Creative Ways to Acquire Businesses and How to Invest with No Money Down with Joey Gilkey

On today's episode of Business Lunch.

So I ended up offering them. I said, hey, how about we do this? Let's do a 10 year seller finance, 10% down payment. I'll do a 4% interest, I'll do a five year balloon. So 10 year AM seller finance, five year balloon, 4% interest at a 4.5 million valuation.

Right.

So I'm going to give you a little bit extra than you want. That's the way you want to get to your valuation. SBA is not going to prove that because it's more than a 5X. So. Oh, and I said also I want to do a, a ddp. I want a six month ddp.

A deferred down payment.

That's right. So I said I want to utilize the cash flow because I would be basically buying about $70,000 of profit. My note would be about 34,000amonth. So I'd still have 40 grand left over. I'd have six months to let that build up. That would more than pay for the 10% down.

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Hey everybody, Roland Frazier here with the.

Business Launch podcast and today I am excited to tell you about my guest Joey Gilke who is with Sales Driven Agency. Joey, welcome to the show.

First off, thank you for having me.

And tell me about what you do and what you got going on right now and then we'll hop on into it. Cool.

Yeah man. So Sales Driven Agency is we build sales operations specifically for digital marketing agencies, hence the name. We help marketing agencies become sales driven. We build out all their sales processes. We we recruit, hire and train their salespeople and we build out their sales enablement like tech stack and Training and all that fun stuff that you tie into a bow to create an operation that's pretty cool. And how long have you been doing it officially? So we exited tribe, um, and then after tribe we ended up creating sales driven agencies to about two years and some change ago.

That's awesome. And so you're actually kind of helping the people sell that help people sell, right?

Sort of, yeah. So with marketing agencies, you know, historically they're creative strategists, technologists, they're not salespeople. So they don't, they don't come from the background of being a salesperson. They've never done rev ops or build a sales operation. They've probably not hired salespeople successfully. And the agency space is very unique in the sense that we have to kind of operate different than a SaaS sales team would. Right. A SaaS sales team can afford to have what we call 3-4x OTE. So on target earnings they can scale a sales department with a salesperson producing three to four times their on target earnings. So the SaaS salesperson is going to produce a hundred grand. You can scale a sales team if they can drive $400,000. In revenue agency world, we don't have those kind of margins. So you got to have a team that's producing 8, 9, 10, 11x on target earnings. And that's not easy for someone who doesn't have a background in sales. So we do form.

So would you say that the skills for the agency sales are kind of particularized or would you say that they're things that could really be adopted over at some of those other places to really upgrade?

Oh, it's very adoptable. You know, we've, you know, we've worked with and you and I have a mutual friend, Vinnie Fisher, at fully accountable. Like they're not an agency, but they have a similar high ticket B2B longer sales cycle companies like that. It's very transferable. Now I've picked my niche because I have a grander plan than just helping people build sales operations that I'm, I'm working on. I like it and I've been in this space for a long time, so I know it like the back of my hand. I understand agency. Now there's some nuances, right? Like with custom scoping and you know, you know, with agencies who do any sort of creative work or do performance work, you know, your salesperson needs to be both consultative and a challenger salesperson, but then also savvy enough on the digital marketing side with product market training. To be able to knowledgeably talk about the product, scope it appropriately for their market they're selling it to. So there are some nuances there that's challenging. I think that the biggest nuance is just the margins, you know, just a little bit different.

So let's talk about your grander plan. Tell me a little bit about what that looks like.

Oh man. So I've been in the agency space for about a decade and started off I was in the Fortune world for a while building a sales operation there. I moved to being a VP of sales of a consulting firm and then I became the VP of sales of a HubSpot agency, inbound marketing agency. At that time I decided to, to. To branch out on my own and build what was then tribe, which I no longer run. And so I've been here for about a decade and so I know agencies super well. I have a mastermind for seven and eight figure agencies well. And so I'm around them all day. I've served them for a decade. I know them like the back of my hand. And so for me, my bigger plan is, is I know how to grow revenue. Like it's at this point almost automatic for me that I can, I can add seven figures in revenue to an agency by building out a sales operation. I can remove owners from sales who are stuck selling. But there's some areas in which I can't help them, which, you know. One, the other side of the coin of growth and sales is ops and fulfillment. Right. If, if we sell how we're supposed to sell and how we know how to sell, we will eventually break operations because we will outsell our capacity. And so the next problem to solve is the operations and fulfillment side of things. Well, I personally don't have that background, but I can buy one that can, which I know you're a fan of.

I am.

I'm actually under contract on one right now. We could talk about that deal. My bigger picture is to be a super company for agencies. So I want to have the sales operation that I can control growth. I want to have the fulfillment and delivery operation that I can come in and streamline fulfillment. I want to. So right now I'm kind of looking at sourcing fractional controller, accounting and bookkeeping companies that serve agencies only. And then eventually I want to have the M and a brokerage that helps buyer and seller represent because I'm dealing with so many agencies and because I'm able to help them become more profitable. Nice. And obviously sell for higher multiple.

So you're doing A bit of acquiring for growth, right?

That's right.

Okay.

I've, I've finally plunged. I've done some small acquisitions of audiences and small software companies that are more just like Chrome Extensions that I flipped for for Quick Buck, but this would be the first, like multimillion dollar in revenue acquisition that I would do.

Those are kind of cool. Let's talk about the audiences. As a lot of people don't realize, you can buy audiences.

Yeah, yeah. So for me, I think that. And I've done it in different capacities in my life. And so for me, someone else has put in the hard work of building an audience and developing trust, and they've got all my ideal customers or all my strategic people I could add to my audience. And one, they don't know how to monetize it, or two, they don't know how to use it. And for me, where I have plenty of offers to offer someone, especially in the digital agency space, there's Facebook groups, there's email lists, there's, there's, there's plenty of areas where my people are spending time. There's LinkedIn groups, and most people don't know how to monetize this. And so I'm going to go to someone else who's probably not making money running those things and say, hey, let me cut a deal with you and work something out where, you know, I can either leave them in and say, hey, I'll help you monetize this, and I'll, I'll create an offer specifically for this. You drive people to my offer, that kind of stuff, or I'll just take it outright and then I'll just fold it into what I'm doing.

And when you're approaching those people, how do you find the best way is to contact them?

Let's see. So the Facebook group that I did before was pretty simple because he put his name on it.

Just direct message.

So I did a direct message. Initially, he didn't respond. And then I went to a, a connection who knew him and said, hey, can you introduce me to this guy? Okay, just a very simple, hey, Joey's interested in, in talking about your Facebook group. Maybe there's a partnership there. Maybe he's potentially open to acquiring it or working out a deal where you can make more money off of the group. And it was a really easy introduction. And then it was, it was pretty simple at that time. Now, I would have done things differently in terms of what I did with it afterwards, you know, and I probably would have had a better handoff. From him to me. But I do think that it was kind of the first thing that opened the can for me of like, okay, someone else has done the work. You just got to find the creative way to make a win win to take their work, siphon what they built and bring it into your ecosystem.

How did you structure that deal? Because a lot of people wonder about how do I know what to pay for something like that.

That was simple. Was eventually. So this one was funny. So this is when I was running tribe. I told him about my offer. I told him, hey, our average retainer's, you know, 15,000amonth.

Hey, business lunch listeners. We're gonna get right back to the show but Roland wanted me to invite you to a brand new training that he's doing on acquiring businesses with no money out of pocket. It's something that he's talked quite a bit about on the show. But he's doing a free training where he's gonna walk through the entire process. So if you wanna get access to that, go to businesslunchpodcast.com epic that's businesslunchpodcast.com epic and you can get signed up.

So pretty high ticket 180, 000 LTV or ACV and and I was like he said we should just do a partnership. It's like I should just own the group. And how about every deal that I do through your group? Because I own it, I'm gonna be focused on it. Every deal that I do through the group, I'll give you 10 of so in perpetuity. This guy's going to make 10 of every deal that we do through this group. And he's like, well, I'm not really doing anything with the group.

So that's 18 grand a year from each client that he gets on a yearly basis.

Yeah, it's easy money for him, but it doesn't cost me anything. It's all performance. I mean it's no different than having a commission only salesperson.

Yeah, I think that's really cool.

And so I did that way for that specific one and then I did an email email list and we kind of did. Actually this is after our. The first epic I ever went to where we did a test.

The epic challenge. Was it the challenge?

No, it was actually epic in Austin.

Oh, okay.

Yeah.

The live ones.

Okay, good. Yep. And so that's actually where I met Vinnie and Caleb Williams and some of those. Jonathan Harrison. Some of those guys. Nice. And what was cool was after that I ended up finding this, this email list And I was like, hey, let's just do a test, you know, and let's do like an offer test. And then whatever you make from it, you know, you keep. And that's my down payment kind of thing. And then after that we just kind of worked on a rev share off the list of hey, anything that comes to this list I'll give you a little cut of. I mean it's somewhat like a seller finance, but not really because there's not a target we're trying to land on. And so eventually it just, it kind of worked its way out, it kind of fizzled a little bit. And a lot of those people are still on my list today because I serve the same market. But it was just an interesting little trial, didn't cost me hardly anything.

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Thanks.

That's cool. So those are cool. And then you said you bought a Chrome extension. Did you say that was one of the things you bought? Yeah, Chrome extension. It was, it was a email signature or not. It was a, it was a open. So if you're familiar with Mail tracker or any of these one that show open rates or, you know, it's kind of like a yes where or something like that. So this, this person had like 2,000 users. There was no pay gate. There was nothing there. And I could tell just a young kid who's kind of, you know, messing around. And so I ended up reaching out to him and what I did was I looked at a lot of the, the negative comments of it and I went to him, I said, hey, you're not monetizing this thing. It could be a pretty decent bolt on to what I'm doing just as like a fun little side project. I've gotten away from doing a lot of the fun side projects because they don't move the needle for my much bigger goal. Right. But back then it made a ton of sense. You know, we had a lot of email, you know, outbound sales that we were doing. So it made sense to try something like this.

Sure.

And eventually the tool is really buggy, but I ended up, I ended up getting it for basically nothing. I paid him five grand and then I, I ended up paying him, I paid him a thousand dollars a month for six months after. So we ended up making. It was an $11,000 purchase day one. So I had 2000 users. I think there was like 1400 that were fairly active. Day one, I put up a $19 a month paywall and I lost like 30% of the customers. But you do the math. And it's like, well, it's.

That's not bad.

Or not. Sorry. I had 30% left, so I lost 70.

That's not bad, though.

And so I ended up having a decent amount of. Of cash flow coming in. And eventually I ended up having. And I flipped it, so I ended up selling it. I ended up selling it for like 150 grand. So I made a little bit of a payday, but it wasn't like a massive deal. It was fun. You know, I enjoy those little deals because they kind of showed the power of. Of creative deal structuring and I don't have to do the work, you know, start from one, don't start from zero.

Yeah, no kidding. And so now you've. You're in the middle or you've completed a deal recently that was.

Yeah, I'm under contract right now. We've already talked. We've got a couple of backup contingency offers that the first one doesn't work out. But I got very creative thanks to Epic. I guess it wasn't Epic back then. It was Legs.

So how did you. How did you find the deal and then tell us a little bit without giving away who it is? Okay.

Strategic partner. Strategic partner. So this is perfect. Lock and key. So I mentioned we do sales operations. This company does delivery and fulfillment operations. So I can help both sides of the coin. They've always been a strategic partner of mine for the past two years. We serve the exact same clients. They tend. They have it. They're better marketers than me, so they have a bigger list than I do. And so they send deals to me. Everyone they send me, perfect fit. Everyone. I send them perfect fits. I'm like, all right. Instead of me making a referral fee, which I really don't care about referral money, to be honest. How about I own the thing? I refer. And so I approached them probably six months ago, and they just didn't have a number in mind. They weren't really that interested. And so I. I approached about three months ago, and they're like, ah, you know, we probably have a number in mind, but here's the multiple we're looking for. And in my head I'm like, ah, it's not worth that. So I came back about a month and a half ago, and I was like, all right, let's make a deal happen. This. It. This fits too big too, or this fits too perfectly in my bigger picture. So I approached him and I said, all right, what do you guys, you know, what's what's your goal here? What's a win? And so then I ended up just throwing out a very simple offer just, just to get the ball rolling. I said, I'll do a 5x EBITDA. You know, I know that I can get you above the million dollars in EBITDA mark pretty quickly and start seeing a 6 or 7x EBITDA multiple for myself. So I can get to that place pretty quickly. But you want a 5x EBITDA. So I ended up offering them 3.9 million and I offered them to do 3.9 million, but I want a 15 seller. Carry on that, that was just a standard deal, pretty simple. And I'm like, well, let's go to the SBA. It's cheap money, it's 10 year AM. Like, this is, this is an easy layup. They came back, said, I want 4.2. I said, it's not worth that. So they said, all right. And I was like, how about I get creative real quick? And so that's, this is actually directly from legs of just stacking. And so I ended up offering them. I said, hey, how about we do this? Let's do a 10 year seller finance, 10% down payment. I'll do a 4% interest, I'll do a five year balloon. So 10 year AM seller finance, five year balloon, 4% interest at a 4.5 million valuation. Right. So I'm going to give you a little bit extra than you want. That's the way you want to get to your valuation. SBA is not going to prove that because it's more than a 5X. So. Oh, and I said also I want to do a ddp.

I want a six month tdp, a deferred down payment.

That's right. So I said, I want to utilize the cash flow because I would be basically buying about $70,000 of profit. My note would be about 34,000amonth. So I'd still have 40 grand left over. I'd have six months to let that build up. That would more than pay for the 10% down.

Perfect. So you do a six month DDP, six month DP.

And they came back, said, that's a little too complex. Okay, let's go back to your original offer. And so they came back and said, we'll do 3.9, we'll do 10 at a 6% interest rate, but we want to keep the software commissions that they, that they have recurring. Okay. I said, well, you know, I understand why you'd want to do that, but you got to Realize that's pure profit and pure profit taken off the top means Your multiple of 5 is now instead of 3.9 valuation, you're probably mug a 3.6.

Basically they'd like to sell the business and also keep the business.

Correct. And so they're like we want to keep the recurring commissions coming in from the clients we've brought in. I said okay, I'm not going to do that but here's what I will do. So this is, I'll, I'll finish it up here. This is, this is the deal. We got under 3.9 million. I'll let you keep your, your commissions for what? To list out who they currently are and that'll get directed to you guys. So I'll lose on that profit. But I want 15% seller finance deferred to the 13th month start date.

Ooh, nice.

So I deferred the seller finance note payments. It's a 10 year AM 5% interest, not 6. But my payments don't start until month 13. So I have 12 months to only pay the SBA. They're 32 grand. And I have 12 months to increase profitability, build out the sales operation. Because they only have 5% of their growth through outbound sales. That's my expertise. So I'm going to, I'm going to build that tomorrow if the moment I acquire it pretty easily. That's awesome. So it's a works out. It's a win for them, it's a win for me. And, and they've contingent bought the or said yes to the seller finance super creative one if as a backup if this falls through. Nice. If SBA gets cute.

That's great.

That sounds like a pretty fun deal.

It was fun. I like these guys a ton. So I wanted to get a win win in there. It's. I'm not trying to, you know, strike a deal that isn't a, a solid win for everyone involved. I just don't. They've been good to me up and good to them. So it worked out well. Working out well, we'll see.

Now have you ever considered doing any kind of like so because you do training and help people get these salesforces put in their digital marketing agencies. Have you ever entertained the idea of acquiring equity in any of those agencies in exchange?

Yeah, so I've, people have offered it to me and they're usually a little bit too small for me to, to feel comfortable signing on. I know that we'll draw the results. It's a matter of. But we charge a lot and so they're asking for basic, you know, our average deals 80 to $100,000. And so they're wanting to not pay any of that and have some sort of equity in there. And so I've started offering some equity kickers or a rev share kicker and people typically just take the fee after they see our. We put together a pro forma for every client of what we think that we're going to create for them from a revenue perspective just based ON We've built 300 something operations now.

Yeah, you have a pretty good track record there.

Yeah, it's almost automatic. We have 97% success rate at this point and our guarantee is a 5x ROI in six months together. So they pay 100 grand. They're going to make 500 at least.

That's great.

So we have this bulletproof offer. But eventually that guarantee somewhat got rid of the equity conversation in a lot of those.

Now, are we working with you at Digital Marketer on this? Because it seems like a pretty good matchup there.

No, I haven't licensed, you know, I've had a couple people try to acquire me, you know, and there's a couple of players who are in the inter Internet marketing space, but I've not partnered with anybody. I'm not licensed anything. I've. I've just kind of been in my hole trying to figure out.

I'm not talking about license, I'm just talking about. It seems like a. Oh, it'd be.

A great referral partner. Yeah. If you have agencies doing 500 grand or more, we can figure out a deal with them pretty easily and it's fairly automatic.

We'll have to chat about that after the podcast. So for anybody that's interested in building a sales team or kind of getting this, this stuff that you do, the magic that you create going, what do you think the best place is for them to get a hold of you and find out more and all that.

Kind of good stuff. Yeah, I appreciate that. It's sales drivenagency.com that's the easiest place.

Cool.

Awesome. Nice.

Well, thank you for being on the show today. I appreciate you taking the time out and it's really exciting. I'm looking forward to hearing how that deal pans out.

Of course, man. And thank you for teaching us how to do it with no money down. Awesome. All right, thanks. Thanks, brother.

You've been listening to Business Lunch with Roland Fraser. If you're enjoying the show, let us know by subscribing and leaving a review. And for more information, go to businesslunchpodcast.com thank you for listening.

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