Ryan Miller
My name is Ryan Miller and for the past 15 years I've helped hundreds of people to raise millions of dollars for their funds and for their startups. If you're serious about raising money, launching your business or taking your life to the next level, to the show will give you the answers so that you too can enjoy your pursuit of making millions. Let's get into it.
You ever wondered how these people make billions of dollars buying and selling companies? Well, in this week's episode of making billions my friend Mike Swigunski and I chop it up around private equity doing deals and we share his insights on the most critical factors on buying and selling your first company. Let's get into it.
Hey, welcome to another episode of Making Billions. I'm your host, Ryan Miller. And today I have my dear friend Mike Swigunski. Mike is the acquisitions advisor and founder of global career investments where he helps to assist investors and business owners to buy and sell their company. He's been featured in Forbes, CNBC, Entrepreneur, as well as a best-selling author of "global career, how to work anywhere and travel forever". So what this means is Mike's the guy you call when you need help, either buying or selling your company. So Mike, welcome to the show, man.
Mike Swigunski
Yeah, Ryan, really stoked to be here. I've been hearing a lot about you through this space, and a listener as well over the past few months since I kind of came across your radar. And it's really great to kind of go from a listener to being on the show. So I'm hoping to really give back some value to your audience. So looking forward to sharing my journey of doing brokering deals, becoming an entrepreneur and traveling the world while doing it.
Ryan Miller
Awesome, man. Well, yeah, I've been so impressed with what you've done, especially from such a young age, you know, age really has nothing to do with it, but results certainly do. And so thank you for that we've done very well in the show. Glad you're a fan, I'd love to hear about buying companies, selling companies, all things private equity, we're gonna get into that. But before we get into all those hot tips, and you're gonna want to hang in there till the end, until Mike's gonna reveal some of his secret sauce that he uses to buy companies. Before we get into that maybe you can walk us through how did you become an expert in this space,
Mike Swigunski
so kind of a starting point to endpoint of brokering more than $120 million worth of deals building one of the fastest growing companies, the United States, it took a lot of time, it took about a decade to kind of get to that point. So basically, I got started studying at the University of Missouri, I started off accounting, it wasn't for me, I switched to finance and real estate. But I also decided to study abroad. And during this time, it was a really great kind of eye opener for being able to study with Americans, but also with Italian classmates traveling all over Europe. And during this time, they actually suggested for me to apply to be a student manager for the University of Missouri study abroad program, I was trying to figure out what I was going to do after graduating, I essentially chose to go down the unknown path, I had a group of students that I was taking abroad for the summer, so decided to book a one way flight to Europe, take my last group of students, and I was like, Okay, I'll spend three or four months in Europe, if I can find a job, then I'll make it work. If not, I'll go back to the States. And I'll kind of go back to the corporate route, right? Luckily, I built some good connections at this university. And I applied to be a financial economics professor. And so at the age of 22, I became a professor. That was my first job out of college, I was teaching kids who were older than me, or students that were actually older than me, which was interesting. But I spent about two years living in Prague love the job. It was really like this Four Hour Work Week job where I'm teaching as a professor having some office hours really getting to travel a lot, I was on a goal to travel to a new country every month while I was living in Europe. And I was able to do this while living there. So it was a fantastic journey. But this was that light bulb moment for me where I realized I could continue traveling, growing a career. But I just realized that becoming a professor wasn't really the the path that I wanted to go down. So I decided to correct this path move back to the US landed a short contract working for Wells Fargo on the trading floor as a prime broker. It just wasn't great. It was just kind of like the office life. But it was, I guess, a very inspirational moment to have that that kind of working the four hour work week to working a 50 hour job that was not great at all. And this was all inspiration for me to move over to Australia. And once I got to Australia, I kind of took a different approach. Instead of searching for a backpacker job like most people do, I was like, I want to work for a startup or a tech company or like some type of job that I'm going to learn experience and actually continue growing. So I was able to land my first partially remote hybrid remote job. And this was again another one way street, where I always say working remotely is a one way street. Because once you get started, it's really hard to go back. And we're seeing that a lot across the United States.
Ryan Miller
Now my understanding is where you really dipped your toe into private equity is you were able to right after Australia, you moved to Vietnam and one of the first people that started working there, he started building a company almost like a marketplace called Empire Flippers. And this is primarily dedicated to anyone buying or selling a company. Maybe you can walk us through a little bit of that experience and how that led you to all the all the good stuff you're up to today.
Mike Swigunski
Yeah, exactly. So after Australia, I did have like a two and a half year stint where I studied my MBA in South Korea. You know, I got a full ride actually to go study my MBA in Korea. And that was one of these things that was just too good to turn down. But it ended up working out really well because it introduced me to the team over at Empire Flippers and I moved to Vietnam to start as employee number four building this company, and we grew it from four people to hundreds of people now one of the fastest growing companies the United States, a fully remote Boat Company, which is also for five people. It's interesting. But with hundreds of people, it's a, it's a very interesting thing to have a remote first company, no office or headquarters or anything like that. But the biggest thing was it just gave me a very unique insight to the industry of buying and selling profitable cash flowing assets and online businesses. And during this time, I was able to broker more than $120 million of these deals. And I always like to say that I've I've kind of seen behind the the internet, like how it works, how it's monetized. And it's kind of ruined the internet for me, and I'm okay with that, because it's opened up so many more doorways and opportunities for me, but basically, any almost anywhere on the internet is monetized in some way. So there's almost a financial bias. And no matter what content you're looking at, whether that's through a news article that you might think, maybe this news article doesn't have any financial bias, but they all have some bias, or maybe it's a YouTuber they have, maybe they're promoting a product or doing a review, there's always going to be some financial bias. But again, you have to really be aware of that. That's what one thing I love about Reddit, there's not as much of a financial bias, but there is still going to be some biases on there. So during this time, yeah, I really learned a lot about what makes a business profitable, what makes an asset and a digital business actually sellable how you can actually build and grow these businesses to, you know, to be more sellable assets, and how you can essentially just acquire a business that's already making money, instead of starting from scratch, wasting two to three years on a concept that might not actually net you anything. And so I've kind of taken a hybrid approach where I built my own businesses, from what I've learned, I've acquired my own portfolio of businesses, and I've also helped other people buy and sell these businesses. So it's kind of getting a little bit of a chunk in all of these and kind of diversifying my portfolio in a sense.
Ryan Miller
And that's brilliant. So you mentioned that you've done 120 million through that time in your life, and then acquisitions during that time, and obviously a lot more. I'm wondering, if you have just maybe two or three things that you find from all of your experience that we can start talking about a little bit of those key things, when you're either buying or selling a business through all of your experience? What have you found to be the most impactful things that you would want other people to understand who are on this path?
Mike Swigunski
Yeah, great question. I would say like splitting it in two, you know, there's the sell side and the buy side, on the sell side, I would say the most important thing is to have a sellable business, you might have a great business, that's making a lot of money, but there's a there's a sellable business and a sellable asset, and there's a business, that's gonna be a lot more difficult to sell. And a lot of entrepreneurs have it structured in a way where it's not a sellable asset. So if you're wanting to have an exit in the future, or even if you don't, it's better to try to create your business in this way, because it's going to make it more efficient and effective. So what does that actually mean? Essentially, you want to put yourself in the shoes of the buyer, right. And if your business can only be run by you, and you're trying to sell your business, it's gonna be fairly difficult. Most buyers don't want to buy a job, they want to buy a cash flowing asset, that they can plug into their portfolio, and just essentially either maintain it or try to grow it. So you need to have it structured in a way that it's fairly passive, meaning that you have systems in place you have SOPs documented. But more importantly, you have either a staff in place, or you've structured it in a way where you don't need a lot of hours. Some examples of this are people who've built some business models just don't require a lot of people to be involved. One of these examples is a content business or an affiliate business, these types of businesses are usually taking eight to 12 months to start ranking on Google, they're creating a lot of content. So they're front loading a ton of the work. And for every one of these people that kind of build these businesses, they're building four or five of them, and one of them just really takes off. And then they flip it at a certain point. So maybe they flip it at when it's making five to $10,000 a month in profit and a new buyer, all they need to do is consistently be adding new content to this website, they already have a writer in place, they already have an SOP for the writer to upload this content, all you have to do is just kind of maintain and manage this person. That's kind of an optimal structure. On the other side of what would be an example that might be kind of difficult is an agency. So let's say you have an agency, you're making a lot of money. And a lot of these agency owners, they're just printing great money, but maybe they're getting all their their clients from referrals, maybe they don't have a customer acquisition strategy, that would be easy for a buyer to replicate. So in that sense, if you're wanting to sell an agency, you need to have a way that this new buyer can also acquire customers and new customers. So a few things are you're locking in your contracts for 12 or 24 months so that when you do transfer over, they're also getting those new clients and you have a way to acquire new customers that this other person can either ramp up or ramp down maybe through Facebook advertisements, or some type of advertisement platform where it's like, hey, for every 100 $200 we then we're getting a really qualified lead that lead is going to our salesperson, our salesperson is closing at 35%. And so they can kind of figure out what it's going to look like to acquire and take over this this type of business. I personally, I love software businesses, that's kind of my my forte, the great thing about software businesses is from the buyer side flip into the buyer side. What a buyer needs to look for is what's the cash flow like what type of moat is around this business and how fast can I grow it? Those are kind of the questions that I'm looking for through the lens of a buyer. How can I structure Deal, that's gonna be a win win for myself. And for the person selling the business. That's what I've seen from kind of buying and selling these these types of businesses. But there's a whole checklist out there of things you need to look for, as a buyer and as a seller.
Ryan Miller
And I love that, you know, and one of those checklists that I like to see myself is working capital management that's effective. For those of you that are out there that are either looking to sell your business, make sure that's in line, if you don't know what that is just look up cash conversion cycle, that's a great place to start back. A little nerdy accounting speak for you cash conversion cycle, really just make sure that your cash flow from operations is well managed. And a lot of those things that we'd like to see on top of SOPs that if I could add to that Mike, is investing in people process and technology. This is a common strategy that a lot of people do to do financial turnarounds and just saying, like, Hey, how's it people business training, hire, fire, retire all of those things, processes or AI? Is there automation? Is it inefficient? And then technology? How's your tech stack? Is there redundancies? Are there gaps? Is there technical debt, all these things that happened to be in place, understanding the ins and outs of that, and really signal whether there are operations that are effective, and if they are, then you're not buying a job, if they are not, like Mike said, you might be getting more than a company, you might be also getting a job because there's a lot of cleanup to do. And that's not always bad thing. Clean up means that you can add some value if everything's perfect, and there's no there's no meat on that bone. Not a lot of value add you could do but a lot of people and I think you're one of them that likes to see some some businesses that need some work, and then you can obviously start pumping up your valuation. So that being said, you mentioned on the sell side, what about the buy side?
Mike Swigunski
Yeah, so when I'm looking at a business, again, if you're looking to buy something, the first thing I talked about is like, what's your liquidity? How much do you actually have in capital, and then you can start looking at businesses from there. But as far as like what type of business, a lot of people are either set on the niche, or they're set on the monetization method, I think it's much better to be, hey, I want to buy a software business or some type of digital product, I think that's a much better thing than I want to buy a baseball website, that's only I only want to deal with baseball, unless you have some really big synergistic plug that you can put into your portfolio of already operating businesses. And there's going to be a huge ROI on that most people don't have that I would say be open to the niche and look more at what's the business model is this going to be an evergreen business model is there going to be continued growth on this business. So I like businesses that have a good track record. So usually, they need to have at least two to three years of year over year growth. And they needed to have a lot of opportunities for me, I want to be in control of almost the whole process of recent acquisition I had and I'll use that as an example as kind of a homerun deal. This business was 10 years old, it was a software it had one founder who had done everything for the business, he hadn't changed the prices for 10 years, that alone was a huge opportunity for us to just increase the prices. The other opportunity there was he hadn't turned on any type of recurring revenue. So it was a yearly plugin, or a yearly subscription. But there was no subscription. After the year, the person had to go through an email process, re sign up is extremely clunky. And we just completely shifted that to MRR or Arr, where it's all automated, put in your credit card once and every month is charging you or every year, it's automatically charging you for that plan. So this is the type of stuff that I'm looking for. I'm primarily looking for these types of opportunities. But with this business, we were able to acquire it for almost the same price of what it costs us to build it from scratch. So it was just kind of a win win type of situation, where month one, we were able to really get back a huge chunk of our capital just by implementing all of these growth operations and growth improvements for the business. So that's kind of what I look at look at as a buyer is, hey, how fast can I grow this business? What's the landscape look like? And kind of what is the past look like looking into, you know, all the finances over the past few years, essentially just digging deep into the p&l to see if there's any discrepancies to see if it's a healthy p&l and essentially kind of playing out the scenarios. Okay, if we increase the prices, you know, we 10x the prices because it hadn't been increased for 10 years. And then we also did a lot of conversion rate optimization. So with all that combined, we're having a huge net positive, even though we're increasing the prices quite a lot.
Ryan Miller
And that is brilliant. So look for recurring revenue, obviously, people who've underpriced their product or service. So this is good for success criteria. But financing a business is also a big part of private equity. What are some things that you've learned over these years of doing this that can be helpful as far as raising capital financing a deal? Anything around that?
Mike Swigunski
Yeah. So, there's two big bottlenecks. And just to kind of clarify, like the industry that we're kind of discussing, these are micro acquisitions or micro assets, usually that's defined as like $10 million valuation and below just for all the listeners who are kind of wondering what types of businesses these are, usually it starts at around 50k, all the way up to 10 million after 10 million is kind of a whole different realm, you have a much different type of valuation and under and underneath the 10 million range, everything's valued on the profit over the trailing 12 months. And then how big is the moat but as far as like financing, there's two big kind of bottlenecks in this industry. One is financing. The second thing is operators because a lot of people at the five $10 million range aren't actually going to be operating the business right We'll start with financing. Because this is the one one of the biggest questions I get a lot, I want to buy this deal, but I don't know how to finance it, it's not as easy as going to a bank and getting a loan like you if you want to buy a house. Or if you want to buy a rental property, it's a little bit more difficult. The two things that I recommend are seller financing, or just family and friends, raising capital from family friends, those would be the two best ways to do it. A lot of people tried to go the SBA route. And in my six years of doing this, I've only seen one person get an SBA deal, he was kind of in a unique position, it took him years to get the deal done as well. So it is possible, but there's a lot of downsides. SBA, one, they're just not structured for online businesses to they're really just kind of hard to work with. And you have to put up some sort of capital. So for example, if you want to get SBA loan, you might be putting your house on the line to get one of these loans, if something goes south with the business, that's why I like these other options a lot better, you can get raise funds from family or friends, that's another great option. And you can raise in two different ways you can raise as an equity partners, the family and friends get, you know, equity in the business, or you can raise it as just an interest on that loan. So you're getting a loan on the money, and you're paying them back what a bank would loan or maybe a little bit more or less. So those are the two ways but my favorite way to actually get a deal done is through seller financing. And this is essentially an interest free loan. And the example that I like to use is let's say you're buying a million dollar business, it's valued for a million dollars. And this is kind of like the 6020 20 rule. And basically, you need to have about 60% liquidity to put as an upfront deal. Again, all these are rough, everything's negotiable. And that's one thing that you need to keep in mind. Everything in the online business space isn't negotiable. So 60% is a good rule 60% upfront capital, so cash that you actually deliver to them whenever you are getting the deal done, and then 20%. So it could be 600k, up front and cash 200k In a seller financing. And essentially what that is, is you're breaking that 200k down into installments, so monthly installments of that 200k Over the next two year period. And the very interesting thing that I like to do is I like to tie either performance stipulations or some type of role stipulation. So keeping the seller involved, it could be as simple as hey, you need to be committed to doing one consulting call every week or every month for the next two years. And that's going to be the thing that keeps this, this earnout going. And if for some reason, they aren't open to that, let's say around month six, they're just like, hey, this is too time consuming, they can walk away from it and the earn out payments would just stop. On the flip side. If you stop paying the money, let's just say the business tanks and you can't afford this and you stop paying this. Usually the business is held as escrow you need to make these payments or else you could lose the business. That's usually the way it's structured.
Ryan Miller
Man, that is brilliant. So the 60-20-20 rule, I have to remember that. And SBA is kind of good, but only in particular situations. So you know, as we wrap things up, Mike, is there anything else you'd like her fans to know and ways to reach out to you or to follow you anything at all? Yeah, so
Mike Swigunski
just to add on the SBA and the last 20%, in case people are wondering to the last 20% is where you get the negotiation, I usually like to offer you know, if you're offering a deal for $1 million dollars, you have a little bit of negotiation there. So you could offer the 60%, up front 20% and earn out and then that other 20% is just the room to negotiate the deal down. So you're essentially buying a million dollar business for 800k. But only 60% up front. And you know, the SBA, it's not really structured for online businesses. It's more structured for like offline businesses that have like physical real estate. So the best place to go is global career book.com You can find all my social media on there. I'm very active on LinkedIn, Instagram, YouTube, and you can also get a copy of my book, I've got a link on there where you can get an auto audiobook free, it's a great reason to go check it out, you can get an audible book free today. And yeah, you can check it out
Ryan Miller
perfect. Well, just to summarize and synthesize everything that Mike has said, build a business with the sale in mind. The second thing he mentioned, the advice he gave us is look for excellent working capital management. When you're looking at a business make sure above all whether working capital management is or not, the idea is to find a business that can run without the owner in place. So you're not just buying a business and a job, you're just buying a business. The third thing is seek recurring revenue, or at least the capacity to achieve it. And finally, the 60-20-20 rule when structuring an offer you do these things, and YouTube will be well on your way in your pursuit of making billions.
Wow, what a show. I hope you enjoyed this episode as much as I did. Now, if you haven't done so already, be sure to leave a comment and review on new ideas and guests you want me to bring on for future episodes. Plus, why don't you head over to YouTube and see extra takes while you get to know our guest even better. And make sure to come back for our next episode where we dive even deeper into the people the process and the perspectives of both investors and founders. Until then, my friends stay hungry. Focus on your goals and keep grinding towards your dream of making billions
