are mature businesses, if they're good, they can grow by 10% compounding every single year. And at the end of 5 years, they can actually increase the value of their business by 60%. Now let me flip it. You buy one business, you dedicate 5% of your resources in your company. You buy one business every year for 5 years. At the end of the 5 years, your business will increase in value 2,000%. Now, it doesn't have to be half your size. It could be a third of your size. You can skip a year, but in general, just understanding the compounding effect about compounding normal organic growth with stacking. And again, I love stacking with— and what you do when you're doing an acquisition, you're not only buying EBITDA, which increases your value as you increase your EBITDA, you're also solving for some of your greatest constraints. You know, we have— we're great at operations, we're weak at sales, where you're going to acquire a company that has great marketing sales team. We're great at sales and marketing. We're weak on operation. We basically If we, we have an e-com agency that's focused on, on, uh, Google and Facebook, well, I'm going to buy an Amazon agent because it's everything my clients need and I want to centralize all the data. So again, from an agency, if I have, you know, if I have a service business, a home service business, and I have one vertical of just basically I do electric, well, let me do plumbing also at the same type of infrastructure. It doesn't matter.

Right.

So identify your greatest weaknesses or Your greatest opportunity for growth that your customers need is logical. And what you do from an acquisition rather than investing it, you're getting all that knowledge and that investment for years of building it. You're getting it like this.

Amazing. Amazing. And it could be folding into the brand that you already have, right? So you're buying your competition or you're adding on another service or product or something that is That could be an upsell or a cross-sell.

100%. If you're in the product brand business like we were with, with us, um, even our, one of our more successful brands that in order to, in order for us to quickly over 2 years get to $40 million in revenue, we were invested $7 million into that, for, into that brand. We were upside down in cash. It was profitable. We were upside down from investment perspective. If I would just take in a fraction that just bought a business and do it, done it on If I'm buying a profitable business, I can leverage third-party debt rather than if we're building internally, it's all out of our pocket.

Right.

So again, it's just, it's just different approaches on that is we've been more successful. So even if you have a product brand business, you know, you want to buy hero products and you can, you can fold it underneath your brand or a second brand that's complementary to your brand. I don't care about the business. It's the same type of thoughts regardless of what the business is.

Amazing. I love it. I love it. Now, you talk about adding a zero mentally and strategically.

Yes.

So, so let's talk about that a little bit.

I love that. Let me tell a quick story here. So it was— so we were in Hoboken. Basically, our home was in Northern Bergen County. I was commuting an hour and a half a day when COVID hit down to Jersey City, and suddenly I was saving 3 to 3.5 hours a day. So I called a buddy of mine up in Austin, Texas, and I said, Brian, want to do something fun? Let's— we've always talked about doing something together. Let's buy it. Let's buy a brand together, whether it's e-com, whether it's Amazon, and let's just scale it together. I said, because at that period of time I had my choice, either do something entrepreneurial or watch Tiger King and drink myself to death. So I chose, I chose Dore. And Brian said, great. Then I called him up the next day and I said, Brian, why are we stopping at that? Let's add a zero. Why don't we build a platform that we can acquire over time and we can manage 10 brands? Brian said— Brian's incredible. He said, I'm in. Then after a long weekend, I called Brian up. It was COVID. We thought a lot. Okay. So I called Brian up. I said, let's add a zero to that. Let's— what do you think about it? Building a platform where over time we could acquire and manage over 100 brands. I said, now I know that my current business, Line of Coast Brands, if I'm having trouble managing more than 3 brands at one time and the little brands, I'm essentially my little brands that can enter a certain velocity of $15 million, I'm more or less giving away. Someone just buy the inventory from me and I've given brands away again, which creates opportunity for other people. But I said, I said, then I learned at that period of time, I read an article by a Harvard professor which taught me an incredible question to ask every time you ask your operations team to do something. They're going to say, yes, yeah, but, yeah, but, yeah, but. So the question inverts it. What would have to turn to them? And it's what I do to myself. What would have to be true to make this possible? I had trouble managing over 3 large brands at one time. And here I am, the audacity to say, Brian, let's add a zero and let's buy and manage 100 brands at one time. So what would have to be true to make it possible? So we went through all our operating assumptions and said, what would have to be true? And said, We created a list. We said we can do this, we can do this, we can do this. With that, we built a financial model. We built a 12-page deck. We talked met with seven private equity firms. We got six term sheets for $100 million, and that's how we launched Foundry Brands. If I went out to try to raise money and try to recruit some senior talent from Amazon with the ideas we're going to buy over time one to ten brands, how many people would have jumped on board? It's because we added two zeros that made. Everything easier. And yeah, I'm not necessarily saying—

Got everybody excited to— and they came because they felt that passion and conviction, right?

Correct. Big vision. But we also had a clear plan on how to get there. The powerful thing about adding a zero, about adding 2 zeros, Allison, is it changes the way you think. And I'm saying you should definitely change your business model to, uh, to add 2 zeros. But I just shared with you One strategy anyone can do to add double 2 zeros. Now, what does that mean? It's 20x your enterprise value by create the vision, develop the plan to buy one business half your size every year, and you'll 20x your exit. Just straight. That's the way you do it. Now, again, I want people— I'm hoping entrepreneurs understand, like with everything, there's a process behind this. So, we're not going out with like children playing with chainsaws. But there's a process to do it successfully.

Yeah. And be very strategic about it and get the support and all of that. But I absolutely love this. I mean, one of the things that we talk a lot about in Pinnacle Global Network is scaling and scalable models. And I would say out of the 15 scalable models that we work with our clients on, the acquisition really is like in the top To for fast growth, as long as you have all of those boxes checked off that are non-negotiable for you. But I love that. I love adding the zero. That's fantastic. Now, for somebody who is at, let's say they're at $5 million, $10 million that's listening to this right now, what do you think needs to change first for them? For them to add that zero or 2 zeros? Is it strategy? Is it team? Is it mindset?

Okay, I'm going to say it's mindset. And the reason why is every single business hits a certain level of ceiling. And that ceiling is, I don't care, I've seen businesses stuck at $1 million, $10 million, or $50 million or $100 million. And then they can't seem to cross over that. And then here's what I learned at Atlanta Coast Brands is that at one time we were the 3rd largest print advertiser in the United States, USA Magazine, magazines, things like that. And 5 years later we did zero because the effect in this wore off. At one time we were the 3rd largest short-form radio advertiser in the United States. 5 years later we did zero. Same thing for our 15th largest short-form TV direct response advertiser. Fast forward 5 years later, zero. Infomercial, 15th largest. We went down to it being 3% of our spend. Every channel, every program, every offer just depletes over time. So what you're doing is you're on a hamster wheel coming up with the next product, the next service, the next offer, and your next client base to go into. And how do you expand? And you're on this treadmill thinking about how do I replace what's less efficient to maintain where the level I am? So how do you break that mindset to say, no, no, no, no, no, no, I'm not going to just fight this battle every year in this hamster wheel. I'm going to actually end up adding a zero to my business, then how do I strategically get there? And I say, whether it's adding a zero or even doubling your business, it first starts with opening up your mind to the opportunities and the possibilities and then finding the resources and the strategies to get you there. And then you're right. Ultimately, you need a team to execute.

Yeah. These are gems. Absolutely. So, this is a gift for any of you that are listening. Absolutely. So—

And you did mention teams. What I learned in Special Forces with the team that I trust, and again, there were 14 of us together, with a team that I trust who have my back with the highest capability capacity, we can do anything. With my best teams, I had a situation when we were against the wall in And we had to let my CM, my chief marketing officer, go. And I lost 2 of the most invaluable people on his team when that happened. And so I went out and hired, even though we were losing $600,000 a month, I went on to hire 2 incredible superstars. But the energy that they brought in and the level of expectation and standards that they brought in, it helped. It was part of the keys to success of turning that business around. Team is really key. You want people that are all heart, all all in, but of high capability and capacity, and they're open to learning. And if not, they will hold you back. And those people that say, yeah, but the person's been with me for so many years and they're good people, understand this: there are opportunities for them to find jobs anywhere else. But the people that are good but not great— I'm not saying bad employees get rid of, but mediocre employees that are just good-hearted and they are not the greatness you expect— they're— when actually let them go and give them an opportunity to shine somewhere else, then you're basically— your team is going to appreciate it because top high-performance people want to be surrounded with high-performance people. Yes, it's the most difficult thing for any entrepreneur to do.

It is, and it is so hard. But what got you here will not get you there. And so I totally get that. I wanted to ask you about, for those For those CEOs, because we do work with a lot of founders that they want to have a premium exit, how should they be thinking about acquisitions today to position themselves for a great exit later?

Okay. So, let's start with this. Have a realistic expectation of what the value of your business is and be open to what the discount factors are. Now, what I mean by that is, let me talk about the 9th wonder of the world, which is exit, is multiple expansion. Multiple is the— is a multiple that's typically against EBITDA or your profit of the business and not against revenue that someone will pay you for the business. If your business is generating $1 million every single year before taxes and depreciation and interest, if your business is generating $1 million a year, then the multiple is someone should pay you, depending on the industry, 4 to 5 times its worth. If your business suddenly is worth— is basically making $10 million a year, you can be getting anywhere from 8 to 12 times that multiple again. So, the higher your EBITDA is, the more people will pay. Why is it reduces— the higher EBITDA, the lower the risk, the more larger organization, the more professional it is, and the higher probability someone has your future of the business and where the strategic buyers and the real money is that will invest in your business. So, that's the first thing to understand. So, when you go out to thinking about selling your business, understand what your number is. What are you looking for from a valuation that you need? The next thing is, is what is the value of your business for multiple and what things will hurt your ability to sell the business? Client concentration. 30% of your business is with one client. Okay. It will hurt you. Reliability. No SOPs, but really understanding the discount factors or you're too narrow as far as the services. And then understand this is if you do, if the number isn't what you want and you want a higher number, understand that some of the time the greatest and the fastest path to a successful exit is through an acquisition. So understand what will drive up your EBITDA number that changes your multiple and what services you can, what services or what weaknesses you have you can solve for in order to get it there. So that's why I like, again, strategically with your thesis, start with your acquisition thesis and you go out and find companies that actually fit that. And there are so many different strategies that are out there for financing any deal, especially when you're going for an exit. And that's like, I know that's a topic for a different day, but capital should not get in your way of doing an acquisition, especially when you're planning for an exit, whether it's 1 year from now or 3 years from now or 5 years from now.

Yeah. And I think that's probably the biggest reason that so many don't acquire. Because they feel they don't have the money in the bank. But like you said, it's not about the resources. It's about how resourceful that you are.

Yeah. Let me, let me throw it this way. Imagine this. You have 2 different scenarios. Your company has $500,000 in profit and you have a company that you work with on a regular basis. They have— that's complementary because you share clients. They have $500,000 in profit. Your both businesses could sell $500,000 in profit. If you're like, for example, an agency, you can probably get 3 times that if everything else is good. So basically, your both businesses are worth $1.5 million apiece. Okay. And then total between the two of them, you're worth $3 million. If imagine you merge your businesses together and you operate and you basically develop your process system that everything's integrated. And you go to market 2 years later, 24 months later with a fully integrated business with— and let's say you just stay flat at— it's still the same $1 million of EBITDA. But because the multiple, people will pay if you're a good business and 5 times that value. So by merging your business like this, you created $2 million in value. Instead of working 3 combined, now you're worth 5 combined. So again, You can think about this creatively on how you can do it. But again, you could have bought half their business and therefore you enjoy half the increase of that multiple itself rather than splitting it. But that's the easiest way to get there.

Yeah. Yeah. So much creativity. I love it. There really is no limit to the growth of your business except for your creativity and your willingness to go for it. And so, This has been amazing. Like, I could literally talk to you for hours. So we're gonna have to have you back, part 2.

I would love that. And if I want to share one thing before people go is the biggest challenge we have is we think everything is more complex than it is. But every journey of 1,000 miles starts with the first steps. What I'm going to challenge each of you to do is to do a post on your social media today. Don't overthink this and don't think it has to be perfect. And you could tweak it every week, but post something. Think about what business would be perfect for you to buy and just do a post and say, I'm looking for a business that is basically between this and this, that has this specialization. And I'm looking to acquire or to partner If this is— if you know of someone, please DM me. Very simply that. And you should get leads. It all starts with just questions. And every time you have a seller conversation, you will learn more than what you can learn in any book or any course that you'll ever take. So therefore, you'll always get an ROI from seller conversation. And it could be, if you don't buy it, your next strategic partner also.

Yeah, I mean, just putting it out there. Putting it out there and start the risk, start having the conversation. Uh, Tom Shipley, this has been so fantastic. Uh, what is the best way for people to connect with you if they want to learn more?

Absolutely. So we're running, uh, occasionally we have invite-only days for, uh, for entrepreneurs that are doing between, uh, $1 to $100 million. So if that's you, you're interested in DealCon, which is our event that we have twice a year, goes to dealconlive.com. DealConLive.com. Sign up for the newsletter. We'll also let you know when we have those periodic invite-only one-day events that we run through the United States about 5 times a year. We'll let you know about that also.

Yeah, fantastic. And I know they're incredible events, so I highly recommend that you attend. And thank you so much, Tom, for being here. This has been so incredibly valuable. And I'm sure the audience agrees. And so—

My pleasure, Allison.

Absolutely. And thank you all for being here on the Scale-Up Method podcast for this fascinating episode all about scaling your business. And if you would like to learn more about Pinnacle Global Network and so that you can have that one-on-one mentoring, have that strategic guidance, be surrounded with a high-level community of 7 or 8-figure founders, you can go to our website at pinnacleglobalnetwork.com. And if you'd like to have a deeper conversation and have someone take a look at your business, open up the hood, figure out the gaps that are holding you back from getting to the next level, just go to myscalesession.com. And until next time, Make decisions from where you're going, not from where you're at. We'll see you next time.