> You should write something about what you do too.
I think most of what one needs to know is already out there. The key is being adaptable to the current environment and being aware of one’s value add (skill set, network, etc.).
The problem with writing specifics about what I do is that it invites competitors and/or haters (e.g., review bombers or DDoSers). Some parts of my businesses have enough moat such that I don’t care, but other parts definitely do not. It’s not something I want to spend additional brain cycles on.
> Buying businesses sounds interesting, can you expand on this?
It’s largely not. It’s financially comfortable, and it’s nice being your own boss / leading your own team if that’s what you’re into (I am), but I’ve done more interesting work while working for “The Man”. A lot of what I do is just streamline a system that was inefficiently run/managed.
What I do is very similar to what Andrew Wilkinson of TinyCo has done, except I am about 10 years back on his timeline, and I’m not sure I will end up going public. I recommend looking for interviews and podcasts with Andrew — I have found them to be super interesting.
In relatively vague terms, I started a web dev agency, and then used that cash flow to start buying businesses that generate additional cash flow. Rinse and repeat. This is exactly what Andrew did. Note that I didn’t learn about Andrew until last year, so I was happy to see someone taking a similar path and scaling to a holding co worth over half a billion.
Some things that I think folks don’t do well when buying and/or valuing businesses (both buyers and sellers):
- Keep an active deal flow pipeline, ideally one that is not widely tapped. This usually entails talking to people… lots of people. For example, finding solid businesses on FEI is possible, but they will be very competitively priced, and it will be prudent to have some sort of pocket growth “hack” in mind if you want to make it pay off handsomely. On the other hand, targeting some “mom and pops” that have little or no idea about SEO and SEM can present some soft deals.
- Figure out ways that one party can scale that others can’t. This is the type of “growth hack” that I mentioned above. I know one guy who has one main move. He looks for businesses in which he already buys some of their inputs at a huge volume discount that smaller businesses can’t access (supplements are an example of this… I don’t recommend getting into supplements unless you are already eyeballs deep in that world). Another example is having access to markets or distribution that the businesses you are targeting to buy don’t have. One area I target (when relevant) that many others don’t is East Asian markets. Another area I target is just increasing prices (usually via segmentation). So many businesses charge way less than the market will bear.
- Learn how to negotiate, including how to say no. Many people just lay down and leave a ton of money on the table. You don’t have to be an asshole about it, but it’s prudent to be aware of what the value is for both the buyer and the seller, and it’s not uncommon for the buyer to have significant upside potential.
- As someone else said, you’re basically turning over a lot of rocks. There are a lot of people trying to bamboozle you, and there are a lot of solid businesses that don’t really offer a growth opportunity that you can efficiently maximize. When you find something that fits, it’s often a no-brainer.
Let me know if you have any other questions. I will be happy to answer.
I will add as a caveat that I can only give you perspective from my limited experiences — there are myriad ways to buy and sell businesses profitably, and my path is only one of them.
What is your take on ecommerce businesses that generate most revenue from a single platform, e.g. Amazon or Shein or TikTok?
It seems like a lot of concentrated risk, and scaling is a challenge, considering the number of Amazon roll-ups that were on fire 2020-2021 and are now on the ropes (See "Amazon aggregators fall on tough times", https://www.axios.com/2023/09/05/amazon-aggregators-tough-ti...)
> What is your take on ecommerce businesses that generate most revenue from a single platform, e.g. Amazon or Shein or TikTok?
It’s not something I do due to the “concentrated risk” you mentioned. Scaling can be done, sometimes quite easily and effectively (e.g., Amazon ads can be quite efficient at scaling).
In general, I try to avoid or minimize exposure to capricious single points of failure, especially in sales/marketing, production, and/or distribution. I consider most large tech companies to fall into the capricious category unless I have someone on the inside who can make things right for me. This access to insiders is not as robust as I would like, but I’m working on it.
All that said, I know plenty of quite successful business owners who have gone all in on a single platform like Amazon or YT.
Regarding the roll ups, i think many of the businesses were bought at unreasonably high values. The linked article refers to this.
Covid changed many markets, in some ways permanent, and in other ways temporary. I was passing a lot on what I considered unreasonable prices for certain businesses. I could have played hot potato, but there was no reason to do so.
I have a feeling a lot of the lessons you learned could also apply to developers who want to be better at freelancing (my case). But I don't know if there is a way to pass down that knowledge while you also get something out of it.
For what is worth, I appreciated your comments in this thread.
If you like "The Secrets of Consulting", the next one for you should be "Exploring requirements: quality before design", by Gause & Weinberg. What an eye opener it was for me!
Idk, optimizing inefficient systems sounds a lot more interesting to me than working for the man, as you put it. Thanks for writing this out. It seems very difficult to get into. I'll reread this a couple times.
> Idk, optimizing inefficient systems sounds a lot more interesting to me
Yeah, I guess I’m being somewhat disingenuous. I like optimizing systems, but I’m aware that it’s not everyone’s cup of tea.
You learn that very quickly at cocktail parties when people ask you what you do, ask for more than the headline answer, and then have their eyes glaze over when you get into the details.
> than working for the man, as you put it.
As a nerd/geek, and I fall into that category, working in a good skunk works type of place is pretty damn fun. It usually doesn’t pay well compared to most tech jobs, it’s often not that prestigious, but damn… it can sometimes tickle the brain like no other.
One potentially bad part of it is that most skunk works are funded in some way by the DoD, so some folks may object to that.
> Thanks for writing this out.
My pleasure.
> It seems very difficult to get into.
Hmm… my first instinct is to say that it’s not, but I might be short-selling my skills, network, and (frankly) privilege if I say that.
I think it’s open to far larger group than is actively trying to participate in it.
I think the main keys are:
- Understand fundamentals of business. I have been around this my whole life, so it came quite naturally to me. That said, it’s learnable, and a lot of things fall into the common sense or empathy categories.
- Be good at contracting and hiring/firing. There are a lot of bozos in the workforce, but there are also plenty of hidden gems.
- Be good at marketing/sales. Although it’s possible, I think it’s tough to hide behind a screen and also scale.
- Talk to your customers. PG beats this drum, and there’s a good reason. Note customers here are customers of any business you own as well as business you want to buy or entities you want to sell a business to.
- Start small, but do things that scale. People think you need a lot of money to start doing this. You don’t. If you do really well, you don’t have to ask around much before relatively large sums of money start finding you. I currently prefer to self-fund, but I’m thinking about transitioning to some sort of dividend growth entity — I think that they will be en vogue in certain circles over the next 10 years or so.
It seems like you enjoy talking about this - is there an email I could reach you at to have a longer conversation at some point down the line? I'm really interested in just about everything pertaining to your experience. If you'd rather not post yours, you could email me directly at [redacted].
I think most of what one needs to know is already out there. The key is being adaptable to the current environment and being aware of one’s value add (skill set, network, etc.).
The problem with writing specifics about what I do is that it invites competitors and/or haters (e.g., review bombers or DDoSers). Some parts of my businesses have enough moat such that I don’t care, but other parts definitely do not. It’s not something I want to spend additional brain cycles on.
> Buying businesses sounds interesting, can you expand on this?
It’s largely not. It’s financially comfortable, and it’s nice being your own boss / leading your own team if that’s what you’re into (I am), but I’ve done more interesting work while working for “The Man”. A lot of what I do is just streamline a system that was inefficiently run/managed.
What I do is very similar to what Andrew Wilkinson of TinyCo has done, except I am about 10 years back on his timeline, and I’m not sure I will end up going public. I recommend looking for interviews and podcasts with Andrew — I have found them to be super interesting.
In relatively vague terms, I started a web dev agency, and then used that cash flow to start buying businesses that generate additional cash flow. Rinse and repeat. This is exactly what Andrew did. Note that I didn’t learn about Andrew until last year, so I was happy to see someone taking a similar path and scaling to a holding co worth over half a billion.
Some things that I think folks don’t do well when buying and/or valuing businesses (both buyers and sellers):
- Keep an active deal flow pipeline, ideally one that is not widely tapped. This usually entails talking to people… lots of people. For example, finding solid businesses on FEI is possible, but they will be very competitively priced, and it will be prudent to have some sort of pocket growth “hack” in mind if you want to make it pay off handsomely. On the other hand, targeting some “mom and pops” that have little or no idea about SEO and SEM can present some soft deals.
- Figure out ways that one party can scale that others can’t. This is the type of “growth hack” that I mentioned above. I know one guy who has one main move. He looks for businesses in which he already buys some of their inputs at a huge volume discount that smaller businesses can’t access (supplements are an example of this… I don’t recommend getting into supplements unless you are already eyeballs deep in that world). Another example is having access to markets or distribution that the businesses you are targeting to buy don’t have. One area I target (when relevant) that many others don’t is East Asian markets. Another area I target is just increasing prices (usually via segmentation). So many businesses charge way less than the market will bear.
- Learn how to negotiate, including how to say no. Many people just lay down and leave a ton of money on the table. You don’t have to be an asshole about it, but it’s prudent to be aware of what the value is for both the buyer and the seller, and it’s not uncommon for the buyer to have significant upside potential.
- As someone else said, you’re basically turning over a lot of rocks. There are a lot of people trying to bamboozle you, and there are a lot of solid businesses that don’t really offer a growth opportunity that you can efficiently maximize. When you find something that fits, it’s often a no-brainer.
Let me know if you have any other questions. I will be happy to answer.
I will add as a caveat that I can only give you perspective from my limited experiences — there are myriad ways to buy and sell businesses profitably, and my path is only one of them.