This week, Marcel is joined by Chris Moore of Dealmaker Concierge and Dealmaker Wealth Society. They delve into acquiring marketing agencies and growth through acquisition, consulting for equity, plus the importance of recruiting staff to help grow your empire.
About Chris Moore
Chris Moore is an entrepreneur, investor, full-stack digital marketer, best-selling author, and business growth specialist. He has a strong background in business development, customer experience design, and business growth strategy.
Chris has helped build and scale several companies earning him 2 INC 5000 awards in the last three years as well as several other equivalent awards and recognition in the digital marketing industry. Currently, Chris is the COO of a large business acquisitions training company (Dealmaker Wealth Society) that he has recently scaled over 7X in the past 12 months. He’s also CMO and Co-Founder of Dealmaker Concierge.
When he’s not working on business growth, he can be found fishing for bass!
Points of Interest…
- From solopreneurship to portfolio building 3:36
- Buying, acquiring, or merging to stimulate growth 5:59
- Financial vs strategic acquisitions 8:19
- Merits of strategic acquisitions 10:22
- Potential acquisition pitfalls 14:39
- Key principals for acquisition success 21:15
From solopreneurship to portfolio building
Our guest today is somebody I met a few weeks ago, onstage at an event in Florida. Now, there are certain people you meet at these kinds of events; you chat with them for a little while. Then, you start to realize, “Okay, this person is the real deal. They’re not just an entrepreneur. They’ve mastered the craft of business to a high level where they can abstract away from any given industry.
Chris is one such person, he’s gone from building and selling several successful businesses to now having a substantial portfolio. So, today we’re honing in on why we should be thinking about mergers and acquisitions as a way to grow our agencies. After all, we’ve talked a lot about selling, but we haven’t expanded upon the aspect of buying to the same extent.
Kicking things off, I’m really curious about what piqued Chris’s interest in working more in terms of acquisitions and building a portfolio. How did he make that transition from being an entrepreneur in one business to wanting to be involved in several?
“Back in 2013, I lost a lot of money all in one day. I was selling real estate and residential resale. My mom and I were a team and had a lot of contracts that fell out because of sequestration, government shutdowns, and furloughs… I realized at that moment that I never wanted to have one stream of income. Since then, I’ve owned between one and 20 businesses at any given time, creating lots of income coming in from different places.”
Another big driver for Chris was some sage advice dispenced by his friend, Clayton, who reminded him that you can’t do everything by yourself. You have to learn how to replace the effectiveness that you have through other people’s efforts.
“You can’t be the magic dust or the secret sauce in every business… So I realized that I could build a castle on my own, or I could build an empire with a large team. Ever since then, I have literally hundreds of employees that are building my empire with me.”
So committed is Chris to helping people grow a multifaceted revenue stream he’s involved in an organization that teaches hundreds of businesses and entrepreneurs how to also get involved in multiple businesses. Currently, Chris and the folks at Dealmaker Wealth Society have 15,000 students (roughly a hundred thousand over the last seven years), teaching them how to undertake effective acquisitions with a view to building a profitable portfolio.
Buying, acquiring, or merging to stimulate growth
We’re focussing specifically on agencies, consultancies, and professional services firms and why they should be considering buying, acquiring, or merging with a business as a way to stimulate their growth. All of these are options I don’t think many people consider when they think about their vision for scaling their firm.
“The traditional methods of growing your business – using sales and marketing tactics – don’t have to be the only way that you grow. Often you can save so much time, heartache, and money by just growing through acquisition, where you can literally acquire your competitors.”
And it doesn’t end there; Chris outlines further facets you can acquire from 6:26 minutes, which you don’t need a pile of money to undertake. In fact, in his experience, you don’t have to use any of your own money, as in most instances you can get 100% financing.
“You can get owner financing. There are special government loans through the SBA, where you can leverage businesses that don’t have a lot of assets or don’t have a lot of equipment or premises; they don’t have any collateral, physical collateral. You can leverage cash flow as collateral. There’s a lot of ways to tap into this.”
I double-click on the merits of the US SBA program and seller finance, particularly when we’re talking about agencies and professional services (which are (usually) largely collateral light businesses) from 7:47 minutes***
Financial vs strategic acquisitions
What does Chris typically view as the best structure for going in and trying to do an acquisition of another agency or professional services firm?
“Part of it’s understanding what kind of buyer you are. I’d imagine everyone would be a lot smarter in this subject, just from reading a book called Built To Sell. It’s such a strong book for both the seller and the buyer. It helps you understand what the seller is looking for and what buyers are looking for in a transaction.”
In terms of understanding what kind of buyer you are, Chris breaks down the reasons why people partake in the acquisition process; going business to business and acquiring a competitor or vendor…
- You’re either buying it for financial reasons, like trying to tap into their cash flow or profit margins, or…
- You’re buying it for a strategic reason where you can leverage the resources that this business has. Perhaps it has a lot of cross-sell opportunities by having a similar customer avatar, or customer lists, that you’re both serving.
“Understanding what you want out of an acquisition is huge. Are you simply trying to grow the book of business and grow your MRR as an agency, or as a professional services company? Then buying a competitor and getting that market share without having to go out and own it; that’s great.”
So, financial versus strategic. The financial is obviously more around money and being able to tap into cash flow. As Chris outlines (from 9:44 minutes***) you could buy a business that’s cash flowing at, let’s say, 30,000 a month and you could buy that business leveraging either other people’s money, using the special funding programs, or even seller financing. And, as Christ puts it, you can walk literally into month one with cash flow going directly into your pocket.
Clearly, understanding the help available to you is huge. That said, you have to start with what you want out of it. Otherwise, you’re just doing it for the sake of doing it.
Merits of strategic acquisitions
So, you’re trying to grow your cash flow, or your profit margin by purchasing competitors or adjacent companies to grow market share. Then there’s the strategic acquisition.
This is where you’re aiming to get a synergistic outcome by merging two things. That might be vertical integration, like – as Chris outlined earlier – purchasing a vendor that you use a lot or purchasing a company that you can do a lot of cross-selling with. Are there any other common reasons that Chris might see somebody do such an acquisition like this?
“Sometimes it’s just to make sure that somebody else doesn’t get it. In some larger businesses, you might have somebody with an emerging technology and you don’t want to have a competitor get their hands on it.”
In Chris’s experience with Dealmaker Wealth Society, 75% percent of students are investors of some sort, be it professional investors, real estate, or creative finance. They’re mostly looking to diversify their portfolio. The other 25%, meanwhile, are usually business owners. That said, there is another huge reason why people choose to do business-to-business transactions…
“They’re working on something called roll-ups! Are you familiar with a roll up?”
For those unfamiliar with roll-ups, Chris provides a handy outline from 11:34 minutes***. Rollups can be summarized as taking several businesses and putting them together. Of course, it’s a bit more in-depth, involving the EBITDA alongside the multiple of what the business is worth continuously rising. It’s to get you to the point where you start attracting private equity buyers, trade buyers, and generally people who have money. More insight into this from the 11:52 mark***
Potential acquisition pitfalls
At this juncture, I’m keen to hear Chris’s insight on some of the more frequent mistakes and missteps that somebody doing an acquisition for the first time might make. What is one of the common pitfalls that he sees before implementing best practices for doing this in a way that’s going to lead to successful outcomes?
“People who don’t understand what they’re looking to get out of it! They go in and just start talking to brokers and making offers and they really don’t have a plan. That’s number one. Number two; not understanding everything there is to know about the financing is a big misstep.”
Imagine getting all the way through the process and then deciding it’s time to figure out how to finance. It’s not the right way to do it; you’re literally playing with other people’s livelihood.
Another pitfall includes not leveraging your existing business as collateral to buy their growth. For instance, there are different loans that facilitate business expansion. In Chris’s experience such loans are easy to get when you’re leveraging something that already has a proven track record. Also, you need to spread the net wide, don’t just go after one deal when you can go after 20!
“Whenever you are looking to acquire a business or one thing, you should always punch past the target. You should always go out and originate or find 10 to 20 deals. Really put a lot of feelers out there rather than people who go after one deal. They get it all the way to the finish line and something happens. It’s demoralizing.”
Chris provides more pivotal insight on this, the idea of going “off market” instead of dealing with brokers, and the potential benefits of all the baby boomers retiring en-mass from 16:44 minutes***
Key principles for acquisition success
We’ve talked about a lot of some of the key principles in the tangential discussion about mergers and acquisitions. So, getting to the nub of it; what are the key principles to making sure that an acquisition is successful?
“If we’re defining ‘success’ by the business has been fully acquired; both parties are happy with the price and terms; and the business is still operating at the same level or better after the acquisition – then there’s a lot of things that have to come true…”
Among those things, Chris cites the following from 21:49 minutes***
- You must have the necessary prep done in advance; including understanding what you want out of the deal and knowing who’s going to be the best strategic business for you to buy.
- Identify the most likely deal structure and financing options available to you. When you go out and decide what type of business you want to buy, you may have some limiting factors, which Chris expands on from 22:06***
- In addition to getting the right perspective upfront, understanding what you want from the deal, and doing the necessary prep, you need an experienced set of hands to guide you through it. You may have experience selling your own business, but that’s just one business in a very fluid M&A space.
“Having someone guide you through the process, who’s done it over and over and over again, where there’s a system, uh, and it’s methodical and deliberate – that’s the key to this. There’s no reason to make these mistakes when somebody else has already done that.”
Many agency owners have a limited vision of how big their business can be… Chris and his business partner at Dealmaker Wealth Society, Carl Allen, are there to share in-depth knowledge about seller financing, the inner workings of the business acquisition process, as well as how to do bolt-on acquisitions and roll-ups (that one plus one equals three model).
So, we’ve talked about the reasons why we might want to look into acquisitions as a way to grow; the idea of buying cashflow and profitability; strategic acquisitions; and then laddering that up into the sphere of roll-ups. We then addressed some of the more frequent mistakes and missteps that somebody doing an acquisition for the first time might make.
“I definitely know that this is probably the perfect storm where there’s more financing ever available right now to buy businesses. There’s more distress in the marketplace and there are more business owners that are retiring and needing to hand it off. But I think you just have to keep it in perspective.”
And, needless to say, don’t play around with people’s businesses. They’re looking for a safe pair of hands. Somebody who is going to take care of their employees, and who’s going to make sure that the reputation of the business and their name stays true.
So, make sure you really understand the type of financing structures that are going to be necessary for the businesses you’re trying to buy.
See more from Chris Moore…
Did you learn anything new from this episode? Let us know in the comments below! We have helpful blogs designed to bolster your agency profitability, such as How To Calculate Your Billable Employee Cost-Per-Hour.
Our next installment of #APP, on November 1st, will see Marcel joined by Emily Hunkler. Our previous APP blog – Episode 125 with Jason Swenk – can be viewed here…
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