Consulting for Equity: How We Get Deals

How much more successful would you be if you had lunch once a week with insanely successful entrepreneurs who share their biggest secrets on how they think and achieve success? Grab your seat at the table because this is business lunch with Roland Frazier and Ryan Deiss.

If somebody says, well how does this work? You'll be able to say this is how this works. So if you want to work with us, basically here's how we work. We do a profits only interest with the rev share monthly. Every single month we take 6% of client sales. Basically less refunds and chargebacks. Right? So that's also known as net sales but so it's 6%. If you just say I'm going to take a profit, it's going to not work out for you. You have to have the greater of 6% of sales or 10% of EBITDA. From whom? Third party accounting financials, okay? We require third party accountants. So we got to have an accountant that's a third party, not internal, okay? If you don't have that, we don't deal with each other until you get one. I'll help you get one, but you got to have one. Why? Because I don't want your brother's, sisters, cousins, mother's uncle to be lying to me about the numbers because you're in trouble and don't want to pay this month. Okay? So now you can't lose because you're going to get the greater of 10% of profits or 6% of gross. Is there any challenge or manipulation possible for 6% of gross when you've got a third party accountant? No. So that's easy. And that just comes off the top. Ach me every month I'm done on exit disposition or change of control. Basically anytime you sell, okay, but it's important that they know you can't just like transfer stuff and figure that you're going to cheat me. Not that anybody ever will. But again, I've got to think worst case scenario because I'm a recovering attorney. 10% of aggregate proceeds from sale, change of control, disposition or transfer substantially all of clients assets. Great. Now they know what the deal is. If they don't like this, then they could just click off the page and never talk to you again. Okay, but now you've got something that's able to help you sell. Meet the team. This will be you, okay? You and your team, then the board of advisors. You'll have your board of advisors and that'll all get taken care of. Then basically, hey, here's the deal. There's a Growth advisory phase and an exit advisory phase. This is very self serving for us, but also true because there's times when you're going to need help with growth and then there's times you're going to need help with exit. And here's the challenges that happen. Cap table, seed round founders, entity type create. We don't play here, we don't play here, right? Talent deficit, cash crunch, legal issues, offer fatigue and market size, we don't play there. Where we start to play is here where you're in a constraints phase. You've had product market fit and now you're going into challenges with talent, cash crunches, legal issues, market size, etc. And then we go all the way through exit. So we say these are the areas where we can help you. Okay, now there are five places that you want to exit. This is something I found to be very, very effective. What's cool is I get to test on social. So whatever I get the most response to, I know really kind of clicks with people. And so talking about the five exits of an entrepreneur, the entrepreneur, first you want to exit the line, you want to get off of doing everything. Then you want to exit the staff so that you're no longer on the staff, you're a manager. Then exit the org chart. Then you want to exit the board, right? You're going to get off the board and just be an investor and then ultimately you're going to exit ownership. And it's like we can help you with all of this because a lot of you that are still. I've got people that do 10 million a year that are still here, right. And they like just to get to here would be amazing. But exit off the. Getting off the org chart is something everybody can relate to. Anybody that's got a business, right. So we're going to help you do that. How are we going to do it? Well, we've got a model, it's a framework, it's spv. Now if you have a different model, you can take this out and put yours in. Okay, so we have leveraged sales. When you have sales and bankable profits, you get scalable. When you've got bankable profits and transferable value, you've got options. You got leveraged sales and transferable value, you've got momentum. That's a framework that I developed. And then here's what we're going to do. We're going to help you get leveraged sales. We got a whole bunch of tools to do this. We're going to have more Sales and more profits, which equals scalability. That's our first focus to get you leveraged sales. Got 196 different ways to do that. Okay, we got you. Then case study, which we'll put in here a sales based one. Again, so this will be actual case studies. So. So that you can say here's something our team has done, okay. And it will be amazing because we have lots of those. Then focus number two is going to be increasing your profit, reducing your costs. Right? More profit, more value means more optionality. And these are all actual tools by the way. We have 63 profit accelerators, so we've got you, okay, six categories, 63 step profit optimizer tool set that we'll go through. And I have all this stuff, you guys can have it. Okay, then case study two on how wonderfully profitable we got. Then focus number three, increase sales, higher value gives you momentum. We're focusing on increasing valuation and we've got 45 value amplifiers to do that with. Then we go through which you guys should have all seen the valuation multiple arbitrage that when you're an owner operator, you're here. The second that we get you professionalized, you're here. As soon as we get you over $10 million in sales or 2 million EBITDA, we're going to sell here. That's our goal. Okay, Then case study 3 on how we increase valuation. Right now here's how we're going to work together. We got three phases. We've got assessment, improvement and exit. So here is what we're going to be doing while we're doing the assessment. Here's what we're going to do to help you improve. And here's what we're going to do as part of the exit process. This is our objective. We're going to increase your efficiencies, profits and valuation. When we start out here, most people are going to be valued around this. And if you think you're valued at 10, then let's just have a conversation on how value is determined and you'll find that you're going to be here. Okay, first year we want to take you up over the next couple of years. 2x to 7x higher. First year we anticipate we can go from 1 to 2 to 3 to 5. A lot of this is achieved just by going from owner operator to professionally managed. Right. But we've got a couple other things we can value levers we can pull there. We do have 45 of them. Then we're going to go in years 2 and 3 to about a 4 to 8 increase. So total goal is to increase you 2x to 7x over the first couple of years as we move towards exit in 4 or 5. Then our goal is to have you 1 to 7 times higher exiting at a 5 to 15x. What is going to determine this is going to be based on what your industry is because that varies and SaaS is a completely different thing. But this is pretty accurate across all industries. So you can see why you want to work with us. Because we're going to take you from the far left to the far right which is better. And we're only going to charge a fraction of that 10%. So if we increase you 5x then we're going to get 0.5 of that. You're going to get 4.5. We increase you 15x, we only get 1.5. The other 13 and a half times your value currently is yours if I'm taking 10%. Okay. Communications cadence. How do we work together? Well, we start with strategic planning. We use three tools. Our scalable operating system. If you have something different, you can put something else. QuickBooks because we want professional accounting and Zoom. We're going to have a quarterly strategic planning meeting via Zoom. We're going to have a founders board which is our mastermind for businesses three times a year. Epic board three times a year. If you have something else then you can call it whatever you want to call it. Right. Or you can buy them into ours. Right? Doesn't matter. Ad hoc check ins. Well what if I have something that's not quarterly? Absolutely. I'm here. I'm a business partner. We're a team. We have a Slack channel that we can talk back and forth on. You can text me, phone me, email me, email email me or WhatsApp me. Then we're going to review monthly. We're going to have a review for KPIs and then get advice. We're going to quarterly have a board meeting via Zoom. And then once a year we'll have a board meeting in person in San Diego at my favorite place, Rancho Valencia Hotel. And the ones that are quarterly will be Zoom. So that's how we're going to talk to each other. Okay, here is how the application and decision process works. We're going to start out with you applying online here right now by clicking on a link that you'll see in a second. Then we're going to, we are going to review your application. We'll have a Zoom meeting to talk about that and see how we seem to fit together. We'll conduct some light diligence, which I have a whole sheet of that for you. We're going to have a zoom after that to get our questions answered and yours. We'll make a decision on whether we're going to do this or not. Then we'll have another zoom meeting. We'll paper the deal and we'll onboard you. Okay? That's how we work together. And if you would like to apply, then we're going to say, what's your elevator pitch? So we know, where are you? Are you going to be somebody that qualifies to do business with us? So here's the deal. It's hard to take 6% of revenues from somebody that's got a 6% profit margin. That's called taking all of their profit. A lot of bigger businesses have lower margins. Maybe they're 15%, 20% because they've got cost of goods sold and things like that. So if you're taking 6% of a business that's got 12%, then you're taking half of their profits. So that's why I say, as a company gets bigger, to take 50% or something like that, it's hard. So it's better to me just to basically say, my minimum is I won't deal with anybody that can't afford to pay me 6%. Because it's like if it's not 6% and you're doing a million dollars a year, 6% of a million dollars a year is kind of crappy for me. It's 60 grand a year. Not super exciting. Right. So you have to basically say, is it making enough to make it worth me doing? Does it meet my acquisition criteria? Okay. So every time somebody fills that out, everything is listed. Now, you can then sort by whatever you want. What am I looking for? I'm looking for people that have more than 10 employees first, and then revenue over this and profits over that. Great, let me build a rule and export that to my CRM. And now they go into nurture. Okay? So it's a good way to basically have an understanding of how can you do this at scale.

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