He acquired 4 podcast companies in less than 2 years

Welcome to another Founder Wisdom Podcast. We have Carl Hughes on for a second time. I think last time we spoke, I was two years ago. Carl is a business owner, owns a couple of companies. One is podcast consultant. He also owns Arise 25 and Draft.dev. Couple of these are think are new since last time we spoke. So Carl, welcome to the podcast. Tell us what you've been up to.

Yeah, always good to be back. We've been moving and shaking things. So we, we've bought a couple digital agencies since we last spoke, both on the podcast side of things, and we're doing more acquisitions in that space. I think, I mean, you're a podcaster, so you get this, but the power of businesses having their own podcast and their own little media operation is only increasing, especially as we're getting more stuff on YouTube and more social shorts that have a lot of value. So we're just going really hard into, into that industry, doing more acquisitions.

Yeah.

Acquisitions and rolling up a bunch of podcast production companies now. No, I think you're muted or I lost your audio feed.

All right, tell me about the acquisition part, right? Like, that's not obvious for most people why they would acquire something rather than start it. That's because I guess they don't have access to capital and don't know the secrets of banking. So how did you get into this?

Yeah, man. So I met some people. I do a guest lecture at Northwestern University's MBA program. So it was Kellogg School of Business every quarter. And I got to meet some people who were doing their MBA and were focusing on this thing called ETA, entrepreneurship through acquisition. And for those of us who are traditional, normal entrepreneurs, we never think about this, but there's a whole class of business school students who just graduated that go raise what's called a search fund and then go buy a small business and they want to go operate it. Really interesting model. And so I started reading into this more. There's a book called Buy Then Build that's really well traveled in that circle. And I was like, I was running draft.dev at the time and I was like, hey, this is cool. I could buy my way to growth and buy my way into diversification rather than trying to build everything from scratch because I have this cash flowing machine that I can use as my leverage point. And I kind of know how to run and improve an existing business because I'm, I'm thought I was doing okay, at least for myself. There's obviously a lot of challenge when it comes to the specifics of how do I raise debt on this or equity? How do you value these companies? How do you evaluate them or whatever? But I figured get started and we'll figure that out. So we bought the first one 3 years ago. The Podcast Consultant was our first acquisition. And then we've been kind of slowly ramping up. We made a couple offers the year after, we bought another one last year, and then this year we did 2 and we're looking at a 3rd acquisition. So we've We're really kind of like getting our stride, I would say. We're starting to understand what works and what doesn't for us.

And tell me about these acquisitions. What are your criteria and thesis?

Yeah, so I think the business-to-business podcast production space is very fragmented and ready for a bit of consolidation. And because most of the business-to-business podcast production companies are fairly small, under a million in revenue or right around there. There's nobody who's a professional buyer that's snatching these things up. So the opportunity I see is for people like us who are smaller-time buyers, we're buying stuff at $500,000 to $2 million in revenue. There's not a lot of professional buyers. There's not PE down at that space. It's really interesting because we can come into an owner and say, hey, look, you've built a good base of clients and a good book of business. It's very sticky. But what do you do to exit? There's not a lot of options. You can either exit through us and we can pay you out in cash or pay you over time, or we can roll your equity in and you can sort of take that second bite when we go to market in 3 or 4 years. So those are the kinds of offers that are resonating, and every founder's different what they want, right? I mean, some people want to exit right away and get out and step away. Others, they're coming along and wanting to work with us, which is cool too. So, um, yeah, you know, we're now in the midst of our, our first like 3-way integration of 3 different companies that we're kind of merging, and that's got its own challenges, but it's also like you gotta learn how to do this stuff. So we're just pushing our way through it.

So can you give me an example of the 3 last companies you've acquired? Like, I, I don't know, one was a production company, the other was a guest finding system, right? Like, yeah, yeah, parts of the, the behemoth one at a time.

Yeah, basically. I mean, we've, we've We basically bought 2 other podcast production companies and closed in May of this year. So this is just a couple of months ago. And they both had their own clients and strengths, areas where they were better or not as strong. And the way that we end up, it ended up shaking out is we are keeping the Rise 25 brand around. It's a strong brand. It's got a very specific niche that it works within well. And then we're keeping the Podcast Consultants brand around because it again has a, has a good specific customer base niche. And then we're merging in, um, the smaller one, Sundial Media, and, uh, looking at another acquisition that would probably would merge in under one of those brands as well. So each one is a little different. And that's what's interesting about acquisitions is there's no two are alike. Uh, you're not buying an off-the-shelf asset that has a set value and a set way of working. All these things are fungible. And so we're, we're constantly looking at each opportunity in a you know, unique lens and giving it the time it needs to figure out where it's going to fit. And then a lot of it comes down to culture, like, is this team and company and are their values aligned enough that we think we can work with them? And because that stuff you can't fix just through changing, you know, behaviors or operational practices or adding AI.

You acquired payroll most of the time? Do you acquire talent and then payroll, or do you just Typically, we—

so my philosophy is if the business is in the black and it's operating profitably and it works, we don't go in in month 1 and try to change a lot. We'll consolidate some like back of the house bookkeeping stuff, or like we consolidate all the financials, we consolidate some of the Google accounts and Slack accounts and stuff like that. But we don't go in and immediately get rid of people. We wait 3 to 6 months to wait and see what's actually working for this company and what isn't. And then we see, are there best practices at one company we can bring to the other or vice versa? Can we completely merge the teams? Do they need to be semi-separate? And that's again, coming down to a case-by-case basis. But, uh, that, that period of holding and observing is really helpful because I think it's naive for me as an outsider to think I'm gonna know how to run somebody else's business in a month that, you know, they've been running for 12 years. Sure, there's some things I'm gonna do better or differently, but I'm not, uh, I'm not a wizard. I don't, I don't know how to fix every problem.

Right. So is draft.dev Still active and Rise 25 all at the same time.

Yeah. Yeah. So we brought in a CEO for draft.dev this year, which has really been a huge unlock from like a time savings. That business has done really well this year. It does content production for businesses that wanna show up more in AI search and also get found by customers. All of our clients at draft.dev are in the software development space, so they're all dev tools essentially. And that space has done really well with all the investment in AI and LLMs and every, all the backing technology. So yeah, so we're, I'm out of that pretty much. I mean, I look at financials quarterly or so, but haven't been actively involved this year.

And tell me about Rise 25. Like that's, that's my thesis right there. I've been like hyperscaling it, like getting business through podcasts. It's totally exponential and most people are still not getting it for whatever reason. Tell me. Why you launched that one 3 months ago?

Yeah, yeah. So we bought them. They've been around for about 12 years now and the founders were, they came to us and they were like, we like the idea that you guys are saying of like this market will consolidate. We really get the business of podcasting as a lead development, as a customer engagement tool. And they were doing it really well with their 80 to 90 shows they were working with. And so when we started talking with them, it became clear one of the founders actually wanted to move on and do something different. One of the founders wanted to stay and keep working on the business. So we said, okay, let's come up with a deal structure that allows one of you guys to go and one of you guys to stay with us as our sales director. And so we've kind of inherited Jeremy Weiss, one of the founders, and the other, John Corker, just went off to start his own AEO consulting business as well. Again, cool opportunity. They were just ready to move on and do, you know, slightly different versions of what they had been. And so that's been great because it's your Like you said, Charles, their ROI to clients is basically we wanna get you 52 meetings a year or more with your ideal client or somebody who can refer you your ideal client. And it's in a nutshell, it's like if you're a small business owner and you wanna have 52 more meetings with your target ICP, then there it is. Like it's easy to do, just start a podcast.

What's hard about this though is like the follow-up, right? And the qualification of these, which I guess the qualification part you already have it, but Closing is so hard in business, right? Like, uh, how do you actually make sure that these relationships close into something fast?

Yeah, totally. And it may not be fast, to be honest. I mean, like, this is one of the things that can be challenging. Like, if you're a high-trust service business, you're a marketing agency, you're a financial advisor, you're a lawyer, like, nobody buys just because they saw one single billboard or they heard one single, you know, radio jingle, or they even jumped on your podcast once. It's a continued relationship that builds trust over time. So you have to be willing to put in that effort. But that said, You can't be afraid of taking shots at goal. In other words, you need to just try and tell people you exist. And one way to do that is invite them on your show. And it's very easy to have a 15 to 30 minute conversation with somebody, and then you turn off the recording and you say, what's really going on? Anything I can help with? And you never know what's going to happen after that.

Yeah, I love it. Uh, how is it to work with Pat O'Shaughnessy?

Yeah, Patrick O'Shaughnessy with Invest Like the Best. So when we bought the Podcast Consultant the, the founder had been working with them since the very beginning. So really cool. We work with a lot of Colossus's shows, the, the network he's part of and started. Um, I mean, you know, they're, they're an outlier, right? Like we've got 2 or 3 shows that are close to that level of popularity. And honestly, like a lot of podcast production companies, um, those people have been at it. They, they didn't, they're not overnight successes. Nobody is in podcasting. Uh, they certainly put in the time and effort and they've ramped up over, over the course of 5 or 7 years probably now. So it's been fun to watch and they keep upping the production value. They keep exploring new things, trying new things. Yeah, they're doing good work over there.

What do you think of Colossus and the little empire he built? Wasn't he one of the most successful folks in the business podcast space of things the last couple of years? What do you think about his portfolio model specifically? Right? Because we could talk about Lex Fridman and all these guys, but I think these— this guy's doing it like VC style, right?

Like, yeah, well, I, I, I don't have any inside knowledge of the like inner workings of their business. I'll say that. Like, obviously we, we help with production, editing, and advising some, but like we're not, you know, in there looking at their P&Ls or anything. But that said, it makes a lot of sense. I mean, the weakness of any creator business is that it hinges on one single creator. I mean, you see like MrBeast, Like he obviously can't do his YouTube channel for 1,000 years, maybe unless AI like, you know, recreates him, in which case there could be a virtual MrBeast forever. I don't know. But like the reality is it hinges on him being healthy enough and being good enough looking on camera to show up every week and record or whatever he does. Right. And so I think that there's lots of different ways to diversify. And one of those ways is you start building other shows with your gravitas and your audience and trying to transfer them to other creators that are your kind of like second-tier creators. And so that's, you know, in my read at least at what Invest Like the Best has been doing. And again, lots of different ways to do this. I think there's probably software plays you could do. There's service businesses you could spin out of this. There's product businesses, but like finding some way to launch, like take your creator cachet you've built up as a single person that people follow and turn it into more of an empire that doesn't just rely on you is super important.

Right. How do you get the funds for all of these acquisitions?

Yeah. So acquisitions for service businesses are in absolute terms fairly cheap compared to other types of businesses. So I'll give you the economics of it. When you buy a digital service business like a marketing agency or something like that, you might be able to get it for 1 to 3 times SDE, which is seller's discretionary earnings, is basically the cash flow of the business, the total the owner could pay themselves or distribute to themselves. And now if you do the math on that, what that means is I'm going to pay the seller up to 3 years of the profit he would have made and the money he would have made from this business, and then I get to own that business forever. So the first 3 years, I basically don't take a profit. I pay that owner off, and then I figure out like everything else is cash flow to me. There's ways to architect the deal that make it even more attractive for buyers or more attractive for sellers if there's more value to be sold. But at the end of the day, all I need to do is come up with 3x SDE and I can generally get a deal done. So banks will do that, especially if you go through the SBA. You can also use— in our case, we've been able to use our existing business's cash flows to pay a lot of those. We'll save up some cash, make an initial down payment on a business, and then pay the rest in installments or a seller's note over time. There's a lot of flexibility. in doing acquisitions. And going back to your earlier point about a lot of people don't even know acquisitions are an option, a lot of people assume you have to— when you buy a $1 million business, you have to have $1 million in cash and you put it on the table and that's the close. But that's almost never how it works. Acquisitions are rarely in the service business more than 50% down, and then the rest of it can be some kind of seller's note, earnout, or even a contingency-based plan of payment. So. There's a lot of creative things we can do there, right?

Um, you make it sound easy though. It's like, oh, just buy it, the owner goes out, everything's automated, and pay them the profit. The question is like, if their business is that automated, why wouldn't they stay into it and pay themselves? You know what's— Totally.

It's rare that we're buying a business that has all the problems figured out, right? I mean, let's be honest, like, here's, here's the thing. Even if you got the business, even if we're looking at a business and it is fairly automated, the owner has delegated most things, they're fairly inactive— markets change. So yeah, today it might work fine, but, uh, we've got all sorts of technology changes right on the horizon here. AI stuff plus non-AI stuff that's just changing every day, and that's going to affect the business and the market that it's in. So any owner that tells you they have a truly passive business that never needs their input or any higher-level input or strategy is kind of full of shit, right? I mean, like Look, at the end of the day, the market's changing all around us. We can't stop that. So somebody has to come in there and tweak the knobs when the market shifts where the business is going. Now, if that owner gets sick of doing that, then it's certainly possible they might look to sell just to move on to something different and get the risk off their table. In other cases, owners are looking at things like, I need to retire, or I have health issues, or there's family health issues. Could be disputes between co-founders. They need to break up to split this thing apart and go do something different. It could be, um, they're just burned out and ready to do something different, never want to look at this thing again. So lots of things can happen to sell, um, to like sort of trigger that sale event. But for us, it's all about just staying in touch with a lot of people that are in our industry, and when the timing is right, we want to be a good partner and sort of friendly to whatever we can be for the seller.

What does your day-to-day look like with all these Companies, what percentage, what percentage goes into unifying all of them under one roof, sort of?

Yeah, like my role at this point is purely, um, front-facing acquisitions. So I'm the, the guy who meets with other business owners and says, hey, we, you know, we're looking at merging in more companies, you interested in talking about that? And then the other side of it is the sort of overall financial and, uh, visionary direction that we're going. So make sure We have the money on hand to make the acquisitions we want to make and keep our payments for debt service going. And then make sure that my leadership team has everything they need to keep moving in the right direction. So we have a very specific timeline and mandate right now. I mean, we're going to— we're looking at stacking together $2 to $3 million in EBITDA over the next 3 years and then going to private equity and doing a raise through them. So there's very specific things we're aiming to do, and anything else that comes up is a distraction. And my job is to— Move those distractions out of the way.

I love it. Uh, your own podcast, how do you leverage it to acquire clients and/or, uh, businesses?

Yeah, we've got a couple we run. So Jeremy Weiss, who came in through the Rise 25 acquisition, has run a podcast called Inspired Insider, which he's always used for business development for his business. Does great. He does a couple episodes a week and, um, been doing it for I think 17 years or something. So been around a long time, has had some great connections through it. I run a, a podcast called Retain Trust, uh, for agency— it's just for agency owners specifically. Um, we're actually just getting the next round of interviews recorded right now to start releasing again, uh, September, which is exciting. Um, and for that, it's a lot of meeting with people who are other agency owners so I can learn from them. And then obviously referrals come up. People say, oh, my friend owns a podcast agency, we should know, you guys should talk. Or I met this other guy who works in PE and they buy agencies, you should talk to them. And so it's just a connection multiplier, right? I mean, you're doing this every day, Charles, you know exactly how it is. Like, I forget who I talked to last month unless they stay in touch, and this is just one mechanism for staying in touch, right?

Right. Um, what podcasts do you study nowadays? Um, I saw on the Jeremy Wise podcast, uh, LinkedIn, he worked for Andrew Warren at Mixergy. You followed like the evolution of Mixergy or EO Fire. It seems these guys are not aging that well.

Yeah, yeah, yeah. I don't know if all of them have kept up with— and I, I have not looked at Mixergy or EO on, uh, on Fire in a while, but I will say I agree with you. There's a lot of podcasts that got stuck in the audio age and haven't transitioned to video well. Um, and that's kind of unavoidable at this point, um, is that like now the distinction between a podcast and a YouTube channel is like almost nothing. So a lot of people are trying to figure out how to bridge that gap. Some people have done it better than others. I don't know all the answers, but I'll say that like if you're looking at podcasting as purely an audio medium, you're probably missing a lot of the upside because both the long-form and short-form video are just really big multipliers for the, the value you get from this.

How do you screen your guests nowadays? I All my processes start with cold outreach, how I got in touch with you, then maybe some LinkedIn follow-up like I did with you here. How do you— how does the process start and how do you filter your guests?

Yeah, man, I always have a wishlist of like dream guests and then I kind of have my long tail of people who I could ask any day, like, you know, whether they're existing connections or people that are one connection away removed that aren't that big, but I still think are interesting. And then there's always a handful, like I said, of like these I don't know, A+ guests that would be really cool to interview, but they're hard to reach, or they're, um, they're kind of like closed off. They don't do many interviews, or they don't do much media stuff. And in that case, it's more of a waiting game, see until I can, you know, have a good reason. Like, I'll try to reach out to them, but a lot of times the cold stuff gets ignored. So then it's like trying to work my connections to figure it out or whatever. And I only approach maybe 1 or 2 of those a quarter because it's, it sort of, um, takes a lot more time and energy, and it's You know, you don't know when it's gonna pay off. So yeah.

The production part of it, I still cannot say I've cracked the code, like getting viral, like, uh, last Stephen Bartlett, you know, like, um, yeah. Have you figured out a way? Is viral even a desired result in B2B if a couple of guys can pay you hundreds of grand or millions?

I, you know, most of our clients look at podcasting is less of a mass market play and more of a very niche market play. So like we work with another good niche show, The Capital Allocators, and Ted Seides, who runs that show, his whole message is to professional investors. It's a very small pool of people actually. It's not like to average Joes like you and me who want to put some money in the stock market. It's like, you know, people that actually manage hedge funds or family offices and stuff like that where, so again, very small niche market. He doesn't need a mass following or to go viral, but he can have a very successful show with, you know, let's call it tens to hundreds, low hundreds of thousands of listeners. I think that's the dream for a lot of our clients. Um, and they're also, because they tend to be in these industries, they're a little more conservative and, um, they try to take a more neutral approach. They're not going for big, like, uh, gotcha moments like a Joe Rogan show would do. So they're just not gonna go viral in that same way. Nothing wrong with that.

Would be a better example.

Yeah, yeah, yeah, yeah.

Joe, I don't think has bad intentions.

Right.

Andrew Warner or Nathan Latka, right?

Yeah, yeah, yeah, yeah.

That is gotcha shit right there and not so healthy to scale relationships, right?

Right, right. Or you'll have like, I don't know, like Alex Hormozi says sometimes some like kind of wild shit on there. And like, look, it's not bad or anything, but I know he's just trying to do it for the mass market. like appeal of saying big things. Most of our clients, again, don't really need that.

Yeah, I do that too, as a guest. I think, uh, yeah, it's just a way to convey— as long as it's truthful and it's, uh, it, it makes sense, right, for the audience.

I mean, yeah, it's brand—

it's branding a lot of things, right?

Yeah, it's branding, you know. Like, if you want to be the guy who says crazy shit on a podcast, go be that guy. It doesn't matter. You could do it.

Yeah, I did think of Alex Hormozi as crazy, crazy guy that says crazy shit. I could think of others like, I don't know, Logan Paul or—

Yeah, yeah, yeah. No, I would say—

In the B2C space.

Yeah, those are definitely—

B2B, there's a bunch, right? What happens after the podcast? What's your funnel, right? You said you stop the podcast and it's like, hey, let's book another call to discuss this and that. Do you have like a full funnel built out to make sure that they convert?

Yeah, so that's a, that is, um, a big part of it. You, you mentioned this earlier, the follow-up. Like, yeah, you wanna record the episode. That's your first touchpoint. Great. Now you, you know, say hey to this person. You ask 'em a few minutes before and after what's going on. Um, do an immediate email follow-up. Tell 'em when the episode's ready, send 'em some collateral. Um, we automate a lot of this stuff. Some of it's semi-automated where there's like a bit of a manual touch on it just to make sure it's personalized. And then, um, There's kind of an ongoing every 3 to 6 months, just touch base with people, let them know what's new, let— ask what's going on with them. And for us, like, because nobody decides to start a podcast overnight, um, it, it is just a long-term stay-in-touch thing. We're also like a little different than, uh, you know, maybe a VC-backed company that needs to grow by 100x in 12 months to make our, like, investors happy. We're, we're a slow growth company and that's okay. We're a cash flow company. So for us, it's about long-term relationships with clients. And steadily increasing revenue, you know, an organic percentage a year plus an acquisition percentage every year. And that's, that's the game we're playing. So it's a little different than like, we don't have to grow in order to survive. We're, we're healthy. We just got to keep it moving a little bit every year.

And what's your master plan? Is it, uh, SaaS-ifying, agentifying this whole thing? You said lifestyle business. Sure. I mean, in their case, right? And yours is cash flowing, but You have a scale in mind and like—

I love the tech. I will say I was a software engineer for like 10 years before I got into this. So there's no part of me that says that like there's not a tech play here. I think that's gonna be fun. I mean, I know you're, I've listened to some of your other stuff and seen some of your other stuff. I know you're big onto the AI like agents and autonomous agents and having people. I think all that's great and it's gonna get even more accessible in the next 2 years. So I would say we don't have it all locked in yet. I would say that our approach in general is build things that work financially, get people to like build processes that can be replicated by other people, then use machines to automate those processes when the tech is ready and able to do it. Uh, and then iterate and repeat. Because the thing about it is in a service business, you're not doing the exact same thing every single cycle. Every client that comes in has a slight tweak on the norm that they want, you know, their, their preferences around how they do clips, the way that they want things uploaded. And so you're constantly tweaking the machine as you go. Nothing wrong with that. That's just the nature of this business. So we just try to stay on top of that mix of how do we use machines to do the repeatable things that machines do well, and how do we use humans to do the things that are edge cases that machines need to be trained on, and it's gonna take some time to get there.

Love it, dude. What's next for you this year? Still another acquisition in mind or mostly—

Yeah, I wanna, I wanna do one more this year and then we are really gonna be ramping up like, um, a more intentional outreach and like, uh, plan to do even more the next year. If we get a couple in hand that are big enough, we may raise some outside equity depending on how big they are. Uh, if we find some good mergers that would take us to our goals faster. So we'll see. I mean, again, every step is like, you take one step, you see where it got you, you take the next step, but we're aiming towards a pretty specific goal. So I'm sure we'll have an update in 2 or 3 years. There'll be a lot of fun.

That was Carl and Charles for another Founder