Turn $0 Into Billions With This Book

So today we're going to talk about how you can make a few billion dollars. So I'm going to go through this book, my key takeaways, and this book's written by Brad Jacobs. He is a 7-time entrepreneur and every single business he founded was worth over a billion dollars. Just to give you a little context here, he is a 7-time entrepreneur and every single business he founded was worth over a billion dollars. And a couple of them were multi-billion dollar outcomes. And he's completed approximately 500 M&A transactions and raised $30 billion of debt and equity capital, including 3 IPOs. And he started in 1979 at age 23 with his first startup, Amerex Oil Associates, followed by Hamilton Resources, both privately held. He subsequently created 5 publicly traded companies, United Waste Systems, United Rentals, XPO, and XPO's 2 spinoffs, GXO Logistics and RXO. XPO stock became a 32-bagger, so 32 times, initial investors in 2011 made up more than 32 times their money. And so this guy is, he's a badass. And so all the people that are helping him quote the book, you have on the home, on the COVID I should say, the former chairman of Sequoia Capital on the back, Ken Langmore, co-founder of The Home Depot. And you have a bunch of other people on the back from other various companies such as NASDAQ, General Dynamics, TIAA, Morgan Stanley, Best Buy, New York Stock Exchange. So this guy's pretty accomplished. And the way I like to judge a book, by the way, is by the number of dog ears. And so you can see this, I'll do this for every book review to just, you can see how many that I have. And this to me tells me it's a worthwhile book. And we will come back to maybe one or two of these just to show you the, give you some of the insights on some of the takeaways that I thought were worth saving. I want to go through a couple of takeaways That I found while reading this book. And it's going to be helpful to me. It should be helpful to you too. So what's interesting is Brad was really focused on consolidating industries, layering in technology, and that was his game. That was his thesis, and it's worked out well for him. And so for him, one good example is United Rentals. And so he saw that the only person that was renting construction equipment, I believe, was Hertz. And it's really expensive. Construction equipment's very expensive, right? And they were the big gorilla in the room, but really there was nobody else competing. And I think they were maybe doing a billion in revenue or something like that, or valued at a billion. And both very different, by the way, but I just don't remember as well. But so he comes into the space and he consolidates a bunch of people that are a bunch of— the industry's very fragmented, right? So he consolidates a bunch of these equipment rental companies and then puts it all under one umbrella. Eventually that company becomes bigger than Hertz's division. And I think it becomes worth, I don't know, $2.5 billion or something like that, or doing $2.5 billion in revenue. Again, I forget which one it was, but either way, still good for them, right? And so his whole thing is I'm just going to go in there. I'm going to buy a bunch of companies. And we'll see how they do. And I'm going to integrate them very well. And he does talk about that in the group. So when you're in the book, when you think about buying a company, it's not just getting the deal done, the acquisitions piece, right? But it's actually the merging piece. That's the integration piece where you have to make sure that everyone is aligned and rowing in the same direction. And you have to rotate some people out, unfortunately, because there might be redundancies in the companies that you acquire. And if you don't do the integration well, that's when the acquisition falls apart. And so, a lot of people don't think about the acquisition piece and— sorry, the mergers piece. And that's something I certainly didn't put as much thought into. When I did my acquisitions in the past, I was like, you know what? I have this company now and hopefully there are people on my team that can figure it out. And I did read a lot of books about making sure the integration would go well. And I did some things, but I didn't do enough. So, you have to be very involved. And one of the key things I learned from Brad is that If you're going to do an acquisition, be prepared to work 14 to 18 hours because it's going to take a lot to integrate these companies and prepare to integrate very quickly too, and prepare to do these deals very quickly too. And so just to back up a second, one thing that sticks out to me is that when it comes to investing or when it comes to buying companies, Warren Buffett likes to say this, that he can just wait forever and he doesn't need a swing for a long time. And that's why he has $188 billion of cash that he's sitting on right now. He's even said in a recent shareholder meeting that there's just no good deals that he sees at the moment. And so you can wait for the perfect pitch and then swing. And so at least in the beginning, I know even though I just mentioned Brad did 500 deals, in the beginning he saw 2,000 deals and he only did 18 of them. And so that's like 0.09%, right? And so you have to really understand what it is that you're looking for. You have to understand that you're going to look at a lot. And when you're going to do— when you're going to handle due diligence, What one thing I didn't do as well is make sure that I interviewed the top 10 or 15 people at a company just to really understand what's good, what's bad, what they would change about the company, what they would absolutely not change about the company and go from there, right? And I actually did that in the past where I met, I did this after the acquisition. You want to do this before the acquisition ideally. So you want to meet with key stakeholders. Ideally, you're talking to some customers as well. And ideally you're talking to some key associates, right? You have to talk to these people because these people are your stars and you'll be able to figure out from there, like, do you want to do this deal or not? And who the stars are going to be and who you really need to get on your side to make this thing work, right? And so again, this is a guy that's done 500 deals and, you know, what else did he do? So he, I would say that he streamlined his acquisition process, whereas people might take 6 months, 12 months to get a deal done. He's just like, look, I'm going to know very quickly just by talking to these 15 key associates for maybe 80 to 90 minutes each. I'm going to interview these people. And so he, I mean, if you're going to talk to 15 people for 90 minutes, that's already 13.50 hours. That's 22 hours. That's basically an entire day that's gone, right? And you have to be willing to dedicate yourself to it. And I would say that, you know, I think it's wishful thinking to believe that you can do an acquisition and then hire a GM at the same time and expect them to handle the acquisition. That's a mistake that I made in the past. If you want to make this work, you have to be focused and you have to be involved. So I like to call that focused involvement. And that's how you can make these mergers and acquisitions work out. Keep in mind when you buy 500 companies, you're trying to integrate all these different pieces. Each company is a different organism and not everything is going to gel well. And you have to be okay with accepting some of the things that don't work as well. You can't, You can't expect perfect. Like with your own company, if you're starting it from scratch, you can probably expect more things to go your way, more things to, more people to follow the rules that you set forth. But if you're integrating 3, 4, 5, 10 different companies, you have to expect that there's going to be some decay with the culture and it's not going to be exactly what you thought it was. You can expect it to change. And that's what I would say. So I wanted to take a moment to share with you the Ahrefs Evolve Conference. This is a marketing conference happening in Singapore. This is October 24th to the 25th, and it's going to be 2 sunny days in Singapore. 500 digital marketing enthusiasts, 18 of the top speakers around the world. And Ahrefs, they really know how to do it up. I know Aleyda Solis, I know Bernard. These are all people I hung out with in person. James Norquay over here. Tim, I've hung out with in person as well. They're all amazing people. Same thing with Victor. They know their stuff when it comes to SEO. They know their stuff when it comes to content marketing. And there's a whole host of other people here that I'm familiar with. And Lily Ray, she tweets amazing news around the latest updates and she's usually on top of things and I, I, I really enjoy her content. So I would highly recommend all of you to go check this out if you're interested in SEO and content marketing. This is probably going to be one of the best conferences you can go to in 2024. And all you have to do is just search for Ahrefs Evolve Conference. You should be able to find it that way and they'll take care of the rest. I thought what else was interesting was that He does these monthly business reviews and quarterly business reviews, right? And usually we do that with our clients at my ad agency, but to do them internally where they share all the numbers and everyone has all the details and they read them ahead of the call and on the call, well, before the call I should say, there's actually a moderator that will look at all the questions people have and all the things people are interested in talking about. And then they will prioritize the— Questions. issues for discussion in order of the number of votes that each issue has, right? And so it's more democratized and then they'll kind of just work down the list that way. But that way when you do a monthly business review, you have all the key stakeholders available for that meeting. And the quarterly, you're just basically doing quarterly planning. And at the end of the year, you're probably making that an annual planning thing as well. And so I think that's interesting because I also think about how Jensen Huang, or Jensen Huang, I should say, from NVIDIA. He basically has meetings where everyone, there's no silos, everyone has all the information, and that way we're going to be able to move a lot faster. And so that's what I think Brad is doing here. You're doing these monthly business reviews and you're trying to get everyone on the same page. You're sharing core metrics, people are asking questions, you're prioritizing those issues ahead of time, and then you can just jump into it on the call. And that goes a long way. What I also found interesting too is that he screens all of his executive hires using a person that used to work at the CIA. And I know someone named Andrew Wilkinson. He actually referred me to a company called BIA, which is Business Intelligence Advisors, right? And what they do is, you know, you pay them a couple thousand dollars, maybe $10,000, $15,000 or so, and they'll help you really deeply screen an executive. And if you're going to hire someone at the C-level, It's worth it for you to make that investment because they can torpedo your company or they can they can make it totally grow in the right direction, right? And so you want to make sure that you're you're screening your executive hires extra hard, and that's what I would say. The other thing too is keep in mind, like when you look at all the different companies that he I'm just looking at the book over here. So one is in oil, the other one is in rentals, equipment rentals, the other one's in waste management. And the other one is in logistics and the other ones, I kind of forgot what they are, but you can't be an expert in all these things. And so what he's done for a lot of these companies was that he stuck around as the executive chair, but he would have people that were experts leading those companies. Some people were actually homegrown. One person was actually promoted up. Another person was a COO at another company. Another person was a CTO, I believe. At another company or maybe a CFO at another company. Very different, I know. But, and they're also very different personalities too. But those people were the right fit to run those organizations. So again, you can hire some, sometimes you'll hire someone from the outside. Sometimes you'll homegrown, homegrow someone. And, you know, it just depends on where, how timing looks and where their chips fall. And so that's what I think is interesting. The other thing I would say is he would always trust the people that work at the company. After he does the acquisition, in the middle of integration, he's going around asking people, hey, so he's surveying the entire company. So he'll survey an employee from a company that he just bought and say, hey, what's the one best idea you have to grow this business right now? And the second question will be, what is the stupidest thing that we're doing right now? So eliminate the stupidest thing. If you're seeing maybe 40 to 50% of the people that are saying, this is really stupid, we should stop doing it. then you should maybe pay attention. And if there's a really good idea and maybe multiple people are saying it, that's enough signal for you to perhaps proceed on an idea that a lot of people have, right? And so that's not saying that you're necessarily going to do everything that people say, but you are setting the expectation that you will listen as a leader and that goes a long way. And once people start to see that a couple of things are being, couple of the ideas that they have are being implemented, That means they understand that leadership is actually listening. And what that means is they'll trust you more. And if they trust you more, that means they're going to stay longer at the company. They're going to work harder for the company as well. Another thing that sticks out to me is he talks about speed. He wants to execute quickly but responsibly. That's one of his core values. And you should never come into an acquisition acting like you know it all because the fact of the matter is you don't. And most of the time, and I'll tell you this from personal experience, is that The seller has the informational advantage and there's a lot of stuff that you won't know at the end of the day, right? And that's just how it is. All right, quick note, this is about my company. It's called Single Grain and Single Grain is an ad agency where we're focused on driving innovation. And so, I want to talk about a couple of new strategies and if you need help with marketing, great. If not, here are a couple of new strategies that you should try out. One is programmatic CRO. So, we are doing programmatic conversion rate optimization on our site. We're building products that will automatically optimize your site to increase conversion rates. We're also auto-optimizing, auto-updating updating from an SEO standpoint. And we're constantly thinking about what else we can do in terms of enriching the visitors that are hitting your website, and also tailoring custom messages for them using AI. And so there's a handful of things that we're doing from a marketing standpoint. And our mission is just to drive more innovation. So if you want to learn more, just go to singlegrain.com, grain like rice. So singlegrain.com to learn more. And we'll see you inside. One good, one really important point that he made too was that You want to go for the big hairy deals and you want to avoid the ones, the small ones that won't make much, right? And this is, I would say this is a mistake that I made in the past. And so, you know, you might have one quadrant where it's a big hairy deal and, but if it works, it's going to go really well. But the hairy part is it's going to be difficult, right? Now, when you do the small deals that are hairy, well, you're not going to have a great outcome. Also, it's going to be a pain in the butt too, right? And so that's what you don't want. And then you really don't want to deal with the ones that are hairy and there's not going to be— there's like, it's just a bad company, right? And so those are— there's different quadrants to go after, but in general, you just want to go after the ones that are big, hairy, and then you can have a better outcome that way. It's a law of numbers, right? It's really a math equation at the end of the day. And that's what I would say. He also has an amazing chapter on running electric board meetings, or I should just say meetings. But before I do that, I'm going to pull from one of these dog ears over here. And let's just see if I can pull a great takeaway for you. So here's what this says. When I created XPO in 2011, we did only 17 acquisitions in the first 4 years. And he, he quoted only, we did only 17 acquisitions in the first 4 years, but we looked at about 2,000 prospects, which is what I talked about earlier. We passed on abysmal deals as well as okay, but not great deals. And sometimes that meant waiting when we would have preferred to be signing. So that's exactly what I just said. So you don't want okay, but not great deals. And you don't want abysmal deals, right? You want the big hairy ones. When we buy a business, we expect to own it for a long time. So we search for the hidden flaws that may surface down the road and cause harm. I like acquisitions where the primary risk in each case is operational execution. I have faith in my team's ability to fix the most flawed operations because I've recruited the best possible operating talent for my companies. The best, the most effective way to understand not just the company, but also their operating environment is by working as hard as the most diligent junior analyst at an investment fund. Do disciplined, meticulous, bottom-up analysis. I want to be confident that I understand The target strengths and weaknesses. We've created a systematic evaluation process that lets us move quickly with less risk. And while there's no one speed fits all in M&A, faster is almost always better. Here are some of the specific questions my team and I answer as thoroughly as possible before we contact a prospective seller. So before I go into those questions, because I'm sure that's probably what you're wondering, so I want to reinforce again, get rid of the abysmal deals. Okay, but not great deals. Get rid of them. Just go for the big ones, right? And take your time if you can't find those at the end of the day. Yeah. And I like the piece on operational execution because if you set your talent bar very high, and I do believe a leader, especially when it comes to executives, executive hiring, you should be involved with the process. And some of the most hardcore people such as like a Jeff Bezos, or when you think about DoorDash's CEO, they interviewed every candidate up to the first couple thousand people, right? And that's hardcore. Yeah. So this piece is also important. And for me personally, I know based on my personality test that I'm not the most detail-oriented person in the world. So you have to surround your team with people to cover up your flaws. When you're going to do deals, you have to make sure you're working with super detail-oriented people, people that are really all over the— we talked, he uses the word meticulous, right? So bottom-up analysis, that means you're just super detailed and you're looking through things and you want to have a checklist at the end of the day. So if you've done a deal or two, you'll have a checklist and you can just Google M&A checklist. You'll find a ton. But over time, as you do more and more, you'll start to evolve your own checklist and you'll figure out what works well for you. So these are some of the questions. What will be the big drivers of profitable growth in this business over the next 5 to 10 years? And again, he's asking these questions to the prospective seller. What do we have to believe in order to be confident we're going to achieve that growth? Are the assumptions underlying these beliefs reasonable or easily derailed? Are these hockey sticks to the growth of revenue and margin without credible explanations for them? Can we accelerate scale more rapidly at a much lower base cost base by deploying AI automation or robotics? And I'll, I'm gonna continue on here and then we'll go through these. What are the synergies we can expect from the integration? If the operational execution isn't up to par, is this something we have the capability to rectify through training and/or our technology? What are the redundant positions, overhead, and real estate costs? What procurement savings can we realize from the added scale? Is there an opportunity for cross-selling for the rest of our company? And then there, there's a lot of other questions here. I'm just going to go through this next paragraph and then I'm going to do a quick review of these. What's the level of morale in the organization? Are the right people in the right place with an effective organizational chart? Where might they be overstaffed or understaffed? Is the sales force top-notch or is there an opportunity to train them to be more effective? The same questions holds for the human resource and financial planning and analysis staff. Are the compensation plans properly structured to motivate people to contribute? To the business plan or is there another opportunity to improve? So there's a lot where he's trying to recognize operational efficiencies and potentially cut costs because when you do an acquisition, there's going to be redundancies, right? There's going to be efficiencies that you can realize. Talking about AI automation and robotics, that's going to lower your cost base, especially in the next 5 to 10 years or so. I encourage everyone that's watching this, if you're building a business, you have to be thinking about this because when you think about How much power our brain— so our brain, right? Our brains can power a light bulb, for example, but how much can a computer power? How much— when you think about what we're lacking, so our brains are actually computers, right? And we can compute up to a certain level, but computers, when they're fully optimized, the level of compute, the level of scale we're going to be able to get— what we're not— what we're going to be looking for in the future is not actually necessarily human labor, but we're going to be looking more for compute. And well, that means compute's going to be doing labor ultimately, right? And so we're going to be able to cut costs quite a bit, but you have to be on top of this stuff. The big drivers of profitable growth. I actually like that first question a lot. So what will be the big drivers of profitable growth in this business over the next 5 to 10 years? And so you want to understand from the seller, like, what is their vision? What do they see? What is something that they see that you haven't seen? Right? What do we have to believe in order to be confident we're going to achieve that growth, right? Because you're trying to de-risk yourself from doing this deal. You want to see what type of answers they give. And I would say, you know, one thing I would say, and I actually think Brad probably does this, is that sure, you might meet with their 15 top stakeholders for 90 minutes each, but you want to spend the entire day, I would say, with the prospective sellers. And they're grilling you. They're asking really good questions. You're asking really good questions because you have to really understand If you can trust this person and if their story adds up and if you think this person is smart. And hopefully I would say, especially in the agency space, as we do more acquisitions, we want to keep the founder on because the founder drives so much of the culture, the vision, and a lot of people look up to the founder, right? And so you want to make sure that the founder stays and you incentivize them to stay in some way, shape, or form, right? Whether through an earnout or something like that. You know, I think the first paragraph of questions, I would just go back, rewind this video and watch those, you know, talking about AI, talking about big hockey sticks to the growth. Margins, right? So that's what it is. I mean, this is just one of the dog ears that I caught, and then I'm going to go through a couple other takeaways. So this chapter title is How to Do Lots of High-Quality M&A Without Imploding. It's a great chapter, right? Great chapter title. So when it comes to making a few billion dollars, I've got a bias toward industries that are ripe for consolidation. Acquisitions are the best way I know of to scale up fast and gain the advantages that come from a large number of locations and greater market share. With scale, I can professionalize the operations by integrating best practices, spread my cost base over a larger revenue base, and attract desirable customers and management talent. So that's the reason. I mean, like he's just saying, look, this is what I know to be best. And I can see that, right? The people, a lot of my friends that are playing the acquisition game, and same for us too, it's at the end of the day, if you want to get scale, people already have the scale and you can integrate it. You have some, Unique insight where it makes it a one plus one equals five scenario, then you do the deal. What I would also say too, one of the lessons from my side is if you're going to do a deal, make sure that it's heads that you win and tails you still win. And so that actually comes. So this comes from Manish Prabhakar. He talks about heads you win, tails you don't lose much, right? But my friend Syed Balki has actually adapted that to be heads I win. Tails, I still win, right? And so you want to make it a win-win type of scenario where even if the deal doesn't work out, you're able to not lose much, right? Or still gain something. Maybe there's some amazing talent, maybe there's some amazing technology, and maybe they have an audience that you can leverage, right? So you got to think about what are all the assets that you have that you can leverage. So talking about running electric board meetings, he has a really good chapter on this. So you want to send the deck ahead of time. And you want to invite only high performers. You don't want the— because you want the meeting to move along, right? You don't want people that are kind of middling that aren't the people that are your A players sitting in those meetings. Because A players like working with A players at the end of the day. The other thing I'll say too is you want to stack rank based on your return on invested capital. That means that the different ideas that you might have, the things that you want to implement, you stack rank them based on basically what the return on investment is going to be, right? That's how you want to look at it. Return on investment capital, it's another investment term that's similar to ROI, but we'll just use ROI for this sake. And you want to ask your high performers what ideas they have to increase customer/stakeholder value. I'm actually going to reread this chapter later because I think it's such a great chapter, but I highly recommend that you check it out. Quick message from the Agency Owners Association. So this is the peer group for agency owners that Neil and I both put together. This is for people that are doing 6 figures, 7 figures, 8 figures, even 9 figures as well, and we're all here to help you grow your agency faster. In this group, we share leads. We also we share learnings with each other. It's a community where people can ask questions, their most burning questions personally, professionally. We'll share templates, reports, things like that. We're constantly adding more value to the group. I will tell you that the price is continuing to increase. The good news is that there's no long-term commitment, so you can just learn more by going to marketing school dot io. Once again, that's marketingschool.io/agency to learn more, and we hope to see you inside. This will be the last part that I talk about. So imagine you acquire a company and you're surveying the entire employee base on how to improve the company. So these are the 6 questions you want to ask. So 1, what's the business doing well that would be crazy to change? 2, what's the business not doing so well that would be crazy not to change? Okay, so that's on the other side of that. So the first part is, That this is like a sacred cow. Like this is working really well. Let's never change this, right? Second one is like, we're not doing so well. Like this is, it'd be stupid for us not to change it. Okay, great. 3, what's your best idea to improve the business? Everyone has a good idea, right? But what's the best idea? 4, what's something that could be made more profitable? Okay. Not everyone's going to have a good answer here, but the people that do, maybe finance is going to have a good answer, operations, like people that are working in certain departments, they for sure will be able to find efficiencies. And if you find that again, 40, 50 people, of people per department are saying the same thing, that's worth looking into more. And what's something that could be more customer-friendly? You're creating a product or service for customers. You want to make sure you're doing a really good job there. It's not just all about profitability. It's what can we do to make things easier for the customer? Because it's who's paying the actual money at the end of the day? It's customers, right? And what's something we can do to improve the workplace environment? Okay, well, to please the customers, well, you need to have great people on the team. So, how can you make the workplace environment better? And so, you know that for someone like Brad, you have to consider all the pieces on the battlefield. And it can't just be, oh, just because you're a marketing person, you really like to do marketing. No, it can't just be that. You have to think about all the implications here, the people implications, the customer implications, right? And also, like the macro implications. Where is this business going to go in the next 10 years or so? And how are you going to drive more efficiencies, right? So, there's all these things that you need to juggle. And that's why this is not easy. But, you know, to me, I mean, I look at Brad, I look at this picture of Brad over here. So those of you that can see the screen. So Brad looks like a very nice guy, right? Looks like a very nice guy. And he actually didn't know that he was going to go into business and he just ended up in it. And he still seems like a very humble person. And he talks about how important that humility is. And so it's really important to keep grounded, right? I mean, you look at this guy, I call him a 7-time champion, right? 7-time unicorn champion. And I think it's really impressive what he's done. And it's not saying you need to follow his playbook. It's just what's worked for him. But I'm sure there are elements of his playbook that you can adopt, and that's going to help you take your company to the next level. So that being said, that is it for this one. And hope you enjoyed my— these are all these new series I'm doing. I'm going to be doing a book review series, right? I'm going to be doing a series on how we're going to get community to $100K in MRR. And then on how to grow the— how I'm growing my agency to $100 million in revenue, right? I'm more excited to share my experiences and we'll still keep the podcast going. But I'd like for you, those of you that got to the end, share in the comments if you like the direction that we're going in or you want more podcasts or you don't like content like this, let me know and we'll see you on the other side. Thank you.