0 → 1 Faster & Cheaper Than Ever

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Contrarian ETA Take: Questioning the Thesis

I had coffee with a friend on Sunday who is incredibly brilliant - he’s a fund manager who’s raised >$3B over his career. In our discussion we started pivoting to the topic of ETA on the heels of him telling me about a Fintech offering he’s built that is a few days away from going live. He seemed extremely passionate about the offering, how it would benefit others (democratizing & more fair lending), and all of the different monetization methods. To me it was entirely obvious that he would be launching and scaling. However, he still wasn’t sure if it would be “worth it” and that only time will tell.

I think that single point has historically been a major supporting point of Buy > Build: you don’t know until you know…if the market will actually want your offering.

However, the tables have turned. With AI + Meta Ads, you can get fairly good, safe to extrapolate data points very quickly. My buddy tested the market with $3,000 on Meta Ads and got >850 signups for a waitlist on the product. To me, that’s a greenlight that literally was not possible to derive for a non-technical founder a few years ago. Sure, meta ads have been around for a while, but combine that with the democratization of information through so many people on social media sharing this info (for free) + AI = people actually believing they can do it + doing it.

5 years ago, if you wanted to start a [any company] you would have to build out the entire offering, define a target market, generate leads, do cold outreach, etc. Now, the timeline from both:

are insanely fast. You can now:

^ all in <2 hours.

Don’t get me wrong, there is still a MAJOR advantage of having an existing customer base, an in-market & validated offering, business infrastructure, etc. It just feels like the timeline from 0 → 1 has never been shorter or more capital efficient, which (from an academic / efficient market sense), would result in Buyer’s discounting that historically perceived “value.”

With all that being said, I am still a fan of Buy > Build…I just think that if you have an idea, there is zero reason to NOT test. There isn’t a risk anymore in wasting years of your life or hundreds of thousands of dollars to validate your offering. The risk is now in the “what if.” If you are a full time searcher or even a part time searcher, maybe think about allocating a few hours per week to upskill on this front. As always, reach out if you want to chat more about this.

Come Hang!
Interested in learning firsthand how I acquired an online business and got my time commitment down to 1 hour / month while working in M&A at a Bain Capital backed software firm? Join me for a fireside chat with the Puzzle Builders Network on January 29 from 9-10 am MST.

Simplifying the Equation

The more I thought about it from last week, rather than give someone a fresh piece of sashimi & a side of soy sauce, I’d rather share with you how I caught the fricken tuna! So here is a bit of a brain dump on how I have honed in on my biz criteria and quickly evaluate opportunities…

I believe my framework is a bit different from others in how I look at deals. For starters, I work backwards off lifestyle criteria NOT CASH FLOW. Because of this, I don’t get near blue-collar services. Why? Well because frankly I just don’t want to deal with managing that personnel. I can’t just trust that they are going to do the job without my supervision and/or direct management. Obviously, if you have a full time operator that runs the show this is not the case (as you wouldn’t be managing), but you need:

I like getting into things that within 30 min - 3 hours of speaking with the owner, I can fully understand every single role & responsibility within the business. And yes, I mean EVERY. SINGLE. ONE. 

From there, I drop in every single role & responsibility into .xls and literally make the following table: 

This makes it very clear to me what my staffing will look like post-close. To be clear, I do this on a pro-forma basis…aka if the Seller is exiting the business, then he/she is not included in existing staff and I will have to hire, outsource or do the task myself to make sure all roles & responsibilities are staffed.

The key here is then taking this pro-forma list, stacking it, and attaching annualized costs to it to inform your PF headcount costs that inform YOUR EBITDA that you bid off. Side note: I could literally care less what SDE is from the Seller, Broker, etc. all that matters is my bottoms up build number. 

If you don’t know what that new hire is going to cost, go to Upwork or Fiverr or Indeed and search for [person you need] or [task that needs to get done on a continual basis]. Don’t see anything? Make a post. Don’t get any responses? Well, then you might be buying a complex operation that would not make it through my #2 criterion immediately below.

I move forward with the deal if ALL the following are true: 

So to apply to real life, this is why newsletter is so attractive to me. I have an operator who manages the affiliate side of the business, writes the content, handles relationships, etc. He’s absolutely incredible. 

My prior operator was great, but I had to make a shift this past fall and I was able to have his positioned backfilled within a few days. Granted my existing operator today that I ultimately chose was in my network, but I posted the position on Upwork @ the same cost profile and got overwhelmed with applications. I still keep in touch with a few today, they would have been great as well. 

Don’t overthink this simple concept. Buy businesses whose roles & responsibilities: 

Sick of rebuilding your process, templates, and diligence request list every time you get off the intro call with the Seller? I just put in +20 hours to compile my exact process, templates, instructions, best practices and real life video examples → LINK (make sure you download the .xls as a true excel file). 100% free for Buying Freedom subscribers.

My only ask: can you reply to this email letting me know if you’d be interested in me doing an AMA on this topic?

Tools I am Using: Firm Flare

This literally feels like I am giving up a proprietary secret. After posting my roundup of my favorite online brokerage sites ~2 weeks ago, Mark Swaringen reached out on Searchfunder and non-chalantly asked me to check out a tool he had built for his own search called Firm Flare: https://firmflare.com/

This feels like one of those tools that gets demo’d and within 15 seconds it just sells itself. If you’re actively searching you NEED to add this to your repertoire. If you do one thing today, just try the tool.

Also, Mark is seeking feedback from other searchers on the good, bad, etc. to refine the tool. As a nice thank you for an incredibly useful tool, that he is not charging for I’d ask you to show some support by adding him on LI and DM with any feedback you may have.

Also as a follow up to my post about my favorite brokerage sites a few weeks ago, I came across two other comprehensive lists that I found to be interesting (not necessarily valuable). I personally think these lists can be more hurtful than helpful given the amount of information overload…and probably just generated by Claude or Chat, but nonetheless if you are truly trying to get full coverage of the landscape, check each of these out:

ETA Insanity

Ok, I know I posted this on LinkedIn last week, but I still can not stop thinking about it. Today’s edition of ETA insanity, is ACTUALLY INSANE. Can you spot it?

Almost a SEVEN AND A HALF MULTIPLE for a home services business? Are you actually f***ing kidding me? Is someone actually paying these multiples? I fully appreciate the impact of cost & “revenue” 😉 synergies driving down the effective multiple, but this is actually insane. If you own an HVAC business, now is the time to sell baby! Software multiple coming into home services, wow. Thank you private equity. Listing here.

Other Things I’ve Liked (that I thought you may like to):