In the final episode of the 10-day business acquisition challenge, Carl Allen congratulates listeners on completing their first deal, summarizing the journey from mindset development to deal origination, negotiation, and finally, closing. He emphasizes the importance of having a general manager (GM) to run the business, allowing the owner to focus on growing the business and scaling profits.

The core focus of this episode is on business growth and wealth creation. Carl explains that wealth primarily comes from scaling the business and eventually exiting through a sale. He highlights two key strategies for growth: organic expansion and bolt-on acquisitions. Both methods lead to increased revenue and enhanced profitability, positioning the business for a higher sale valuation.

Carl provides a detailed scenario, explaining how to scale a business using three key levers: increasing the number of customers, raising the average transaction value, and encouraging repeat business. He illustrates how even modest improvements in these areas can dramatically increase revenue, profits, and the value of the business within a few years.

In addition to organic growth, Carl discusses the benefits of bolt-on acquisitions. He uses the example of buying an electrical contracting business and a plumbing business to demonstrate how cross-selling services to shared customers can drive revenue. He also emphasizes the cost savings that come from merging businesses and leveraging economies of scale.

The episode concludes with an invitation to join Carl’s Dealmaker Protege mentorship program, where participants can deepen their mastery of deal-making and wealth creation. Carl stresses the value of community, accountability, and the rapid pace at which deals are closed in the program, encouraging committed listeners to apply.

Full Transcript:

Hey, guys. Carl Elland. Welcome to day number ten. So you have closed your very first deal.

So congratulations. We’ve been through the whole process. We’ve worked on your your mindset. We talked about your buy box.

We’ve done deal origination.

We’ve gone and had meetings. We’ve done valuation and structure and financing. We’ve had offers and negotiations.

We’ve done deal execution, and then yesterday was all about the closing, how the funds flow during the transaction and the importance of having a GM to run the business for you if you wanna be an owner investor working on the business, not an owner manager working in the business. So you’ve probably just walked out of your attorney’s office or the sellers attorneys office or you’ve done DocuSign, you now own the business, you’re on the way to meet your GM or meet your employees and and look to get to grips with growth. So I’m gonna be talking you through in this training about the importance of growing a business and why it’s really the bulk of the wealth creation that we generate as dealmakers, and then I will see you at the end of the training again face to face where I can walk you through what are some of the options for you to take this very very simple introductory ten day training and go to a much deeper level of mastery working with me inside of Dealmaker Wealth Citing.

So let’s get into the training. So today’s all about growth and remember there’s only three ways that you can make money doing deals. So the total wealth that you create will come from three places. Sometimes, but not all, you’ll have some cash, some surplus cash at the closing table.

We talked about that yesterday. That was that surplus money out of escrow that goes back into the business for you to take. The second thing is is the owner of the business net of the debt service, remember that debt service cover ratio, if you’ve got a debt service cover ratio of two for every dollar that you’re generating in cash flow fifty cents is paying down debt so the other fifty cents is yours. So you’ve got a business doing half a million dollars a year of EBITDA and you’re paying two hundred and fifty thousand dollars a year to service the deal, you as the business owner are making two hundred and fifty thousand dollars in distribution.

So that’s your monthly cash flow net of debt service, but the real value the real wealth creation is when you scale the business and then you exit you sell it to somebody else having paid down all if not most of the debt. So that’s what we’re gonna get into today. So let’s think about it. Let’s say you buy a business it’s doing a million dollars in revenues and it’s doing a hundred thousand dollars in profits.

It’s got a ten percent margin to a total cost of nine hundred thousand dollars. And let’s say you go and buy that business for a two and a half times multiple. So you buy that business for two hundred and fifty thousand dollars. EV is enterprise value.

That’s the value of the business. Now let’s say over five years, you scale that business radically using two of the strategies that I’m gonna share with you today. Let’s say you grow the business from a million to five million dollars over five years, and let’s say because you’re growing the business and you’re getting more economies of scale, you’re able to increase the margin from ten percent to twenty percent. So now you’ve got a business doing five million in revenue making a million dollars in profit, and now you can sell that business for at least a five times multiple.

Most businesses in most sectors, when you get to seven figures in profit, you can command a five times multiple when you sell. So now you’ve got a business that’s worth five million dollars. You sell that depending on the deal structure. If if someone buys that through an SBA loan, you’re gonna get four million dollars or more of that cash at closing.

So you just made a phenomenal profit over five years of being that business owner. So what would have to be true for that to happen? Well, a large part of it is about growth, and we’re gonna talk about growth today, but growth is underpinned by improving margins. It’s underpinned by you being a leader as the owner investor in the business, about having accountability.

It’s about having goals, and it’s about having the strategy to grow the business and make the moves. It’s about you having vision for what you want your business to be within that five year period, and then it’s about the management and the KPIs, the key performance indicators that you’re gonna track and you’re gonna measure every single week inside of the business. And remember what we talked about yesterday, there’s only three legs in a business. You’ve got a marketing leg or a sales leg, which makes a promise to the customer.

You’ve got the operations team which deliver on that promise through the product or the service, and then you’ve got the finance and admin team that kind of glue everything together. Your GM is your integrator, so marketing ops finance and admin report into your integrator, could be also your COO or your GM. And then your job as the owner investor is to be the visionary, is to really set the heartbeat of the company, not to drive the bus. That’s the integrators job.

If marketing, ops, finance, and admin, they’re the people on the bus, your integrator is the person driving the bus, your job is to chart the path. You’re the GPS for that business. And remember, there’s only two ways you can grow a business. You can grow it organically by just adding more customers, adding more sales, adding more sales, adding more products, or you can do bolt on acquisitions.

You can buy other companies and combine them with the business that you’ve already got.

So let’s say you’ve gone and acquired an e commerce company and that ecom company is doing one point two million dollars in revenues, and it’s generating a fifteen percent profit margin, so a hundred and eighty thousand dollars per year in profit in EBITDA, and you’ve bought that business for, say, a two and a half times multiple. So you’ve gone out and you’ve paid four hundred and fifty thousand dollars to buy that business. You’ve got two thousand customers in that business. Your average cart value, so every time a customer buys a product or buys a bundle of products from you, they’re spending two hundred bucks and they’re buying from you three times a year on average.

So let’s say you’re selling supplements and let’s say you have a supplements bundle. The customers coming in on average they’re spending two hundred dollars every time they buy from you on average and they’re buying from you on average three times a year. Now let’s just make really small incremental gains inside of that business. Let’s let’s drive three levers.

Let’s increase the number of customers, let’s increase the average cart value, and let’s increase the number of times that we get them buying from us on an annual basis. So let’s say in the first year of owning the business, we increase our customers by fifteen percent, and the way we do that is we just do more marketing. So you might be doing Facebook ads, Google SEO, you might run a joint venture with another company, there might be a whole bunch of other different ways that you can, you can market to a new audience. So we’re gonna grow our customers by just fifteen percent in that first year.

What we’re also gonna do in that first year as well is we’re gonna increase average customer value by fifteen percent. The third thing that we’re gonna do is we’re gonna get them to buy more often. We’re gonna get them on average to buy fifteen percent more often than they do currently inside of the business, and we’re gonna keep we’re gonna make our profit margins also fifteen percent larger because as we grow the business we’ll get better as economies of scale, we’ll be able to sweat the overhead and the cost base of the business a lot more, so our profit margins will increase, but we’re only going to increase them by by fifteen percent on the fifteenth.

So let’s see what happens. So in year one, we’ve grown our customers by fifteen percent. So we’ve gone from two thousand to two thousand three hundred customers. So we’ve got two thousand three hundred customers after the first year.

The second thing that we’ve done is we’ve made more offers and we’ve bundled our products better, and we found more things to sell them, more incentives, so we’ve increased our average cart value by fifteen percent. So the average cart value has gone up from two hundred dollars to two hundred and thirty dollars and then we’ve also increased the amount of time, number of times they’re buying from us during the year. So the day we bought the business they were buying on average three times a year, now they’re buying on average three point four five times a year because again we’ve increased it by fifteen percent.

So if we multiply the number of customers twenty three hundred by the average cart value two hundred and thirty dollars by three point four five times a year on average that they now buy from us, we’ve now got revenue of one point eight two five million dollars. So we’ve had a fifty percent growth in the annual revenue because we’ve compounded those three levers. The number of customers, the amount they spend, and the number of times in the year they spend with us. So we’ve gone from one point two to one point eight two five and change.

And then what we’ve also done, because we’re able to sweat the overhead and get the economies of scale, we’ve added, fifteen percent on top of the profit margin. So we start fifteen plus fifteen equals thirty. We’ve just added fifteen percent on the fifteen percent. So our new profit margin is now seventeen point three percent.

So our EBITDA has almost doubled. It’s gone from a hundred and eighty thousand dollars to three hundred and fourteen thousand eight hundred and twenty one dollars. And at that level, we could probably sell that business today for at least a three times multiple. So now we’ve got a valuation of nine hundred and forty four thousand four hundred and sixty three dollars.

So we’ve more than doubled the value of the business in one year just by tweaking three things inside the business. The number of customers that we’ve got, our average cart value, and the number of times per year the customer buys from us. And then let’s do exactly the same thing in year number two, but let’s stretch our length a little bit. Let’s grow in year two by twenty percent across those three marks.

So the number of customers is going up by twenty percent, that goes up from two thousand three hundred to two thousand seven hundred and sixty. We increase our average cart value by twenty percent, so we go from two thirty to two seven six, and then we increase our number of orders per year by twenty percent from three point four five up to four point one four. So now, if you multiply two thousand seven hundred and sixty customers by two hundred and seventy six dollars average cart value, multiplied by an average of four point one four times per year that they buy from us. We’ve now got a business that’s generating three point one million dollars and change.

We increase our profit margins by twenty percent, so our margins go from seventeen point three up to twenty point seven. So that’s gonna generate an EBITDA of six hundred and fifty two thousand eight hundred and thirteen dollars. At that level, we can sell for at least a four times multiple, probably close to five, but let’s stick with four. So now we’ve got a business four times six fifty two and change is two point six million dollars and change, so that’s a one hundred and seventy seven percent increase.

So just by moving those three things incrementally year on year, the number of customers in the business, the average cart value, and the number of times per year that they buy from us, we can dramatically grow both the revenue and the profit, but more importantly the valuation of the business. Because if you were to sell that business after two years, you would get the bulk of that two point six million dollars. Assume that four hundred and fifty thousand dollars you did that on say a ten year loan to buy the business after two years you probably have say three fifty, so you’d sell for two point six less than three fifty.

You’re making well clear of two point two million dollars in profit just for two years. That’s a million dollars a year. That’s not even including the distributions you’d get. So you’d be making a million dollars per year plus for two years straight.

That would put you in the top zero point five percent of all taxpayers in the United States and the UK. And we’ve not really done anything that difficult. We’ve bought a business, which I’ve showed you how to do in the last ten days, and then we’ve just increased small and incrementally three levers. Number of customers, average cart value, and the number of times per year that they buy from us.

Pretty amazing. Right?

And if that’s not blowing your mind, this is really, really gonna blow your mind. So one of the other ways to grow a business is to buy another business and integrate it to what you’ve already got. So let’s change industry for now. Let’s say you go out and you buy your first business, and let’s say it’s called Ben’s Electrical.

So you buy Ben’s Electrical contracting business, and Ben’s got two things. Right? He’s got customers, and he’s got electrical services. He’s got customers that pay Ben and his team to go out there and do electrical work.

So what you can then do is you can go out and buy another business. So let’s say one of your next deals is you go and buy Pete’s Plumbing. So Pete owns a plumbing business, you go buy Pete’s Plumbing, Pete’s got exactly the same things that Ben’s got. He’s got customers and he’s got plumbing services.

So instead of doing electrical work Pete’s doing plumbing, he’s fixing faucets and laying pipes and and doing all those great things. He might even do a little bit of HVAC on the side, but you’ve got two completely different businesses doing two completely different things. But the key here is you’ve got a common customer avatar because the customers that Ben’s got, the electrical customers, they’re always gonna need plumbing. And then Pete’s customers who do plumbing, they’re also gonna need electrical work at some point in time.

So what you can do with these two businesses is you can cross sell. So Pete’s customers can enjoy the electrical services that Ben’s providing and then vice versa. We can take Pete’s plumbing services and we can apply those to Ben’s customers. So if Ben’s got an electrical customer, he’s just had some new lights installed or or some new wiring installed and all of a sudden, that customer’s faucet leaks or they want a new bathroom or they they want some new plumbing installed for a new kitchen or a new extension, Pete can provide that service.

So rather than that customer going down the street and going with a competitor, you now own the plumbing business so you can offer those services inside. So we get this amazing cross sell of services between the two businesses. And then when we combine those two businesses together they could potentially be in the same location, so you’re saving on rent, on property tax, on utilities, on maintenance. You’ll get better buying power in the building supply, So when you go to the supplier to buy your cabling, if you’re buying pipe work as well and valves and all those different things that plumbers use, I’m not a plumber so I don’t know.

Please don’t ever ask me to do plumbing for you. It would leak. I’m I’m, was born with a mathematical deal making brain, not a practical brain. So, but when you go to the the the building supplies and you’re buying the stuff for both businesses, you’re gonna get discounts.

You’re gonna get economies of scale. So those are called financial synergies. You’ll also only need one CPA. You might only need one marketer.

You might only need one person to answer the phone. At the very least, you’re gonna save on on Pete’s salary, because you don’t need Pete to run that business. It can be run from inside of Benz Electrical. So there’s loads of financial synergies when you combine businesses together.

So let’s do an example. So let’s say we’ve got Benz Electrical. It’s doing a million dollars in revenues, nine hundred thousand dollar total cost base, making a hundred thousand dollars in profits with ten percent margin. And again, let’s say we’re buying that at a two and a half times multiple, so it’s gonna cost you two hundred and fifty thousand dollars to buy that business assuming you’re not inheriting any debt.

So, two hundred fifty thousand dollars is what you’re gonna pay to buy that business with whatever the deal structure is. Right? And then we go and we we buy Pete’s Plumbing. Pete’s Plumbing is the exact same business, exact same numbers to keep the math simple.

Million dollar revenue, hundred thousand dollar profit, two and a half times multiple to buy it, so it’s another quarter of a million dollars to do that deal. So you’ve just spent half a million dollars buying those two businesses but you own them both. Now let’s look at the cross selling. So let’s say we can only cross sell twenty percent between the two businesses, so let’s say twenty percent of the customers combined cross sell from each other.

So we’ve got two million dollars in total revenue between Ben and Pete, so if we’re gonna cross sell we’re gonna add an additional four hundred thousand dollars of revenues within the next twelve months between those two businesses. And then let’s assume that’s at the same ten percent margin. So we have four hundred thousand dollars of new revenue, but it’s cost us three hundred and sixty thousand dollars to deliver those cross selling services. The second thing that we can do is when we combine these two businesses together, we’ve got all of those fantastic cost savings, all those fantastic deal synergies.

And again, let’s assume when we combine those two businesses together, we’ll save around twenty percent of the total costs inside of the business. So if you add up nine hundred thousand plus nine hundred thousand plus the three hundred and sixty thousand dollars of additional cost from the cross selling, when you multiply that by twenty percent, we’re gonna save around four hundred and thirty two thousand dollars in total cost by combining those businesses together and driving that cross selling. So now what have we got? We’ve got a business that’s doing two point four million dollars in revenues.

We’ve got the million from Ben originally, the million from Pete originally, plus the four hundred thousand dollars of cross sell, that’s two point four. And if we add up the the three costs, nine hundred plus nine hundred plus three sixty, and then we add back the four hundred and thirty two thousand dollars of cost that we’re gonna save, we’ve now got a cost base of one point seven two eight million. So that taken away from two point four means our EBITDA is now six hundred and seventy two thousand dollars in profit. So we’ve gone from a hundred thousand dollars when we were just Benz electrical to now being having six hundred seventy two thousand dollars in a twelve month period by driving the cross selling and driving the cost savings.

So now you’d be able to sell that business for at least a four times multiple, so that would give you a valuation of about two point six eight eight million dollars. And then let’s assume you still owe a quarter of a million dollars on the deal. You’ve now selling that business for two point four million dollars and change. So you’ve nine point eight x ed the value of your business and your net worth just by doing one bolt on acquisition.

And if you’ve done one, why stop at one? Go buy a roofing company. Think about your customer. What do they spend their money on besides electrical and plumbing?

Roofing, landscaping, hardscaping, pest control. You might buy a garage door company that can fix their garage doors for them. You might buy a cleaning company, a painting and decorating company. It doesn’t matter.

Bolt and acquisitions always revolve around the customer. What does the customer buy that you don’t provide? Go and buy a business that does that and then you can cross sell between the two.

So that’s it. We’ve talked about growing businesses, why every business is a three legged store, your GM working in the business running the day to day driving the bus is really really important and I walked you through two ways to actually grow the business and build value. We looked at bolt on acquisitions, how to cross sell products and services between different businesses, and then how to drive cost synergies out of a combined deal. And then I also showed you the three step way to organically grow any business, that you buy.

So if you found the ten days to your first deal challenge useful, I got some really really good news. I actually have a mentorship called Dealmaker Protege. It’s a very intensive twelve month group mastermind and mentoring program. I run that program three days a week.

You’re also in teams. You’ve got accountability partners. There’s accountability software that’s driving and tracking every single thing that you do. We’ve got deals closing every single day inside of that community.

It’s not for the faint hearted. I’m gonna hold the feet to the fire. If you’re not somebody that can pull the trigger and do stuff and get things done, Please don’t apply to come in as one of my mentees. If you think you’ve got what it takes and you absolutely want to be a deal maker and you want to have all the amazing benefits of being a deal maker, wealth creation, cash flow, work life balance, pride, assurance, all those amazing qualities and all those amazing benefits.

Click on the link inside of this video. Click in the comments. You will absolutely be taken through an application process. If we think you have got what it takes to answer the questions honestly and fully for me then we’ll schedule an interview for you and you never know you might be one of my next mentees, one of my next proteges and we’re out there in the marketplace doing deals.

I can’t wait to work with you. I’m thrilled that you’ve enjoyed this training. I’ve been really overwhelmed and blown away by all the amazing comments from you. So have a great life as a deal maker.

I’ll see some of you in protege. The rest of you, keep watching this YouTube channel. Please hit like and subscribe so you can get all of my stuff in real time, and I will see you guys soon. Until then, bye for now.

Hey, guys. I’m Carl Allen. I’m the founder of DealMaker World Society. I’ve done tens of billions of dollars of deals over the last thirty plus years.

If you’re new to my channel, definitely hit like and subscribe so that you can get all of my amazing DealMaker maker content in real time. You’re not gonna miss any of the outstanding information that I’m gonna share with you. And if there’s a question that you’ve got, if there’s something that you want to know the answer for and you want me to speak to it, definitely hit me up in the comment section, and I will record those videos for you, and I will get them on this channel as soon as possible. So love having you part of this YouTube community, and I can’t wait to serve you.

Until then, bye bye for now.