Diversification = Kevlar

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Contrarian ETA Take: Diversification = Super Power

The current ETA narrative worships the notion of going “all-in” and betting on yourself to take an existing boomer-owned company to the moon. I too have derived a lot of self-worth and gained a lot of self-confidence by betting on myself to figure things out; however, succeeding in business is not the same as succeeding at running a sub-3 hr marathon. There’s not a 16-week template that you just follow.

Betting on yourself and succeeding requires massive self-discipline to effectively control the controllables. However, the underlying assumption is that the controllables represent a +90% percentage influence on the outcome. That is why betting on yourself for a physical goal is so rewarding. Basically, you do the work, you get the result.

SMB acquisition & operations thereafter is a different ball game. So much of the outcome is out of your control (coming from a guy who lives and dies by an internal locus of control).

I believe Scott Galloway’s articulation of this is 1000x better than anything I could come up with. I’d highly recommend a quick scan of this article and listening to or reading his podcast with Chris Williamson, Scott Galloway - The 4 Secrets to Get Rich (start at 27:30). Beginning of the excerpt here:

“I've been rich three times. This is the third time, and I'm really hoping it sticks this time. But the first two went away, and it's because I didn't understand diversification. I always assumed that if I threw myself into anything, that I should go 110% in, not only with my time, but my capital, and that anything I devoted 110% of me to, because I was so awesome, that I could move mountains. And you need to recognize that market dynamics will trump individual performance all of the time. Most of my success and my failure is not my fault. And the way you protect against that is diversification.” Read on →

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.

Overlooked: Direct Mail Advertising

From time to time, I will aim to provide some contrarian takes on areas of the market that are opportunistic and worth taking another look at. You will never see a laundromat, HVAC or landscape company in this section, I promise :)

To avoid any sort of confusion and pre-emptively address the question: “If it’s so good, why aren’t you going after it.” Well truth be told, I am pretty swamped at the moment as I keep finding myself trying to launch new content here, turn around 1 business, grow another, & launch something new, so taking a pause on search and would rather one of you guys get it while it’s hot versus someone else!

Direct Mail Advertising: rather than provide a theoretical view, I will just breakdown a live deal

34 Year Old Direct Mailing Service
📍 Location: Florida
💰 Asking Price: $1,400,000
💼 SDE: $418,849
📊 Revenue: $1,726,622
📅 Established: 1992

Thoughts: 
This seems to be fairly priced at 3.3x and I’d imagine that you could get the Seller down to 3.0x on the dot (my personal ceiling) as most buyers wouldn’t get close to this as they’d see direct mail and printing as major no-nos. IMO the direct mailing space is extremely overlooked and will only become more powerful, not less as:

…all the while, every working-man in the world has a mailbox that has no restrictions on what gets put in.

Further,

What I’d Focus On: I actually got very far along in a process with two separate direct mail businesses, so speaking from experience I’d be interested in learning more about: 

How I’d Run it Post-Close:

(these could all be the same person too)

If one of you actually goes for this deal, let me know & keep me posted!

Tools I am Using: Claude Skills

Everyone is talking about AI, so why not me?

I want to start this section with a major disclaimer…if you are currently in a white collar role and feel paranoid at the fact that you are not leveraging AI enough, relax. I have come to learn that 99% of the AI hype and job elimination is focused on low-level, highly automatable roles such as customer support, financial reporting, etc.

If you don’t have automatable processes in your day-to-day…congratulations! You are in a domain that is highly valuable and will be very tough for AI to displace. By no means, should you be naive to what is going on…but I have personally struggled with feeling “behind the curve” from time to time, when in reality the use cases getting all of the hype are for low-level skills & tasks. AI is taking over, but you are likely not going to lose your job tomorrow if you are in a role that requires highly subjective decision-making. This might make you feel better too.

With that being said, I do want to introduce Claude Skills

Background: I came across Claude Skills via a LI post from John Peslar (a good follow for practical thought leadership around AI tools). From the onset, the image he shared just clicked. He later shared one of his lead magnets with me here for a more fulsome guide.

How I am Using: I heavily related to the notion of plugging in a +2,000 word prompt for a repeatable process (testing newsletter drafting for emails on newly acquired business, Wealth Daily). I had reference files scattered across my G Drive for my sources, another email archive file as to be non-duplicative and tons of random rules all over the place. After seeing this John’s post, I quickly enabled the Skills setting and got to work.

Within a few minutes, I had a fully functioning “tool” to create high quality, editorial-level content at my request. Claude truly does a fantastic job of organizing & structuring the instruction file as well to easily “see what’s under the hood.” I have continued to be mind blown by the outputs & ease of use.

I hope it goes without saying that you should always fact check your AI. For this use case specifically, I have had to remind it multiple times to stick to the sources doc I have provided and not go rogue. One reel-in is all it takes.

ETA Insanity

In this section, I think it would be fun to highlight some of the insanity going on in the ETA space.

For this week, I am sharing a LI post I came across and commented on (at the risk of sounding uninformed or missing something):

Perhaps, I don’t understand bankruptcy law well enough. But in my opinion, this thought process is a contributing factor to folks driving multiples through the roof. Rather than folks thinking through value, payback period, etc. it is all about “how much will the bank give me.”

I guess this makes sense if you view bankruptcy as a binary outcome: either you are bankrupt or you aren’t…and therefore the amounts of your liabilities truly don’t matter. But in my opinion, this view of defaulting on a $1m PG being the same thing as defaulting on a $5m PG is flawed, encourages “getting in over your head,” and is not applicable to folks that have “something to lose.” Perhaps, if your net worth is $0 this could be speaking to you, but I still believe it is flawed thinking. Let me know what you think :)