Ep 302: 15+ Profitable Online Business Acquisitions, Scaling & Exit Strategies with Mario Peshev

What is the difference between a strategic acquisition and a financial acquisition in M&A? Hi, I'm Jaryd Krause. I'm the host of the Buying Online Businesses podcast today. I'm speaking with Mario Pachev, who is a serial entrepreneur who has over 14 years experiencing buying and selling businesses.

He's spooked strap multiple startups from zero to seven figures and he is the CEO of DeVrix, which is a digital marketing agency. He's also the best selling author of MBA disrupted and he's done amazing things as an angel investor, advisory sitting on the board of different companies.

Then in this podcast episode, Mario no dig into acquisitions. How many acquisitions he's done? How many he's done under the 20k range? How many he's done over the 20k range up to the 200k range? What they look like? We talked about businesses that he's advised on.

Businesses helped build and sell how he scales businesses within his DeVrix digital marketing agency. The type of clients he's working with. We talk a lot about like funding acquisitions, what they look like, how you can run them alongside your primary business or how you can merge them into your primary business if that makes sense.

And yeah, we talk a lot about how to buy business and or sell it. And listening to this podcast, it's pretty important that you understand due diligence. We do talk about due diligence or buying businesses a lot. So make sure you don't go away and buy business without knowing how to do due diligence. You get my framework.

It takes the guesswork out of doing due diligence. A lot of people have used it, saved people millions of dollars and made people millions of dollars, get that buying on my business.com for just free resources. We also talk about like advisors and my buy side M&A service.

If you're looking to acquire a business and you would like me to find it, source it through our private network and go through due diligence on it yourself. This is for businesses. I'm talking like seven figure range plus businesses. Reach out. I'm here to chat.

But for now, enjoy the pod.

Areo, thank you for your time and welcome to the podcast.

Absolutely. Thanks for having me. A pleasure to be here.

Yeah, looking forward to chatting a lot about M&A acquisitions, buying, selling. Now, you've started multiple businesses and you've sold businesses. Happy bought businesses. And if so, what type of businesses? That's a great question. I bought several small businesses and I've also bought about 30 probably digital assets or let's call it micro businesses through just websites.

I'm sure I've definitely been on that side of the table myself. I've also facilitated different acquisitions. So I've been kind of on both sides working with investment bankers or M&A, just making micro acquisitions for different businesses. Right now, I'm in a process of transitioning business to private equity. The business is doing tens of millions. So it's kind of a pretty large size of transaction. So I'm kind of working with both parties as a consultant.

So yeah, it's definitely an interesting space. I'm seeing a lot of movement in that over the past year and a half, particularly. So I'm super excited about the opportunity to present on the table.

Yeah, absolutely. So let's start with the first sort of few businesses you acquired. What type of business? You said you bought seven issues also and then you bought some micro assets. What's the difference between those two? Like how would you characterize them differently?

Yeah. So in some cases, it's an entire business with stuff and turning operations and stuff. In other case, it's mostly an asset that may have some monthly recurring revenue or it may not. You'd be kind of a VC-backed product that didn't pick up. That's kind of one example of cases where we do buy distressed assets in a sense. So these are kind of the differences that we have. So in one, one of the...

So a category of business that I've bought and sold is a theme marketplace. So a bunch of different themes, particularly for the WordPress platform. So first, I was involved in one back in 2009 or so.

Then I sold that and... Actually, a lot of dig into questions after I let you go on a roll. Yeah, absolutely. So this was kind of one of the businesses. And over time, I've also bought kind of smaller businesses with, let's say, two, three, four designer developers or kind of founding developer and two, three contract designers. Kind of as a standalone theme marketplace business as well in the process. I've also bought a small CRM.

It's called Daupi CRM. So it was the main developer and one more writer there. And we've acquired two or three micro agencies along the way as well. Again, two, three people just merging into the DevExec system. Oh, congrats. And did you acquire… Was it first getting the business where you're doing startups like bootstrapping or did you acquire first?

So the business that I started was completely bootstrapped. So I started with my own savings and stuff, starting the service-based business, meaning that every hour was built more or less. So it was easier to kind of accrue some revenue and some savings. And over time, I started acquiring first digital assets and then kind of small businesses, as I mentioned.

And because the digital assets it shows you are like, if you buy a website for like two grand or five grand for example, you already have a kind of a playground with something that has been alive for a year or two. There's the main authority. There's some content. There's a branding place. So it's easy to speed up other opportunities and other activities that you do yourself. In some cases, we've done similar acquisitions for like properties for again, two, five, 10, 20, 30, 40K, gave them for a specific clients of ours.

One example that I can give is we work with... Even though B2B 95% of kind of what we do, we have some B2C businesses as well in kind of our agency and advisory portfolios. And in some cases, there's a strategic move to a new market or strategic move to affiliate marketing or partnerships. So we may buy an entire kind of influencer hub with 1500 people or on a affiliate website with 300 articles that's already ranking for some strategic keywords or something like that to just speed up the process and boost that and use it as a kind of brand revamp and brand boost in a sense versus trying to buy internally or work with an agency and then not really owning the assets at the end of the day. Yeah, cool. I'd like to talk about that.

So if you've done that for clients, have you done it for yourself as well? And what does it look like? So it sounds like you're first getting to business, you started your business first before you actually acquired anything. What was it that you acquired and how did that acquisition help you grow the business? Like how did you merge that acquisition into the business for growth?

And because some business growth by acquisition is a great strategy. Sometimes it just doesn't necessarily work depending on the business models that you have as a platform business and then what your class. So what did that look like for you? That's a great question. And again, not all acquisitions spend out. Sometimes if you don't do your due diligence right or you're just too hopeful or you're just too excited to get something, it doesn't necessarily work.

Right now, I've built it on another kind of microsite for about five grand and I've been waiting to hear from the buyer. So it's going to be a pretty smooth transition because it's kind of a low volume, but I'm actually pretty excited about that because I was about to build that, right? So knowing that otherwise, I'm actually probably going to spend more time effort and resource to build that.

And on the other side of the spectrum, we also have an existing like brand. It's already been on product hunt like a couple of years ago. So it's actually think it's undervalued. It's probably cost 20 grand. So it's kind of on this stress asset again, in a sense, but it's not making revenues.

You just put your financial hat on. If you just put your financial glasses and count it with it, it's definitely not going to be valid this way. But when you think of it as a strategic acquisition, it's absolutely awesome. So just following that train of thought, the initial acquisition that I had were more of strategic acquisition than financial. The theme marketplace that I mentioned, it just had several WordPress themes, 10 places we could have used.

So when back in the day, we were building websites for plans. We still do is just kind of not build the main part of business. But building a website meant we had to go through a tedious process of bespoke design, building into static pages for the more tech savage HTML and CSS static files, moving it to a dynamic theme, building a dynamic backend for editing the block experience with Gutenberg or show and then integrating some points at the end.

So it's kind of a pretty long and expensive process. So buying the marketplace actually allowed us to also provide an alternative opportunity for clients saying, hey guys, we also have several pre-made themes. So let's say the from scratch, 10 page design or show, like again, bespoke ones going to start from 10K, a pre-made with the theme is going to start with 2K. So pick your mind. Again, you're going to be more constrained. It's not going to be made completely for you.

There may be some compromise here in there, but essentially 80% cheaper to go this way and also it's practically for us. So it's kind of a win-win situation. So this was kind of the strategic approach to making it happen. Another example and again, I'm kind of counting business and digital assets. So it was kind of a digital asset type of thing, but as a direct call, several digital assets that were kind of productized services. So in several examples, we have been building and trying different services to figure out whether the market needs them or not.

And in some case, it does. In some case, it doesn't. So the way it kind of works is you kind of buy a small agency again with 102 people, maybe just a founder with an outsourced vendor. Sometimes it's something like five or just someone who works and it's a completely productized service. Let's say social media management for 30 days or building a drop shipping website or something else.

So there's kind of a fixed cause. There's someone who's kind of delivering that solution and it's something that would be risky offering on our end kind of as a professional agency. As a boutique business with an average contract value of 80 to 100,000 dollars, it's hard to pivot into low ticket one of productized service for something that costs 400, 500, a thousand bucks.

So this way, we kind of buy micro businesses and we run them separately, again, separate out accounts, separate campaigns, separate email marketing, separate social accounts. We run some tests for a few months and then we decide whether it's worth it or not, we chat with actual prospect clients, we decide whether these are the right people in the first place or not. In some case, they're not, you know, they're just too early in the process, you cheap, a lot of overhead and just communication wise, it doesn't add up. In other case, we just segment that and kind of merge that into the business.

The third or fourth example that I can come up is WPCRM. I don't recall the exact cost, it was probably 25 grand or so, but it was an existing login business in the WordPress ecosystem. So it really helped us also position ourselves into, hey, we are bid to be, we do integrate with HubSpot and Salesforce and Mercado and some kind of the other players.

But if you want something small, we actually have, again, an integrated solution that we develop ourselves. So it's going to be within your website, you're not going to be monthly annual licenses, it's going to be because of your needs and whatnot. It's also an existing product. So if you don't want to work with us, you can just pay an annual license for sure.

So this was another way to kind of a project. And additionally, through the WPCRM, we also acquired businesses for the agency because they become plug-in clients, they ask for some customizations and features and they in turns out to come up with an actual plan, go to market strategy and stuff and they say, well, you're already working on the core portion of the business, technologically speaking. So let's just pick up some other areas.

So the interesting thing that I liked about the WPCRM is it was a purely financial acquisition at first. So I did the mod, we were expecting about 18 months, a return on recouping investment. Now it was 18xCB door show and we managed to pay it off in about 13 months. So just over a year and it became fully profitable since and that was in probably 2016. So it's it's only been making money since so wonderful acquisition. Yeah, absolutely.

That's a great acquisition to congrats. And so is there a price point that you will buy for a strategic acquisition where it's not really a financial decision for the business? Like is there a cap that you will not go over for that where you're not valuing a business based on EBITDA, you're sort of valuing it based on what sort of service you could provide or the service that business provides or say the SEO value of it all. And then is there a price bracket where you're acquiring businesses for financial purposes primarily with the bonus to add them in strategically to the business?

Hmm, I guess it depends on the category but what I would say is that it probably starts strategic first. So the first and 15, 20K is going to be strategic. Then we are moving towards a financial market. So let's say 20 to 100K is going to be financial and north of 100,000 like 100 to half a million. For the most part, it's also primarily strategic. So it's probably 30%, 30% financial, 70% strategic, but I would say it's most strategic. And the rationale behind that is lower ticket acquisitions.

Again, up to like 10, 20 grander show. A for the most part, they're not really going to make a substantial amount of money or the revenue is going to be driven by things like the founder. Let's say I got a pitch for a director the other day, the founder said on 15 grand for that. Throughout the lifetime of the business, the past year and how to show, he had only made 5K.

So first off from a financial standpoint, if we try down the same trailing 12 method, we'll probably need about three years to recope that, which is not ideal or maybe for a year and a half on average, two year stops. So that's always the capability and one service, right? It's very risky for the three year multiple. Exactly. Yeah. And I mean, it's still a, so it's a directorie, so it's less human capital involved in the sense that it's a non-life website making primarily organic traffic in a sense.

But when I took a look at analytics, about the third of the traffic was on the terminal, so it was direct traffic, which looked slightly fishy. And it's not fishy in a way that it's been lying through rating. It's more that probably his staff or partners or some of the late things there that I don't really know.

And the other third of the traffic was his own Twitter. Kind of what I told him is as a strategic acquisition, I'd probably buy it even though I kind of have mixed feelings on the ICP, but I'm really worried that I'm going to lose 65, 70% of the traffic the moment we signed that deal or several months after, even if he keeps promoting that over the next few months. Again, this is going to fade away. It's absolutely normal.

So again, with that in mind, the first, let's say, 20 grand or so, it's mostly strategic, you know, just going to buy because there's something that, again, it's bivers as built. Like, do I want to build that with my team and brand it and the main and the main authority and link building and stuff. It's mostly strategic and 2200.

It's mostly something that I'm going to try to use as a, let's say a cash cow that's more or less related to the business. So I would buy kind of a publishing site with ads, a directory, a newsletter that's almost an auto-pilot or show. And then over 100 kids, probably going to be something that's dramatically going to change the direction of the business. Or dramatically at least, let's say, buying a acquiring company with a very similar tangible audience where we can cross sell.

So it's not just this, but it's also that or acquiring an AI company with a very innovative way of approaching LOMs. Meaning that we are going to be disrupting and innovative. It's going to get a lot of press. It's going to help us upscale our clients where we are going to automatically acquire logos that we didn't have, which is going to completely revolutionize the way we do outreach and the way we position ourselves, you know, getting awards and things like that. So these are some examples.

And again, your mileage may vary, but I'd say that start strategic, who's to finance, show, and then upper tier is primarily strategic for me at least. Yeah, it depends on who the acquire is, right? So we have you're doing, I would say mostly 70%, and I would say that's rightly so, as a company, acquiring for growth by acquisition, as a strategy, strategic is definitely the way to go with some financial ones that you can run alongside it. But if you're just brand new starting out and you're just acquiring to just get an income, very different, very, very different, you'll be going for financial, because there's no, should I have a strategic acquisition, because you don't have a business yet, but maybe for your second or third one, you might, right?

So I've got two questions. One is, how many acquisitions do you think you've made, and in what time period? And then I want to talk about the cost benefit of analysis of, do you start something for what you're trying to achieve, or do you acquire, and what that looks like? So how many, yeah, first, how many acquisitions do you think you've made, and when did you first start acquiring?

Do you want to put any sort of a cap on that? Like, what's the minimum threshold for an acquisition that you'd consider? Well, we could, two buckets, maybe you've got a bucket of, like, things that are under the 20k range that are not really generating much of income, and then above about 20k, maybe. Yeah, so I'd say it's probably, definitely the lower range is higher. It's probably 30 or 40 of these, and 20 to 200,000 give or take, it's probably a dozen, you know, 12 to 15 give or take, maybe let's say 15.

Yeah, cool. And when did you start? When was the first time you decided, oh, I'm going to go and acquire something for, like strategic purposes, things like growth by acquisition. When did you start to explore that? So I think the first one that they got a hold of was a flipper, small side, probably back in 2012, 2013. I'm tempted to say 2011, but somewhere along those times, probably 12 to 13 years ago.

I've always been on internet entrepreneur, meaning that I've always been curious following, you know, social media forums, like, including the affiliate warrior forums, like all those kind of cool hidden plates from the internet directories with opportunities with growth. So again, I've always been passionate about that even though I hadn't been active. So I stumbled upon kind of one of these kind of micro businesses, less productized, one of business sites that I really enjoyed, and I thought I'm going to give it a shot, just probably an a thousand bucks to show back then.

So if you're just for inflation, it's slightly higher, but back then it kind of made sense. And it just really, it changed my perspective on someone spend the time to come put on the main lending page, prototype service, a way to kind of deliver that. So even if I don't do anything with that over the next like 69 months, it's just going to be there and ready. So I can bring it up in conversations with accounts. I can just tell it to existing cloud. Like there's a lot to do with very minimum supervision.

And I was pretty excited about that because it brings additional opportunities. It saves you time versus starting from scratch. It also brings additional perspective. And this is very important, right? So when I make acquisitions, again, in some cases, especially if you talk about code base, my background is also in engineering, it's likely that I'm going to see things that they don't necessarily like.

That's fairly common. But when it comes to just branding, packaging, positioning, incorporating funnels, I oftentimes see things or ideas that I can definitely resonate with and I wouldn't have come up with myself. And that's pretty critical for acquisition. Yeah, I think people forget about rock market fit, right? Where we might go away and I'm going to ask you about the cost benefit analysis of starting versus acquiring where we have this ideology of we want to because we are limited in our thinking.

We're unlimited as well, but sometimes we have limitations in our thinking based on where we're at. And we might have limited thinking of like what this service or this business is going to look like that we're going to build. And then the market says, well, it's not really hitting the mark of what we actually need. And then what you will acquire is probably closer to product market fit because it actually exists and people are paying for that. And I don't think people really have thought about that distinction.

Now I want to ask you around a cost benefit analysis like, all right, we've got this product that we want to provide or this service that we want to provide or we want to help people in a certain way. How much would it cost to build versus doesn't already exist? What does that look like for you guys? How do you work that out? Sure. So I want to add a disclaimer here and it's very important because it really depends on just as you said, it depends on the acquirer whether you do strategic and financial acquisition. It's, and I also have a story for that, by the way, the Shopify sales that I saw was a completely strategic acquisition. It made total sense. So it's a great story, but I'm going to get to that later.

But the, when it comes to bivers as built, the reason it's so dependent on who the buyer is the following kind of four different categories in my opinion. First one is someone who's completely out of business. So it's fully financial acquisition unless they want a guardian team, which also matters, but they don't have their opportunities going to be we have to figure out what to do in the first place.

Do we hire people? Do we work with agencies? Do we have consultants? Do we have freelance? It's a pretty messaging. So they have no idea whatsoever and they just compare something that they see on the listing versus something that's kind of hypothetical.

Option number two is a business that has an engineering department, a marketing department, and they have to compare that to the costs they have. So in most cases, that's kind of a product business that may be acquiring on a publishing website for PR or a YouTube channel or like another agency or something like that. So they kind of compare, hey, what's my payroll? What does my payroll looks like? What are the missed opportunities based on business that we don't deliver?

And kind of, including that as well. In the third case, you have an agency business that's kind of more optimal. There's more flexibility. You still have your stuff on payroll. So you're kind of limited to that team, but you also have some flexibility in the sense of, hey, I do cloud work. So I know that my stuff is not 100% involved and with an internal product, I know I can maximize my free yaps.

So I'm not going to directly lose money because it's not beable work anyways and it's going to be spread across efficiently so that the team can make it work. So you're kind of calculating your cost of labor and agencies have to keep their cost of labor sustainable just because that's kind of part of the business model. And the four at last, most important case I would say is people like me who are zero entrepreneurs and those who veteran technologists and business advisors and I'm not saying that as a brat behind you.

It's more about a good portion of my own time goes into finding suitable solutions to solving problems, meaning that I work internationally. I have teams in different countries. I'm searching providers. I'm assigning test projects oftentimes. So I'm actually paying out of pocket hundreds of thousands of dollars a year on experiments with agencies with vendors with freelancers in order to have plugins and boilerplates for my own clients and for the agency clients, right?

So that when anything comes up, if we need to develop a chatbot, I say, hey, these are the two guys that are like building chatbots. Or if we need a product I saw, I say, hey, I've tested five different MVP builders, four of them sucked. But this is someone I can trust on. I've done some initial reviews.

So like a third of my time actually goes into experiments and working with fractional COOs and with freelancers with agency specializing in very niche things. And I can get the most efficient return on investment on pretty much anything compared to the other two categories.

So and this kind of opens the door like if I'm a and by the way, I'm also working with VC funds and with private equity sometimes as a consultant and they say, hey, like we need you to jump in and take a look at the piano of that business and let us know whether it's something that we can optimize.

And like, is it, do we need to keep team on staff or not? Is there a more cost efficient option? Is it a better culture option? Like, do we, is it worthy sacrificing this for that? What are the regions around the world where you can effectively outsource or working to retain talent optimized for velocity and do something else and so forth? So in some cases, people who fall in the first and second category, not having a business or having let's say a SaaS business or something that's completely different, they reach out to tech advisors, business advisors and consultants to figure out what are the options and what would something like that look like.

And they've also worked with people like that in other businesses, better than tech consultants or other advisors and you just have a better read on the economy. Like, should I do that in housing the states or in Australia, should I offload in Eastern Europe or in Asia? What's the quality like? What's retention like? House communication and so forth. So that plays a pretty important role here.

Absolutely, absolutely. Very different types of acquisitions with goals and strategy. For example, your across many of those verticals, whereas there might be somebody that has one business or two businesses and they want to do a strategic acquisition, but they also want to be a financial acquisition, but they don't know the marketplace very well, like you place with these different top price tiers. They'll come to me as a buy side M&A advisor and say, this is how much cash we've got all raised. We want to make this a financial decision, but also a strategic decision that runs parallel with the primary platform business right. So with you, you're looking at multiple deals and multiple marketplaces. We'll get to flip our soon. I'll just bookmark that there. But I want to ask, how are you financing these? Are you using this as a business expense, taking money out of the business? Are you raising debt? Are you using some of these people in VC and PE that you know and work with that want to invest as well? What was that look like for you? In terms of... That's a good question.

In almost all cases, I've done that bootstrapped out of pocket. I've had debt financing for... Well, depending on smart, but it's less level need to be involved. What is a good thing too? Yeah, and my personal acquisitions are usually in the tens of thousands up to lower hundreds of thousands. So in most cases, it's something that's I would say affordable to do or something that's kind of meaningful if you do your math and it's more about something's going to pay off in like year and a half.

So with that in mind, it's different if I need to buy a let's say five million dollar business. I would be... First of my liquidity right now is right below. It's about three million. So I would definitely need to raise something. And second, I definitely don't want to put all my action one basket. It's going to take a while for that to recover.

The market is too volatile. Yeah, I'd be... I'd be wary whether that's the right path to go, so to speak. But yeah, in almost all cases being bootstrapped, I've had dept in like two deals. And with VCs, again, we've done other things. I've worked with them as a pre-investment advisor during investment R&D and kind of due diligence and post acquisition, again, advisor or restructuring service. But yeah, raising is something that that's... I've worked as a CEO for a VC funded business, but I wouldn't go into the hoops for the most parties.

t's a pretty time-consuming case or so, I would say. Yeah. It's very life. And you think when people don't know too much about acquisitions and getting investors involved in raising funds and it's like, let's go buy something, you know, build a 20 to 50 million dollar portfolio. You can do it with very little money of your own. Obviously, you want some skin in the game at first and keep showing your skin in the game to be able to acquire that finance. But if you're really working, like if you're not slowly acquiring without too much of your own debt, you're really working for others and it really becomes a job, right? Is that what you've seen?

So, again, there are two aspects of working with VCs. And even with dangers, even though I believe 20 angel investments myself, but working with VCs for the most part, first, it depends on how much you give away from your company. Again, could be 10%, 15%, 20% it's still, but I know founders with 5 to 8% remaining. And even if you aim for a unicorn exit, I mean, I'm sorry, but like with 5% you're essentially really someone on hard with equity, even if you found the company. It's just, I would hardly feel any form of commitment considering that the entire board is deciding what I do and how I do it and what I do.

So that's kind of one side of the table first, how much you give away from the company and kind of what you aim for. The second part is the control stake. So how much are VCs controlling your every move and deciding on kind of what to do? That's very, very, very, very important because if you, if they chase the hockey stick growth, meaning that you have to burn cash like crazy, it puts you in a position that if you don't raise, you've been required to be irresponsible with funds, but then you can bankrupt the company because you couldn't raise again.

So it's very important and again, the third one is same thing like how much burn do you have to accrue because the thing with and what people don't really understand, well most people I would say, is that VCs are expecting an exorbitant return on their investment. So they wouldn't be happy giving you two million and making two and a half three million back. They don't care about that.

he invest in a hundred companies, 50% of them would die. Another 40% are going to be like the percent return, 30% 50, probably a hundred percent return, meaning barely going to pay off give or take. And if you consider their time involvement legal, it's going to be at loss. So they expect two unicorns and maybe three, four, five other like five to ten X returns of the portfolio.

Everything else, they don't, I mean, it's kind of rough paying it with the same brush. I'm not going to say they don't give a crap about, but it's actually losing money. It's very expensive, executive VC partner time and analysts and all that. So they cannot afford to just spend time four years with a business that's not making it work. So the thing is you can't even build a cash cow business with them. And that's kind of pretty tricky because you're just forced to keep growing. And even if you do like a four X return, in most cases, they're just not going to be happy.

And yeah, it's kind of a, it's always not being not satisfying. The people who gave you cash is another type of feeling came super excited about.

That makes sense.

I totally agree.

Like I'm taking it on board investors. I want to just serve them and do give them the best return because then you help them out once that you do really well, you're then ever going to leave your loan. There always going to be throwing money at you, everything you do. And that's probably a better way to go versus the churn and burn way. I want to talk about the SaaS, the Shopify SaaS business.

So did you acquire this? Grow it, run it parallel with one of your businesses, then sell it. What did this look like? It was actually instilled as CEO by one of the funds. So I joined an existing company.

Yeah, and it's kind of a complicated story, but let's say the founders didn't play well together. And they were just pushing in different directions. So this put the business at stall in a sense. And they needed some resolution, right? I mean, either one of the founders had to go out and maybe leave in a company with one of them. Some of the funds weren't really happy with splitting founders, like one of the VC funds that we start working with at the time.

They just had a policy that the founding team should be 100% the same. Otherwise, it's literally in their byline or withdrawing the investment. They want to kind of sit and buy back, in a sense. So they just say either the full founding team or we don't, like we don't believe the business is going to persevere after. So either way, I joined as an advisor first, as kind of just assessing the business health.

It was at the stage where again, the founders weren't really cooperating a lot with one another. And it's not to blame any of them at this point. You know, one of them wanted one thing. The other wanted to develop in different direction. This had been going on for months, maybe six, seven, eight, nine months or so. And it just wasn't helping the business, especially the VC funded business with the burn rate. So I came in for two weeks, made a pocket like everyone in the business, made an assessment from the team, quality, financial health.

And I built a plan for kind of what did it take to bring the business to where it should be, follow on investments and kind of how to structure that. So it started like this. And then kind of throughout that period, it literally took two weeks for the due diligence and another two weeks to just chat.

The dynamics, the culture internally shifted pretty fast. And you know, I kind of got a few people who really believed in my vision. They said, we love what you see and think about the product, you understand us, you get it, like you see the vision, like we'd love to work with you and stuff. Some other people are still trying to put in different directions. So essentially the investor said, well, we'd like you to step in a interim CEO first and kind of see where it takes us.

So that's kind of what happened. I put on some initial projections, a specific growth rate and kind of expectations. We exceeded them by 20 over 25% by the end of the year. So nine months later, we were over 25% on top of kind of the projection. And back then, what I saw around Black Friday is that it wasn't an easy season for the economy. Bottom line, you had 2800 businesses, 2800 shop five stores. And we were tracking down numbers.

And roughly speaking, our businesses were making about twice the sales in a normal day. And historically, and I also see that in other businesses, from the Derek's portfolio, from my advisor's portfolio, from my injury investments, I know that historicals are often six to ten X. Some businesses even make like 20 X, they're normal day on Black Friday. So when you take a look at the broader portfolio of over 2000 businesses, and you see that the average is two X, you understand that the market is not in a great shape.

And it's going to be tough to just withstand that with kind of that level of team and that level of environment. So again, we've been chatting with investors like every couple weeks who show. So I reached out and say, hey guys, I can my investor report like we need to chat, like these are the numbers that I see. It's not a product thing. I mean, we can still sell it and stuff.

But my assumption is that the E-commerce landscape is going to be in downturn for the next 18 months or so. I'd start chatting with some potential buyers and kind of see if they see that as a strategic or maybe financial acquisition now.

Because otherwise, we may have to raise more money and just kind of move to a more sustainability mode and wait for that to pass. So it's going to prolong that. And again, from a VC standpoint, once again, it's not, it's not how VC works, right? We could have turned that into a cash cow. Yeah, we could have turned that into a cash cow. But that was not really what was needed.

So right, right around Black Friday, which was again, end of November, we started having conversations with several competitors actually. Two of them came in with pretty strong deals. One of them and I need to call them again. They wanted to acquire just the clients. And that was freaky because it would have left kind of the stuff out of business.

And kind of the stuff and the product is actually was actually going to disappear. Yeah. So that was that was the tricky part. So in January, the conversations kind of evolved. This is got excited about that and say, hey, let's try to push through like we see interest. We see responses from others and like this, this looks like this maybe the right time before a new one further slowdown of the economy and kind of the E-commerce space. So I kept. What was this? What was this? What do you mean? What year? What year?

Yeah, this was this was just earlier this year. So end of 2023. Yeah, end of 2023 and this year. Yeah, we finalized the acquisition in like May or something. So yeah, with that in mind, like in January, we had like more thorough conversations. We started due diligence with one business. It went on for about three weeks, but they couldn't they really insisted on getting the Antar team on board. And they couldn't reach an agreement with the co-founder, one of the guys who stayed.

You know, he was just he was burned out human kind of a different drug kind of different aspirations and opportunities and stuff. So just couldn't really reach an agreement. So literally the deal fell through the last in the last minute. We had three weeks, the Friday of the third week. And they knew that two days earlier, the entire team received contracts, like annual contracts and keeping them around and all that stuff.

And it was just more or less one single disagreement with one specific person. Once again, I'm not putting that to blame for anyone, but you know, things like that actually happened during the process and your deal. Even if you have a letter of intent, even if you have contract everything, this can fall through last minute. It happens quite a lot.

So keep it in mind. So this felt I had someone else that was kind of on the bike burner in a sense. I mean, they didn't have a lot of time. I hadn't followed up because we were going through this. I called them and said, hey, you know, our last deal just fell through last minute. Right now, we're kind of in a state where the team doesn't know what to do or clients are kind of wondering what's going on. We're kind of in this transition state and it's not good for anyone. So here's a kind of blitz deal.

If you want to do that, I'm just going to send you like all the documents that we sent previous firm because we went through the entire due diligence. We had our deal room ready to rock like 40 different dogs and stuff. We just had to sign an NDA or stuff. They were pretty, pretty quick, pretty prompt, pretty fast, pretty, pretty professional. I'm talking about shop circle on the head, I know, 160 million or 200 million funding themselves.

And the deal went through in like in weeks, maybe two or three weeks. And they kind of sat on and got what you wanted. No, the co founder eventually went away. They retained, I'd say, half of the team, the entire product, customers, licenses, hip spot like it was a pretty copy paste or kind of rather move acquisition from one folder to the other. So that was pretty awesome.

And again, so the reason it was a strategic acquisition is a VC funded business itself again. We had burn rate. And this was kind of normal. So we managed to streamline it in January as we were kind of moving to transitions. We paid several of us to a few people and stuff. We reduced some of our licenses like CRM calls, for like third party API keys or some others that are just more enterprise grade licenses. But ultimately, there's this added cost of hey, we have a full time QA engineer because it's important for a product or we have an accountant, we have a legal firm, we have this, we have that show an existing business already has all that, right?

They have that infrastructure for bringing in other companies without paying for another accounting firm legal firm and stuff and just paying premium for all that. They have that integrated. They can buy 10 other companies and drop the entire admin layer, same for licenses. You know, they already had a large enterprise hip spot license, they can just merge that in without paying to grant a month for a spot. And a lot of these other points and pieces in a strategic acquisition where you can deliver a lot more without paying for everything that you used to pay before.

And this made it possible for them to again, just tap into their internal staff infrastructure contracts, deals partnerships and and run that a lot more efficiently. And I believe this was the key thing and going through some acquisitions in some cases, strategic acquisition is strategic for the buyer, but it's all strategic for the seller, especially if the seller states for another year or two, and especially if they just want the business to survive.

With financial, it's most likely to trim it left and right just to and keep optimal for efficiency in the private equity model. With strategic oftentimes, it's just entering an ecosystem that's already powerful, so you get emerged into cross-selling, like an existing community of driving members, happy customers with that brand, and it's definitely a different vibe.

Very, very different vibe. So, Flipper Ambassador, you're a Flipper Ambassador. Blake Hutchison, he's been on this podcast quite a bit. I'm going on the Flipper podcast soon. He's coming back on soon. What does Flipper Ambassador look like? Yeah, Blake just texted me a few hours ago, and time zone difference, I still need to get back to him, but he's an incredible guy. He's a favorite CEO of mine, by the way, like super committed and very devoted, so I could just for that.

As for the Ambassador reason, it's not a super active, ongoing, engaging, growing sense. Flipper, Flipper, like I said, about 13 years ago, or something. I love the marketplace. I've been on Ambassador informally, in a sense, for years, just recommending the marketplace, linking it to my articles, sending people their way, helping others close, you know, six-figure exit, seven-figure through Flipper. You know, sending Flipper listings to businesses that I work with, like, hey, this is a good acquisition, you can take a look at it and stuff.

So I've been a powered user for like a decade, and before we connected more heavily with them, and by the time we did, it just clicked. Blake and the team were developing a broader European ecosystem, so they were penetrating Europe more actively, and they asked me whether we can organize something in Europe. I was like, yeah, sure, we are going to do like Flipper exit in my part of the world, live in Bulgaria.

So we did that like a couple times, and in the first conversation, I got their previous VP of Business Development. He was here in Sofia. We did like 30-minute recording, talking about M&A, turned that into videos, so I promoted it left and right. So it was, again, I was excited to just talk more about acquisitions and opportunities for everyone, because, yeah, one thing that, and the thing is, you're in Australia, and like, you're the people who watch the podcast, and kind of listen to the podcast in Australia, they probably are fairly aware with buying websites for the most part, and kind of how it works and stuff, but... Most people are from America, most of my audience, but yeah, same thing, same deal, familiar. Yeah, yeah, same thing.

So Australia and America fairly familiar with the market, but Europe is especially Eastern Europe, and you know, Southern Europe. Most of the acquisitions happening are number A real estate, very, very, very common, very traditional. Number two, probably gold, or some other precious metals. Hey, these are probably two, yes, these are probably the main acquisitions.

In some cases, you may buy like, I don't know, like a 24-7 store, like a 7-11 or something, you can probably buy and show something like that. Yeah, pretty, pretty, pretty, something pretty small, pretty local, pretty, just a booth somewhere, right? So that's kind of what recap. So I wanted to just spread the word and provide more opportunities and kind of give more knowledge to people as to what they can do with their finances and how they can maximize that.

That's why I'm also an ambassador for seedling, and they're doing angel investing and kind of crowdsource angel investing, but just expanding the horizon for people and what they can do with their capital and how they can maximize it. And also providing opportunities for builders, because I know a lot of people who are not satisfied with their jobs or they live in a small town and stuff, and if they actually build starter websites or apps or GPT wrappers or whatever, YouTube channels and stuff, they can actually sell them and make a decent living, given as a kind of part-time job of being a flipper creator.

Yeah, all of these reasons essentially led to the flipper teams saying, hey, do you want to just formalize that and just have you like an official title in a sense, and we're just going to fund a flipper meeting, send some swag and training materials and brochures and stuff just so that it's kind of more efficient. You're going to be a go-to person in the area for anyone who just wants to have a non-site meeting or something like that. Yeah, that's awesome.

That's awesome. And DevRix, if you were to explain what DevRix does in like one or two sentences, you'll see how DevRix you have been for a while now. What's the, what does DevRix do? DevRix is a marketing company providing containers for B2B businesses, so we are chaining where from 3 grand to up to 40 grand a month for doing the full sheet of technical and marketing services for businesses from development, digital marketing, marketing strategy, launching new channels, hub spot SEO integrations and the myriad of different things, trying to keep it as short as possible, but yeah, my elevator beach needs needs to revamping.

Well, it's hard when you offer so many services and it's full staff in terms of, yeah, it's like you can bring most digital businesses in, yeah, whether that affiliate lead gen becomes sales or any of that sort of stuff, you can We literally have everything, yeah, it's hard to limit to one thing just because go to market is go to market, the way you approach that depends on your audience, not on the type of business.

Absolutely, absolutely. Mario, thanks so much for coming on and chatting, really appreciate you sharing your story and your insights and what you've been up to. Where can we send people to find out more about you?

I'll put your LinkedIn in and then a link to DevRix. Is there anywhere else that people should come and check you out? I think that's good. Again, you can check out DevRix after and reach out on LinkedIn. Just make sure you put a prompt message where you found me because I don't accept all requests and you can also check what I do and everything else, my book and like other projects on mariopechef.com.

Yeah, appreciate your time. Everybody is listening.

Thank you for listening and I'll speak to you soon.