Logo
    Search

    Lessons Learned from Investing in 22 Companies (Pt.2) | Ep 609

    enSeptember 21, 2023

    Podcast Summary

    • Having hard conversations with founders is crucial for business growthBeing founder-friendly leads to a better investment experience and can result in a bigger pie for founders

      Having hard conversations with founders is crucial for unlocking business growth. The wealthiest businesspeople view entrepreneurship as a game, and documenting lessons learned on the journey to building a $1 billion portfolio is the goal of the podcast, The Game. Being founder-friendly is a core belief for investment decisions at Acquisition.com. Instead of removing founders from the equation, the idea is to offer a better deal by investing resources and offering a larger stake in the company. Founders who sell a portion of their business for growth opportunities can end up with a bigger pie, even if the shape changes. Traditional private equity models are lengthy, painful, and litigious, and often focus on financial arbitrage rather than growing businesses organically. By being founder-friendly, Acquisition.com aims to create a better investment experience for all parties involved.

    • Shifting towards transparent and collaborative approaches in business salesBy involving all parties and focusing on mutual understanding, business sales can be completed more efficiently and fairly, saving time, resources, and building stronger relationships.

      The traditional process of selling a business can be a lengthy, painful experience filled with excessive diligence, checklists, and legal battles. Founders may feel worn down and undervalued as buyers slowly chip away at their asking price. To create a better experience, some companies have shifted towards more transparent and collaborative approaches, such as plain English contracts and face-to-face negotiations. By involving all parties and focusing on mutual understanding, deals can be completed more efficiently and fairly for both sides. This not only saves time and resources but also builds stronger business relationships.

    • Valuing founders in business dealsBy heavily vetting founders and keeping them involved, we efficiently unlock business potential and minimize disruption, benefiting both parties and setting the stage for long-term success.

      In business deals, having face-to-face conversations and keeping founders involved leads to a more efficient and founder-friendly process. Traditional private equity firms often have longer deal timelines and remove founders from the equation, whereas our approach values the founders and their ability to manage growth and change. By heavily vetting founders and keeping them involved, we've had success in unlocking the potential of businesses while minimizing disruption. This approach not only benefits the founders but also sets the stage for long-term success within our strategy.

    • Committing fully to advice for successFully committing to advice is crucial for success, while half-following can lead to confusion and hinder growth. Founders must prioritize business needs over personal attachments for growth.

      Fully committing to advice and implementing it wholeheartedly is crucial for success, whether it's in personal health or business growth. The Solomon Paradox refers to the combination of having more data and less emotional attachment leading to better decision-making and strategy. However, half-following advice, such as only implementing part of a diet or keeping an inexperienced and unqualified person in a leadership role, can lead to confusion, chaos, and ultimately hinder growth. Founders must be willing to have hard conversations and put the business's needs above their personal and emotional attachments to unlock growth. At Acquisition.com, we value sincere candor, unimpeachable character, and competitive greatness in founders, and we believe that these values are essential for achieving success.

    • Founders Matter More Than StrategyFounders' enthusiasm and execution matter more than business prospects. Prioritize founders and learn from successful ones. Identify and relieve business constraints for growth.

      A company's culture can be a more important factor for success than its strategy. This idea was emphasized through personal experiences of investing in two companies with different opportunities but distinctly different founders. The company with less exciting business prospects but enthusiastic and engaged founders outperformed the other, demonstrating the importance of founder execution and enthusiasm. The lesson learned is that founders should be prioritized above everything, as they can execute proven strategies effectively. Additionally, it was advised that founders should always strive to learn from those who have achieved more, as there is always someone better to learn from. Another key belief that was reinforced is the theory of constraint, which suggests that every system, including businesses, has a single point of constraint that, if identified and relieved, will allow the business to grow until its next constraint.

    • Focus on top constraints for growthPrioritize limited resources against unlimited options, identify top 3 constraints, and achieve more with less for higher growth rates and less founder stress

      Focusing on too many areas at once in a business can hinder growth and lead to overwhelm for founders. The theory of constraint suggests prioritizing limited resources against unlimited options, and identifying the top three constraints to work on in a given period. This approach allows for more effective use of resources and higher growth rates, as founders can focus on the most impactful areas for improvement. The use of a diagnostic process with a long list of potential issues can lead to overwhelm and potentially moot problem identification. By focusing on the top constraints, businesses can achieve more with less and experience less founder stress. The "Acquisitions.com" logo, with its triangle shape representing the 3 term contingency, a fulcrum for leverage, and the governing law of supply and demand, is a visual representation of this concept.

    • Identifying and addressing business constraintsEffective founders focus on the most significant constraints and allocate resources efficiently to address them, leading to exponential growth

      The key to success in business and in life is identifying and addressing the constraints that limit growth. This concept, known as the Theory of Constraints, suggests that every business has limitations, and the most effective founders are those who allocate resources efficiently to address the most significant constraints. By focusing on the one thing that will have the greatest impact on the business, founders can make significant progress and unlock exponential growth. This can be compared to a deadlifter who, despite having the potential to lift more weight, is held back by a limiting factor like a weak grip. By focusing on improving the grip, the deadlifter can lift more weight and, in turn, increase the business's revenue. The Theory of Constraints encourages a focus on doing more of what is already working and doing it better, rather than being distracted by new and exciting opportunities that may not address the underlying constraints. Ultimately, the goal is to create a business that meets the market's needs and continues to grow until it reaches the next constraint.

    • Identifying the constraint in a business can lead to significant growthFocusing on the business constraint for improvement leads to the highest throughput increase.

      Identifying the constraint in a business can lead to significant growth. This can be mathematically proven by fixing a percentage improvement across every function of the business and calculating the resulting increase in throughput. For example, if a sales setting has a 50% scheduling rate, 10% show rate, and 50% close rate, improving each rate by 10% would result in a 20% improvement overall. However, if the show rate is improved from 10% to 20%, the throughput is doubled. Therefore, the area with the largest increase in throughput from a fixed improvement is the constraint of the business. It's essential to have a ruthless focus on this area to grow the business effectively. Additionally, investors should consider the likelihood of disruption from AI and the size of the companies they invest in. Disruptability by AI and investing in larger chunks of bigger companies are two important beliefs that have been reevaluated and adopted.

    • Focusing on larger investments with significant growth potentialAcquisition.com prioritizes larger investments in growing companies for potential meaningful exits over $100,000,000, and aims to create generational wealth for founders and investors alike by assessing imperfections and their impact on future success.

      Our investment strategy at Acquisition.com requires a high level of discipline and prioritization due to our active value-add approach. We focus on larger investments in companies with significant growth potential, as opposed to passive investors who can have a larger portfolio with smaller investments. Our goal is to identify opportunities that have the potential for a meaningful exit, ideally over $100,000,000. This approach is influenced by the idea that as individuals, our wealth and time horizons expand as we become more successful. By working with founders and helping them achieve a significant exit or enterprise value, we aim to create generational wealth for them, and in turn, for ourselves. Additionally, we understand that every business has imperfections and do not require perfection to invest. Instead, we assess whether these imperfections are material and are likely to impact the business's future success.

    • Investing in imperfect businessesIdentify strong leadership and potential compounding vehicles to invest in imperfect businesses with growth potential.

      Imperfect businesses with growth potential are worth investing in. The presence of significant issues does not necessarily disqualify a company from being a viable investment opportunity. Instead, investors should assess the strength of the business's leadership team and determine if they can address the identified constraints. Additionally, the absence of a compounding vehicle within a business does not equate to a bad investment. Instead, it presents an opportunity for investors to install a flywheel that can drive growth and increase enterprise value. By calculating the hypothetical max of a business based on sales velocity and lifetime value, investors can identify the potential for uncapped growth. Ultimately, the goal is to find businesses with at least one independent compounding vehicle that can drive growth at scale.

    • Leveraging Compounding Growth Vehicles for Business SuccessImprove processes, make structural changes, bring in experienced team members to identify and implement compounding growth vehicles, leading to significant sales increases and faster business growth.

      Identifying and implementing compounding growth vehicles in businesses can lead to significant increases in sales and customer lifetime revenue with relatively limited effort. This can be achieved by improving existing processes, such as content creation, or by making structural changes, like altering deal structures to reduce churn. Additionally, having experienced team members, often referred to as "gray hairs," can help first-time founders avoid becoming the bottleneck in their business and enable faster growth. By bringing in experienced leaders in key functions, businesses can learn from their expertise and accelerate their path to success.

    • The Value of Experienced Professionals in StartupsHiring gray hairs adds emotional stability, expertise, and mentorship. Attracting top talent with industry experience leads to cross-learning and growth. A reputable brand or investors can help attract high-level talent. Learn from potential hires during interviews. Constructive feedback from investors can help startups improve.

      Having experienced professionals, or "gray hairs," on a startup team can provide emotional stability, serve as mentors, and bring valuable expertise to the table. This can be particularly important for younger founders trying to attract top talent. Hiring individuals with extensive industry experience can lead to cross-learning and growth within the company. Additionally, having a well-known brand or reputable investors can help attract high-level talent, increasing the overall value and potential for growth of the startup. It's essential to ensure that during the interview process, you're learning from potential hires, especially in departments where you lack expertise. Furthermore, if a startup doesn't make the cut for investment, potential investors should provide constructive feedback and recommendations to help the startup improve and grow.

    • Key Factors Investors Consider When Evaluating BusinessesAccurate financials, clear goals, quick decision making, and focus are essential for investors when evaluating potential investments.

      Having a clear understanding of your business numbers, maintaining honesty with those numbers, having a big and clear goal, demonstrating speed and effective decision making, and maintaining focus are essential factors that investors consider when evaluating potential investments. Knowing and presenting accurate financial numbers is crucial for assessing a business's potential and demonstrates an entrepreneur's organization and attention to detail. Misrepresenting numbers will lead to disqualification. Having a clear and ambitious goal aligns with the investor's vision and resources. Demonstrating quick and effective communication during the deal process predicts future behavior. Lastly, maintaining focus on one business or project shows dedication and increases the chances of success.

    • The Importance of Focus and a Strong Team for FoundersSuccessful founders prioritize long-term growth and impact over novelty, focusing on one venture instead of spreading resources thin. A strong team with multiple vested partners or key personnel leads to faster progress and better outcomes.

      Focusing on one thing and growing it effectively is more beneficial for founders than spreading resources thin and trying to manage multiple ventures at once. The most successful founders are those who prioritize long-term growth and impact over short-term desires for novelty. Additionally, having a team with multiple vested partners or key personnel can lead to faster progress and better outcomes for businesses. Investors often prioritize the quality of the team and their ability to execute on a vision, rather than just the novelty of the idea itself. The "beer at the airport test" is a useful litmus test for investors, where if they don't look forward to working with a founder, they won't make a deal. Companies with more founders or key team members who have a vested interest in the business tend to have better growth rates.

    • Key elements of building a successful businessSwift and honest, clear business goals, compelling vision, team alignment, potential partnerships with Acquisition.com for growth strategies.

      Building a successful business involves several key elements. Be swift and honest, have a clear focus on your business goals, and maintain a compelling vision for the future. It's also beneficial to have other team members with a stake in the company, even if it's a small one. This can help keep everyone aligned and motivated. For businesses generating over $1,000,000 in profit per year, consider reaching out to Acquisition.com for potential partnership opportunities. The team there can provide valuable insights and help unlock the full potential of your business. And even if the partnership doesn't lead to a sale, you'll receive a detailed plan outlining potential strategies for growth. Overall, the key is to be transparent, focused, and open to collaboration.

    Recent Episodes from The Game w/ Alex Hormozi

    You Need to Understand this if You Want Your Business to Scale | Ep 735

    You Need to Understand this if You Want Your Business to Scale | Ep 735

    "If you want to build an asset that makes you generationally wealthy, this is for you." In this episode, Alex (@AlexHormozi) shares that for most businesses that he's started and worked with, there's a core value driver that must be understood in order to truly scale. And if the entrepreneur does NOT work on this and instead gets distracted on other problems, they won't grow as quickly.

    Welcome to The Game w/Alex Hormozi, hosted by entrepreneur, founder, investor, author, public speaker, and content creator Alex Hormozi. On this podcast you’ll hear how to get more customers, make more profit per customer, how to keep them longer, and the many failures and lessons Alex has learned on his path from $100M to $1B in net worth.

    Timestamps:

    (5:30) - What Business?

    (7:50) - Supplement Example

    (9:30) - Paired Incentives

    (15:00) - What is solving the problem worth?

    (16:00) - The Woman in the Red Dress

    (20:00) - Every Business Has Shit

    (26:30) - Marry Your Business


    Follow Alex Hormozi’s Socials:

    LinkedIn  | Instagram | Facebook | YouTube  | Twitter | Acquisition 

    This Simple Productivity System Made Me $100 Million | Ep 734

    This Simple Productivity System Made Me $100 Million | Ep 734

    "Understanding the difference between the two kinds of work has been the biggest unlock in my life." In this episode, Alex (@AlexHormozi) defines "Maker" vs "Manager" work, why they matter for leverage, how teams can build more awareness and intentionality around them, and ultimately how putting this system into practice can make you a lot more money.

    Special shoutout to Paul Graham who wrote a piece on this concept 14 years ago.

    Welcome to The Game w/Alex Hormozi, hosted by entrepreneur, founder, investor, author, public speaker, and content creator Alex Hormozi. On this podcast you’ll hear how to get more customers, make more profit per customer, how to keep them longer, and the many failures and lessons Alex has learned on his path from $100M to $1B in net worth.

    Timestamps:

    (1:35) - The Manager

    (3:15) - The Maker

    (8:03) - The Maker/Manager Conflict

    (16:11) - The 3-Pronged Approach

    (16:36) - The Solution: Managers (Step 1)

    (17:41) - The Solution: Managers (Step 2)

    (18:33) - The Solution: Managers (Step 3)

    (19:50) - The Solution: Makers (Step 1)

    (21:09) - The Solution: Makers (Step 2)

    (25:33) - The Solution: Makers (Step 3)

    (26:06) - The Solution: Makers (Step 4)

    (27:20) - The Solution: Organizations (Step 1)

    (30:44) - Alex’s Calendar

    (35:54) - The Solution: Organizations (Step 2)

    Follow Alex Hormozi’s Socials:

    LinkedIn  | Instagram | Facebook | YouTube  | Twitter | Acquisition 

    Stop Trying to Get Rich. Get Better | Ep 733

    Stop Trying to Get Rich. Get Better | Ep 733

    "Getting rich is an output, getting better is an input." In this episode, Alex (@AlexHormozi) breaks down a fallacy that many small business owners fall into, which is that they need more leads in order to scale. This episode explores an alternative way to scaling; what if you just improved your product or service that nobody ever left?

    Welcome to The Game w/Alex Hormozi, hosted by entrepreneur, founder, investor, author, public speaker, and content creator Alex Hormozi. On this podcast you’ll hear how to get more customers, make more profit per customer, how to keep them longer, and the many failures and lessons Alex has learned on his path from $100M to $1B in net worth.

    Timestamps:

    (00:31) Business Owners All Ask This Question

    (01:36) Building Back To Front

    (2:05) The Business You Don't Want to Be In

    (4:03) How To Actually Get To $1m Per Month

    (6:23) My Friend’s Business

    (11:12) What The Biggest Businesses Avoid

    (15:24) Keeping Your Promises

    (19:56) What Metrics You MUST Understand

    (24:07) Nobody Thinks

    (28:47) Break Stuff Move Fast

    Follow Alex Hormozi’s Socials:

    LinkedIn  | Instagram | Facebook | YouTube  | Twitter | Acquisition 

    13 Years of Marketing Advice in 85 Mins | Ep 732

    13 Years of Marketing Advice in 85 Mins | Ep 732

    "In the beginning, you just want to get flow through the system." In this episode, Alex (@AlexHormozi) shares marketing lessons learned from 13 years scaling and selling businesses. Tactics are relevant for everyone from those just getting started to seasoned marketers looking to optimize their funnel just a little more.

    Welcome to The Game w/Alex Hormozi, hosted by entrepreneur, founder, investor, author, public speaker, and content creator Alex Hormozi. On this podcast you’ll hear how to get more customers, make more profit per customer, how to keep them longer, and the many failures and lessons Alex has learned on his path from $100M to $1B in net worth.

    Follow Alex Hormozi’s Socials:

    LinkedIn  | Instagram | Facebook | YouTube  | Twitter | Acquisition 

    Why You Should Document Your Business Mistakes | Ep 731

    Why You Should Document Your Business Mistakes | Ep 731

    "I can't keep repeating these same mistakes... I have to find a way to learn from this." In this episode, Alex (@AlexHormozi) breaks down the importance of documenting failures in business & the process he's been doing for over a decade that he attributes much of his success to.

    Welcome to The Game w/Alex Hormozi, hosted by entrepreneur, founder, investor, author, public speaker, and content creator Alex Hormozi. On this podcast you’ll hear how to get more customers, make more profit per customer, how to keep them longer, and the many failures and lessons Alex has learned on his path from $100M to $1B in net worth.

    Timestamps:

    (0:52) An Interesting Thing Happened...

    (4:15) Small Business Owners Have This Problem

    (10:00) What I Learned From ALAN

    (13:25) How this helps with Content

    (17:39) Biggest Meta-Lesson

    (20:03)Document Everything Publicly

    (26:24) Bonus Q&A

    Follow Alex Hormozi’s Socials:

    LinkedIn  | Instagram | Facebook | YouTube  | Twitter | Acquisition 

    9 Things Top Sales People Do Differently | Ep 730

    9 Things Top Sales People Do Differently | Ep 730

    "The perfect salesperson would take maximum calls, have maximum conversion rate, and have maximum consistency." In this episode, Alex (@AlexHormozi) breaks down the 9 things that top salespeople do differently. These are observations from building multiple 7 and 8 figure sales teams across his companies and the Acquisition.com portfolio.

    Welcome to The Game w/Alex Hormozi, hosted by entrepreneur, founder, investor, author, public speaker, and content creator Alex Hormozi. On this podcast you’ll hear how to get more customers, make more profit per customer, how to keep them longer, and the many failures and lessons Alex has learned on his path from $100M to $1B in net worth.

    Timestamps:

    (00:39) - Maximise Hours (#1)

    (2:53) - Pull Up Calls (#2)

    (5:47) - The 2 Sop’s (#3)

    (6:40) -  BAM FAM (#4)

    (10:18) - Multiply Your Leads (#5)

    (12:50) - Pre-Call Prep (#6)

    (16:16) - Take Notes (#7)

    (17:17) - Talk Less Sell More (#8)

    (22:13) - Breathe The Script (#9)

    (26:10) -  Kill The Zombies (#10)

    (34:03) - Ask Hard Questions (#11)

    (36:55) - Ask Again (#12)

    (41:17) - See Everything As A Skill (#13)

    (42:07) - Kill For Sport (#14)

    (44:47) - Track Data (#15)

    (49:23) - Never Blame Circumstances (#16)

    Follow Alex Hormozi’s Socials:

    LinkedIn  | Instagram | Facebook | YouTube  | Twitter | Acquisition 

    7 Obscenely Easy Ways to Get New Customers This Week | Ep 729

    7 Obscenely Easy Ways to Get New Customers This Week | Ep 729

    "These have made me millions of dollars." In this episode, Alex (@AlexHormozi) breaks down 7 different tactics for getting customer referrals, which are an incredible way of getting leads because they close at higher rates, stay longer, buy more, and also are usually FREE.

    Welcome to The Game w/Alex Hormozi, hosted by entrepreneur, founder, investor, author, public speaker, and content creator Alex Hormozi. On this podcast you’ll hear how to get more customers, make more profit per customer, how to keep them longer, and the many failures and lessons Alex has learned on his path from $100M to $1B in net worth.

    Timestamps:

    (00:23) Ask customers who else they know after a sale

    (7:54) Offer a discount to customers in exchange for introductions

    (10:28) Offer more free services

    (11:07) Offer them money

    (12:52) Referral at success

    (15:02) Handwritten card

    (17:28) "Spouse program"

    (18:41) BONUS!

    Follow Alex Hormozi’s Socials:

    LinkedIn  | Instagram | Facebook | YouTube  | Twitter | Acquisition 

    Are You Being Insulting Without Realizing It? | Ep 728

    Are You Being Insulting Without Realizing It? | Ep 728

    "Instead of talking sh*t behind someone's back, talk it to their face." In this episode, Alex (@AlexHormozi) shares the valuable distinction between insult and critique and breaks down how to have tough conversations with your team when you're trying to get better together.

    Welcome to The Game w/Alex Hormozi, hosted by entrepreneur, founder, investor, author, public speaker, and content creator Alex Hormozi. On this podcast you’ll hear how to get more customers, make more profit per customer, how to keep them longer, and the many failures and lessons Alex has learned on his path from $100M to $1B in net worth.

    Timestamps:

    (0:44) Life changing concept

    (2:06) How do you give feedback without being insulting?

    (4:30) Mock critique conversation

    (7:10) Real story of someone who became an *sshole

    (13:45) How this can make organizations stronger

    (16:41) Closing remarks

    Follow Alex Hormozi’s Socials:

    LinkedIn  | Instagram | Facebook | YouTube  | Twitter | Acquisition 

    Maybe You're Not Good Enough (Yet) | Ep 727

    Maybe You're Not Good Enough (Yet) | Ep 727

    In this episode, Alex (@AlexHormozi) shares a brutally honest truth that you should consider. If you've been doubted, if you've lost a sale, if a conversation didn't go your way... That maybe it's not someone else's fault. Or the circumstance. Or a bias someone has against you. If you want to have the impact you say you want, maybe you need to get better.

    Welcome to The Game w/Alex Hormozi, hosted by entrepreneur, founder, investor, author, public speaker, and content creator Alex Hormozi. On this podcast you’ll hear how to get more customers, make more profit per customer, how to keep them longer, and the many failures and lessons Alex has learned on his path from $100M to $1B in net worth.

    Timestamps:

    (0:40) Examples of "needing to get better"

    (3:17) It might not be because of bias

    (4:35) Examples from when I needed to get better

    (8:17) Get honest with yourself

    (15:58) "What would it take?"

    (21:30) Beat your victim mentality away

    (22:00) Closing remarks

    Follow Alex Hormozi’s Socials:

    LinkedIn  | Instagram | Facebook | YouTube  | Twitter | Acquisition 

    How to Build a Valuable Business You Can Sell Someday | Ep 726

    How to Build a Valuable Business You Can Sell Someday | Ep 726

    "Keep the Goose, Sell the Eggs." Today, Alex (@AlexHormozi) shares a valuable framework for understanding if your business is sellable, and if it has multiple components of it, which could be the most valuable aspects of it to sell.

    Welcome to The Game w/Alex Hormozi, hosted by entrepreneur, founder, investor, author, public speaker, and content creator Alex Hormozi. On this podcast you’ll hear how to get more customers, make more profit per customer, how to keep them longer, and the many failures and lessons Alex has learned on his path from $100M to $1B in net worth.

    Timestamps

    (00:24) - Story of someone trying to sell his business

    (01:16) - The Golden Goose

    (03:24) - The Big Picture You Have to Understand

    (06:21) - How to Verify What Your "Goose" Is

    (9:56) - Mrbeast Holdco Example

    (14:38) - How Rollups Work

    (18:42) - Closing Remarks

    Follow Alex Hormozi’s Socials:

    LinkedIn  | Instagram | Facebook | YouTube  | Twitter | Acquisition 

    Related Episodes

    James Freeman (Blue Bottle Coffee) - Subtle Notes of Coffee and Philosophy

    James Freeman (Blue Bottle Coffee) - Subtle Notes of Coffee and Philosophy
    James Freeman, the soft-spoken founder and CEO of Blue Bottle Coffee, shares his entrepreneurial journey from the farmers' market where he learned commerce in its purest form, to opening cafes across the country. Freeman explains how customer experience is part of a product and shares the inspiration he draws from philosophy, literature and other cultures.

    Constructive Chaos vs. Clusterf***s

    Constructive Chaos vs. Clusterf***s
    They look and smell alike, but there is a difference between the two types of messiness in the workplace. That difference is intention. In this episode, Stanford management expert Bob Sutton discusses how organizations achieve a balance between structure and anarchy, like allowing for heated debates within constraints designed to fuel creativity. He speaks with Dom Price, head of R&D and “work futurist” at Atlassian, a leading provider of product-development and team-collaboration software, which has a globally distributed workforce of about 2,000 people.

    If we don't fix time and cost, is it really an Agile Project?

    If we don't fix time and cost, is it really an Agile Project?

    After a debate in the pub, Paul McNeil (Agile Coach and Consultant with Magic Milestones) and Steph (CEO of Magic Milestones) were determined to get the answer to their question as to whether a fixed time and cost is a pre-cursor to an agile project.  Have things moved on in the agile of stable teams?  Do we care about constraints anymore? What's a project anyway?  Join us for this in-depth (if slightly geeky) new world of agile projects.