Zero to $100M in 2 Years? These 2 British Dudes Are Trying It.

What I want to teach you is how you can create a $100 million econ valuation within the next two years. I'm doing this in my own situation. And every single one of you in this room, you listen to the presentation. You can do this.

Hey guys, today I want to bring something to you that is going to stretch your mindset. It's going to push the barriers of what you might think is possible. And it's to going, going to be a little bit different than the things that we talk about here almost every single week on the show. And it's because I recently met two acquaintances here in Austin, Texas that were doing something that changed the way that I view what's possible in business. I always thought that business was about coming up with a great idea, building a great product, working really hard, getting profitable, and then maybe having a big exit one day. And it is that. But it's only one play in the playbook. There is this entire playbook of different plays of the way people do business. And of course I've been doing E commerce and Internet businesses for 20 years. So I have my way of doing things and I have my view of how it has to be and that way works. In fact, if you want to build a million dollar business, I'm very confident that the strategies that I talk about here all the time are the most effective, most predictable way to get there, especially if you want to do it like a 12 month time frame. But what we're going to talk about today sounded impossible to me when I first heard it. Because the frame of the presentation that was given at the Capitalism conference was building $100 million vision in two years.

Yes.

Yeah, right. Come on, that's impossible. But it's a totally different playbook than what I would normally follow or even think to follow. I did not know that this type of approach was even possible until I sold my company a few years ago. And when I saw the private equity group that bought my company, I got a peek into how other people play business. At the time, honestly, I didn't even really know what a private equity group was. I don't have a finance degree, I'm just a scrappy entrepreneur. But as I saw what they were attempting to do and I saw how other groups like them thought about business, and I realized that they were just people. And I realized that they had failures and they had successes, they were just following a different strategy and they had different relationships and they had a different tool belt to be able to execute on their plan. It made me See, oh, there's a bigger, different way to play business. There's a lot of people have tried to do roll ups and acquisitions in the e commerce industry. A lot of them have failed. And I think right now is a very interesting time to make a play in E commerce because there's so few people who are trying to do it because a lot of people failed in the last couple of years. We can go into the details about what they did wrong or how they failed. But today I want to focus on the mindset behind the two acquaintances that I know that are making a play right now. Now, I don't have a financial relationship with these guys. I don't have a business relationship with these guys. I just find their approach very freeing and very interesting. And it's changed, changing how I think about the opportunities that exist for me and for our community@capitalism.com regardless of what happens with what they're trying to do, the little nuggets that I've learned from them and from some of the other people in my network have helped me see how we can create bigger opportunities for the people in our community@capitalism.com and I hope as a result of hearing some of the takeaways from what they're trying to do, it liberates you to think bigger, to feel less stressed because you know that there's a bigger opportunity out there and also helps you specialize in the things where you are best. Because as you're going to come to see, you only need to be good at one thing in order to have a very meaningful exit. So let me introduce you to these two guys and what the strategy that they're following looks like.

If you've never met me before, you don't know me. I've been doing this for over three decades now. Wall street guy for about 15, 16 years. Then I retired, got bored, then became an entrepreneur buying and selling businesses. I've worked on over 400 acquisitions in that time. I own 26 different businesses today in e commerce, in professional services. I even own a bowling alley. That's another story. I'm buying online coaching companies, I'm buying companies in aerospace. But E. Com is an industry that I absolutely love. And my business partner Ross and I, who's over in the back, we're buying lots and lots of companies. Over the next few years, we're actually building a $1 billion roll up in the health and beauty and wellness space for women here inside the United States. And our strategy, our model, is what I'm going to be teaching you today as part of this training. So what is a roll up? Sadly, it's not what you think it is. Right, A rollup. This is my definition. I think Wikipedia has a different definition. But a roll up is the aggregation. We've just talked about aggregators. It's the aggregation of complementary businesses within the same niche for both strategic and financial value. You have to do both. And this is what I'm going to be teaching you guys today. And it is the absolute fastest path to shareholder value in any business, in any industry. So we've all heard of Microsoft, right? $3.19 trillion valuation. Microsoft's a roll up. They've bought 250 businesses over the past 30 years and that's a big driver of their valuation. IBM's a roll up. Not as large as Microsoft now, but IBM at one stage was one of the biggest companies in the world. They've bought 150 businesses in their time. And the big 800 pound gorilla of the E Comm industry that we're all in is Amazon. Right? Every conversation you'll ever have about E. Com is likely going to include the word Amazon. Right? Amazon. Almost a $2 trillion market cap today. They've actually bought 100 different companies as part of their journey. They've spent $44.6 billion buying those businesses and that's helped them create a $1.86 trillion market cap. So the whole strategy of buying a roll up or building a roll up is a lot about acquisitions. It's about buying other businesses in your marketplace that are financially and strategically aligned to what you want.

Does anybody in the room have a supplements company? I think there is because I got this amazing bag when I got here with all these free stuffing. So you own a supplements company? I work for supplements. Okay. So if you own a supplements company, one of the things, one of the questions you should always be asking yourself is what other products are my customers buying from somebody else? And then you can go and acquire that business. So let's say you owned a supplements company and I'll walk you through the math again. If people don't get the math, we'll help you. So imagine this was your company, right? It's doing $3 million in revenues. A little bit of financial accounting 101 here, used to be a CPA. Thank God I'm not anymore. But $3 million in revenues, your cost of goods sold when you own a business is what is it costing you to have your product, your supplements manufactured and then delivered to your customers? So let's say your cost of goods sold in this business was 600k. So you've got a gross profit of 2.4 million, which is 80%. And then let's say you've got $1.95 million of other costs that are going through your business. Most of that is probably going to be marketing. But you'll have VAs, you might have other employees, you might have a physical office, you'll have your. It costs all those different things. So that's a typical E Com business at around $3 million. It's probably doing about 15% profit margins. And there's a word in profit that we use when we're valuing companies. It's called ebitda, stands for earnings before interest, taxes, depreciation and amortization of goodwill. Does anybody know what EBITDA was before I said it? A few of you. So you guys can help the other guys that don't know, right? So that business, in today's market, an average business is probably worth about a four times multiple of its profit. Most businesses are valued at a multiple of that profit number. So if you've got a $3 million revenue business doing $450,000 a year of EBITDA, you're probably worth a four times multiple. So you could sell that business today for $1.8 million. That's probably what it's worth. However, don't do that.

Let's say you did research in your supplement customers. Let's say they were females or women, and you figured out that one of the things they also bought a lot was apparel. So you as a supplement owner could go out and buy an apparel company and then what happens is, so now you own a supplement company with customers that buy those supplements. And then now you've just bought an apparel company with apparel and then you've got different customers. They're part of the same customer demographic, but they're mutually exclusive in number. So what can you do? Well, you can sell your supplements to the customers of the apparel business you just acquired. Vice versa. You can now sell the apparel that you've just acquired to the customers that you already had in your supplements business. And when you do that, you're going to remove a lot of duplicate costs, namely marketing. You're now not paying marketing spend to get your product in front of those customers. You own those customers in another business so you can cross sell. And when you take duplicate costs out of a business like that, you're going to increase shareholder value because your profit margins are going to increase.

So basically a roll up is a group of businesses that, that you partner together. So for example, if you have a business that sells camping gear and you bring in another business that sells RV accessories, those two businesses serve the same person. So it might make sense to do cross promotions and it might also make sense to have one employee work on two brands. In doing so, you could theoretically drive down the cost of operating the business and drive up the profits of the business. That's part one. But the thing that's most exciting to me is when we bring brands together, the valuation of all of the brands go up. Here's how Carl described it.

Now we Talked before about 4x. That's an average multiple. If you take the E commerce space right now, sub $1 million a year of cash flow. There's a range of multiples. It's from 2.1 up to 9.7. Well, that's a pretty big range. Like why is it such a big range? That's because you have average businesses which probably sell for a 4X. You've got below average businesses which sell down in the 2 range, but they're the absolute best businesses in the marketplace. They're going to sell for the nine to ten times multiple. Why is that? Well, it's basic economic supply and demand, right? Have any of you guys seen a cybertruck? So I flew in from Florida yesterday and I was driving my 2 row, wasn't a Cybertruck, sadly. I was driving my 2 row up here with my family and I saw my first cybertruck and I'm like, wow, it's like the car that used to drove as a kid, right? Incredible car. I said to my wife, I have to buy a cybertruck. So I got to Ross's house, I got on the Tesla app, I thought I want to buy one now. They're like 90,000 bucks. Like I want one now. Pick it up tomorrow. No, it's a four year wait list, right? But I can buy one if I want tomorrow for about a quarter of a million dollars. Because you've got very, very low supply but very, very high demand. It's exactly the same with a best in class econ business or e comm brand. Everybody's going to want to buy it because it's good at all these different things and that drives up the multiple. As the owner of a business, when you're selling, you can't control what those range of multiples are. That's determined by the capital markets, right? When cost of capital is expensive, which it is now, Multiples go down. When cost of capital is cheap, like it was a few years ago, the multiples were up. But what you can control as a business owner is where your business lands in that range of multiples. If you strive to create a best in class business that everyone's going to salivate over, that's why you get the big multiples versus a me too business or a very average business that might have very high customer concentration. It might not a lot of. Sorry, it might not have a lot of documentation or systems or processes dialed in. It might not have lots of different routes to market. If that's your business, you're probably going to get an average multiple or even less. So that's how businesses get value based on how good they are.

When I sold my business, we were valued at five times our EBITDA, five times our profits, and we were profiting about $3 million a year. What I later discovered is that once you cross into the eight figures in profit, the overall valuation goes up. Now, it would have been a lot of work for us to take our business from $3 million in profit to $10 million in profit. But if we had partnered with three other brands that were also doing $3 million in EBITDA, that would have taken us over $10 million in profits and that would have brought us into a different tier of valuation. So Instead of getting five times EBITDA, we might have been able to get eight to 12 times our EBITDA. What does that mean for me? Well, it would theoretically mean that instead of selling a business for $15 million, we could have sold it for $30 million just by having partnerships with other businesses that were at the same level as us. If you want to dive deeper into this, we shared one of the talks at one of our events with Brandon Colucchio and he talks about the different tiers of valuation and why that is the case. Why are big institutions willing to pay a higher multiple when businesses have a certain level of profits? And if you want to check that out, you can find that full video here on the channel. When Carl shared their model on stage at our event, he talked about how you could get to $100 million in two years. Yeah, right. That's impossible. Looks great as a headline, but that's not actually practical, is it? Well, here's where Carl breaks down what the numbers would need to look like in order to accomplish $100 million in two years.

That's the income statement of the business we looked at before. So that's your supplements company, your Business might be bigger than that, it might be small than that. So that's the $3 million revenue business do $450,000 in profit, which is a 15% margin. And that business is worth a 4x, so $1.8 million. So I'm going to show you now how you can take that to $100 million over just two years by rolling up complementary businesses in your niche. So let's say we go and we buy the apparel company and let's say for the sake of math, it's the same business, same financials in that business. So it's doing $3 million of revenues, 15% margin or $450,000 in profit. And we're buying it for the same value. So it's four times multiple. It's going to cost you $1.8 million to buy that business. Now we can do that cross selling, so we can sell apparel to the supplements customers, as I showed you, and we can sell the supplements and the apparel customers. And let's just say over the course of a 12 month period, we can get 20% of our mutual customers to do that. So that would add an extra $1.2 million of revenue in that business. So it's a 3 plus 3, which is 6 million, 20% of that is $1.2 million of additional revenue. Let's keep the margins the same for now. So 50% margin. And then let's also say in that one year period, we can organically grow both those businesses as well by 20%, which is a pretty decent rate of growth. So that adds another $1.2 million of revenues and adds another $180,000 of cash flow. But then look at the costs in this business. Now. If we add up the costs of the supplements company, the apparel company we've just bought, on the costs that we've incurred for the cross sell and the organic growth just by saving on the marketing alone, which we don't have to do now, we're going to save at least 20% of that $7.1 million of total cost inside of that business. So that's going to return an extra $1.4 million of change of cash flow to that income statement. So we add all this up, we've now got a business doing $8.4 million in revenues. It's the 3 plus the 3 plus the 1.2 plus the 1.2. But now we're doing $2.68 million in profit because of all the cost synergies that we have been able to benefit from from doing these deals. So now we've got a business that's doing 32% margins versus the 15% margins that we had in each of those two individual businesses.

And then if we've leveraged some of those best in class superpowers, again with that higher level of profitability, we're now probably worth a seven times multiple of profit. So that just doing one deal in one year, integrating it into the business you've already got and driving just 20% growth, we've taken a $1.8 million valuation to an $18.8 million valuation. We've 10x the value of your business in one year by doing one deal and that $1.8 million acquisition. Let's see if the light works. There we go. Oh, no, it doesn't. That $1.8 million acquisition, if you did an SBA 7 loan, which we'll get into in a minute, you could buy that business with only $90,000 of your own capital to be able to do that deal, which is incredible. So let's go again. So you're one year in, you've just hit an $18 million and change valuation. Let's see what happens in the second year. So in the second year, we're going to buy two more businesses. Let's say they're exactly the same size. You don't need to do this with $22 million. Businesses like me and Ross are buying. You can do this with smaller deals. There's probably people in the room that you could partner with as well and merge together as part of this strategy. So you go and buy deal number three. Doesn't matter what it is, as long as it's in your niche. And deal number four, and then do exactly the same process that I just took you through in that first roll up, so you create another $18.8 million business. But we don't just add them together.

We could do the same thing again. We could take our $8.4 million group of our first two businesses, our $8.4 million revenue group of our second two businesses, deals three and four, we can cross sell again. Now we've got four brands that can all sell to each other. We can take out even more costs, we can introduce some more organic growth. And by the end of year two, you've now got a group of just four businesses that's doing $23.5 million in revenues. And through all those cost savings, by not having to spend a lot more money on marketing, you're now doing $10.7 million and change in profitability, and then you're now probably worth a 10 times multiple. Remember, the bigger the profit, the bigger the multiple. But again, you're leveraging a lot of those superpowers across all those different things. You just bought four businesses, or you had one business and you bought three. There's going to be at least four superpowers across that portfolio that you can now upskill every other business that you buy. So if you're doing $10.7 million of profit and you're worth a 10 times multiple, your business is now worth $107 million and change. So we've done this in just two years. We've bought four businesses. Let's say we bought a hair care business, a supplements business, a skin care business, and a nail business. We've leveraged all the superpowers that these businesses had inside of them. We've done that roll up magic. We sold products to different customer bases that we now own that were part of the same engine. And we've increased that shareholder value. We've done some organic growth because you don't just want to buy companies as a way to go. You want to be able to scale those businesses as well organically. But we went from $1.8 million, which is the value of your business today, to $107 million in two years just by implementing this strategy. So it's a 59.4x return on that investment. Why?

Obviously, there are some assumptions. There are some things that have to go right in order for these numbers to be true, and everything looks good on a spreadsheet. But seeing this model helped me understand how a bigger game of business could be played. Of course, you still need to be a good operator. You need to have good businesses. You can't just make the numbers work and then hope for a big exit. There needs to be quality businesses that make up these assumptions. But it opened my mind to a different way of thinking, and it made me see that a really big number is possible if I just tweak the strategy. And as we're starting to see, some strategies are bigger or better than others. The biggest mindset shift that I had was realizing how much money and capital and investment there was to make this type of an opportunity possible. When I started to understand the financial structuring and the money that was available to make this happen, I started to realize, oh, this, this is not just theory. This is very doable. I had that mindset shift when Carl introduced me to his partner, Ross, and he told me about the conversations that he was having with people who wanted to write really big checks to see something like this happen. In fact, one of the things that Ross shared with me is that it's easier to go get $50 million from a partner than it is to get a few million dollars from a partner. Here's what he said in his own words.

It turns out it is way easier to raise a bigger check size. Don't even look at that size. Start at 50 million and look up.

Explain what you mean by it being easier. Like what was the, what was the experience like going for a big check versus a small check?

Yeah, that's a great question.

It's interesting because when you're asking for like a ten million dollar cheque size, obviously ten million dollars is a lot of money. When you're talking to PE funds, financiers, they're like.

It'S not worth our time. It's the same amount of effort, energy to write a larger check. And our mandate is to write bigger checks.

The idea that some people would say, unless we're going to write you a check for $50 million, we can't even talk to you. That, that just made my brain have to go out and get new thoughts. I had to think about business differently. When I thought about it that way, it allowed me to think about, wow, what would a really big vision even feel like? Because I don't know about you, I tend to take my expertise from the past and say, what's possible now or in the future? And I'm limited by my past experience. If I haven't built a $50 million company, which I haven't, I've built a $10 million company, but not a $50 million company, well, then it's gonna be hard for me to just believe that I can have a $50 million vision or $100 million vision. But when someone else is saying, oh, we can't even work with you unless you can accept a check of $50 million, it forces me to think, oh, well, the money is already there. How could we leverage that and build a much bigger vision? And I think that is such a freeing thought to take the money piece out of it and only think about how we're going to build a really big vision. One of the big takeaways here is that there are people like Carl, there are people like private equity groups. There are people like me who invest in businesses as a minority partner. There are people who are counting on entrepreneurs like you to build good businesses. It never occurred to me that there were People whose business was to buy other businesses. I wish I had known that at the beginning of my journey when I was grinding and working really hard and getting to profitability. If I had known that at the end of that there were people who were hoping and counting on me to be successful so that they could build a portfolio around what I was building, I would have thought about my business differently. But instead I was thinking about how much cash flow a business could make so that I could have a different lifestyle. And when a group showed up with a big check, I didn't think about their long term vision. I didn't think about how that valuation in the future might affect my life. I just saw a really big number. And if I had known what I know now, I would have thought about my business differently. I would have sold my business differently. And I hope that as a result of you understanding that there are people out there counting on you to be successful so that they can buy your business, you realize that what you're building might end up being a partnership with somebody who's following a different and a bigger playbook in the future. So let me summarize these main points and then I'll, I'll share with you what we're doing with this new information. So first of all, the big idea is that if you partner brands together in what we call a roll up and they have shared resources and they promote each other, theoretically we could drive up the profits of each business and more importantly increase the valuation and the multiple that we would get for each business when we go to sell. That means that we need to focus on partnerships. We need to focus on what brands would add value to each other, what people would add value to each other, what superpowers could we cross over into each brand and what partners might be the best fit to acquire. That means buy a portfolio like the one that we are building. If that's the target, if that's the guiding light, then what can we do with something like that? Well, it helped me see that I have access to hundreds of e commerce businesses as a result of teaching this model and sharing this model and helping people build million dollar businesses. It helped me see that if we take some of those businesses and bring them together, it can help each one of those brands make way more money in the short term by increasing their profits, but ultimately get a much bigger check when they go to exit. It made my partner and I sit down and say, what would it look like for us to do a roll up with some of the brands in our community. And that's a conversation that we're having right now. The other thing that it did was it made me sit down and think about how can we free up entrepreneurs in order to focus on their superpower and how can we help them think about increasing their valuation to prepare for an exit like this, whether it is to a roll up or to a private equity group or to a strategic competitor. That's the entire thesis of one of our programs, which is called the capitalism incubator. We took an ownership stake in an infrastructure company that comes in and brings their resources and their people to free up the entrepreneur to focus on the things that add the most cash flow that increase valuation. And since we own a stake in that infrastructure company and we can use those resources to put into the brands within our sphere of influence, it actually allows us to build the early stages of a roll up if we decide to pursue that, because we own the infrastructure company and we'll own stakes in some of the businesses that we invest in here@capitalism.com As a result, we can create a much higher valuation for the brands that are coming through our community. And we do have relationships with people who focus fund businesses like this. This helped me see that I had a lot more resources to go in a much bigger direction than I had seen up to this point. And I hope as a result of hearing how some other people are playing the game, you start to see that those relationships that you've been cultivating in business might be much bigger than what you realize right now. In fact, I do have a contact who built a company. They came to one of our events, they built a really profitable company. When they sold their company, they sold it to a group that was also buying the manufacturer and other businesses that complemented that brand. They did a roll up. And my colleague did sell for a whack ton of money. Way more than he would have sold if he just sold the brand. He got more money at the end of the day because he was participating, participating in something much bigger. These are the kinds of things that I didn't know when I was starting my business. I didn't know that if I thought about who might want to buy my business at the end or how the people who might buy my business would benefit from plugging my business into the rest of their portfolio. I was just looking at a check and who would write the biggest check. I wish I could go back and tell the younger version of myself that if you're more thoughtful about how you position your business and you're More understanding of the play that other people are making. It's better for all parties and that's why I want to share all of this with you. If you're starting a business, building a business, investing in businesses, knowing that the long term strategy of what that exit looks like changes the numbers and changes the way that you play the game from the very start. If you have a growing business, this might be a strategy that you want to consider. Looking at other brands that you could create partnerships with, or at least looking at the people in your space who are doing roll ups and having conversations with them to see what your business would need to look like in order to be an attractive purchase for them. If you need some help getting prepared for that, we do have resources to make that possible for you. Like I mentioned, we have an infrastructure company that we can plug into e commerce businesses to free up the entrepreneur to focus on their highest leverage activities. We have relationships that we can bring to the table to make that easier and to give you clarity about what adds the most value to your business when you go to sell, we do that inside of our capitalism incubator. You can find out more resources around this episode if you want to get plugged in. It's not uncommon for a business to come in and change their strategy just slightly, get some help and realize that there's $2 million of additional value that they weren't maximizing and they could maximize that over a period of a few months or maybe a year. Sometimes a simple tweak in perspective or a change in strategy completely changes the numbers of the opportunity that you are sitting on. And I hope that as a result of seeing this strategy in a real case study, it liberates you to play a much bigger game. I'm Ryan Daniel Moran with capitalism.com if you're at the beginning of your journey and you want to build a business that you ultimately take to a million dollars and then have an exit, the best place for you to get plugged in is to download our free resources over at capitalism.com playbook that'll show you how we take businesses to a million dollars in top line revenue, how we position them to sell them, and how we do that in about a 12 month time frame. And we give you examples and case studies to be able to see that this is actually possible. Yes, we have seen businesses start with nothing, meaning entrepreneurs who are scraping by build businesses that over a couple years were worth millions of dollars. And my hope is that the more that we go in a direction like we talked about today, those million dollar checks become much, much bigger checks. All right, thanks for watching. I'll see you on the next episode. Take care.