IS this a fastlane busines model?

[Jay D]

I have a buddy that used to be a Mergers and Acquisitions advisor for JP Morgan. He left JPM and started consulting on his own, from a small office. It's him and his assistant.

He earns a sweet, high 6 figures from fees, but here is the kicker, he's using his consulting fee's to buy businesses. :0) He own's 5 small businesses that generate about $25-$30/millions in annual sales. He uses some of his consulting fees along with the profits of the businesses to buy other businesses. He says he can usually get his money back within a year. These are businesses that do $5-$10 million a year in sales.


All of which are managed by professional managers, he oversees things and manages the numbers from dashboards. These are the most unexciting businesses that one would want. (that's the beauty of them).

2 of the businesses are: wooden pallet maker and industrial packaging maker

His plan is to build them up and sell them over time. He says he always wants to keep at least 5 businesses at any given time that he's planning to sell. He's a 45y/o guy but he has a great lifestyle and plenty of coin put away.




Would you guys consider this a FASTLANE approach? Maybe not the way the book presents it but I think he's doing it his own way.

 

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[InMotion]

IMO Yes....if he can scale them up etc. Would still be nice cash-flow though if all is running well.

Does he buy them as fixer uppers with intention of a turnaround or is he buying companies in good shape? Just curious.

Personally, I would rather take over an existing business than start one from scratch, but that's a very broad statement. Opportunities in both.

 

[khsrr]

He owns businesses that generate 25-30 million in annual sales. Tell me what is not fastlane about that?

 

[Jay D]

He's not a turnaround guy. He buys businesses from the following:


77 year old guy looking to retire. No one in the family can run the business so he sells to a outsider.

or

The internal management of a the business doesn't know how to line up the cash, so they can't buy the business, therefore the owner sells to a outsider.

or

People that are tired and simply want to move on and do other things.


All are solid businesses and have stable profits of conservative growth.

IMO Yes....if he can scale them up etc. Would still be nice cash-flow though if all is running well.

Does he buy them as fixer uppers with intention of a turnaround or is he buying companies in good shape? Just curious.

Personally, I would rather take over an existing business than start one from scratch, but that's a very broad statement. Opportunities in both.

 

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[InMotion]

He's not a turnaround guy. He buys businesses from the following:


77 year old guy looking to retire. No one in the family can run the business so he sells to a outsider.

or

The internal management of a the business doesn't know how to line up the cash, so they can't buy the business, therefore the owner sells to a outsider.

or

People that are tired and simply want to move on and do other things.


All are solid businesses and have stable profits of conservative growth.

Interesting. Sounds like a sweet position to me. M&A is a fascinating subject.

 

[evoo21]

I don't see how this wouldn't be a fastlane approach....

Sure, he has to keep the consulting job in order to finance the businesses, but eventually he will be able to live off of the businesses alone, and not have to work by the hour.

$25 - $30 million per year? I mean even if he is making a modest 10% net profit on these he is bringing in around $3 mil a year. depending on the types of business, a multiplier of between six and 12 would set him up pretty nicely to retire.

 

[fsna.hartley]

He owns businesses that generate 25-30 million in annual sales. Tell me what is not fastlane about that?

I agree. What that buddy does on turning every profit into another income generator is fastlane enough.

 

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[Jay D]

Let me clear something up. He doesn't consult to finance the businesses, he consults because he likes it and as a result he uses the consulting fees to add to his investments. He certainly does not need to do that.

He's far surpassed the need to do consulting.

As a side, when you have businesses set up that can run without you, that leaves you with a great deal of free(dom) time, therefore, why give up consulting? :0) He does it to "keep busy".


I'm going to have him create a account on this forum. He's a super cool dude. He loves to talk about what he does and how to help people "make money'.

I don't see how this wouldn't be a fastlane approach....

Sure, he has to keep the consulting job in order to finance the businesses, but eventually he will be able to live off of the businesses alone, and not have to work by the hour.

$25 - $30 million per year? I mean even if he is making a modest 10% net profit on these he is bringing in around $3 mil a year. depending on the types of business, a multiplier of between six and 12 would set him up pretty nicely to retire.

 

[SeanKelly]

Let me clear something up. He doesn't consult to finance the businesses, he consults because he likes it and as a result he uses the consulting fees to add to his investments. He certainly does not need to do that.

He's far surpassed the need to do consulting.

As a side, when you have businesses set up that can run without you, that leaves you with a great deal of free(dom) time, therefore, why give up consulting? :0) He does it to "keep busy".


I'm going to have him create a account on this forum. He's a super cool dude. He loves to talk about what he does and how to help people "make money'.

can you please elaborate on how he manages to own so many businesses at once. Its something id like to do in the future, but I'm confused as to how each business would run smoothly

 

[Jay D]

can you please elaborate on how he manages to own so many businesses at once. Its something id like to do in the future, but I'm confused as to how each business would run smoothly

Actually owning 5 companies of that size isn't that much. Those are not "big companies". You can run companies like that with your eyes closed.

First things first, don't buy junk companies. Look for good companies to buy. When I say good, I'm talking on a scale of 1 to 10(10 being great) look for 7's or 8's. Those are good companies that will be in great shape. When you have companies like that you don't need to do too much to them.

Another thing is, when you buy them.......PUT YOUR EGO IN CHECK!!! The first thing people want to do is "change" the company. The company is already running well, why are you trying to "fix it". That's all ego. Live and let live. All you have to do as look for others to buy, to add to it. Nothing more.

What you would do is manage the company by the numbers. Monitor the numbers via your dashboards. Your dashboard will show you everything in real time reduced down to a number or ratio. You manage the business based on those numbers.


Leave the turnarounds alone and stop trying to find "undervalued" companies. Everyone wants to find "undervalued" companies. Just look for companies that are for sale at market value and do something to increase their value, in this case, merge them with other companies.

Don't try to be some hot shot Wall St guy. Just look for good deals. Unless you're working for some big firm, your sweet spot will be $5-$25million in annual sales as far as the size companies you can easily acquire as a individual buyer. Anything larger, you're going to have a lot of competition with very deep pockets.

 

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[SeanKelly]

Actually owning 5 companies of that size isn't that much. Those are not "big companies". You can run companies like that with your eyes closed.

First things first, don't buy junk companies. Look for good companies to buy. When I say good, I'm talking on a scale of 1 to 10(10 being great) look for 7's or 8's. Those are good companies that will be in great shape. When you have companies like that you don't need to do too much to them.

Another thing is, when you buy them.......PUT YOUR EGO IN CHECK!!! The first thing people want to do is "change" the company. The company is already running well, why are you trying to "fix it". That's all ego. Live and let live. All you have to do as look for others to buy, to add to it. Nothing more.

What you would do is manage the company by the numbers. Monitor the numbers via your dashboards. Your dashboard will show you everything in real time reduced down to a number or ratio. You manage the business based on those numbers.


Leave the turnarounds alone and stop trying to find "undervalued" companies. Everyone wants to find "undervalued" companies. Just look for companies that are for sale at market value and do something to increase their value, in this case, merge them with other companies.

Don't try to be some hot shot Wall St guy. Just look for good deals. Unless you're working for some big firm, your sweet spot will be $5-$25million in annual sales as far as the size companies you can easily acquire as a individual buyer. Anything larger, you're going to have a lot of competition with very deep pockets.

Thank you so much! I understand much better now

 

[InMotion]

What you would do is manage the company by the numbers. Monitor the numbers via your dashboards. Your dashboard will show you everything in real time reduced down to a number or ratio. You manage the business based on those numbers.

So your friend is allowing the owner to exit the company and then plugging a competent manager back into the business in place of the owner? Are old owners reluctant to owner finance or do they not normally care and just want out?

 

[Michael W.]

Probably a mix of seller financing and leverage buyouts. lbo-deals.com has some pretty good info on this, also a small ebook .

No affiliation just a fan.

 

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