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May 6, 2021

E1: Top M&A Entrepreneurs - Marty M. Fahncke "Chasing the Whale"


Over 8 Acquisitions since EPIC.  Chasing the "whale" acquisition.  Why he lost it.  What he learned.  How he recovered.  Building $100 Million in Dry powder for the next Acquisition.  Why he loves doing this.

Transcript

Jon Stoddard: You're recording. So... I want to make this kind of informal, Marty, because you and I have talked before, we're friends, and I just want to find out how you're doing. I want to interview the top M&A entrepreneurs. So, this is Marty Fahncke, welcome to the show.

 

Marty: Thank you. Excited to be one of your inaugural guests.

 

Jon: You are the inaugural guests.

 

Marty: Oh- the inaugural guests?

 

Jon: Yes. I mean, I've got other people signed up but you are the very first guest.

 

Marty: You know what they say about pioneers right there, the ones that wind up with the arrows in their back and then everybody else just follows along behind them after they blazed the trails.

 

Jon: Yes. Like, "Hey, honey, let's go build, it's 18, 20 or something like that, let's go build a house out in the west and I don't know." "What do you think? Property's free." "Yeah. No, thanks. Yeah."

 

Marty: I'm so excited.

 

Jon: So, we met each other through Roland's epic course, which is the M&A group and I just want to find out- I'm going to ask you some questions, just how it's going for you. So everybody on the other side gets a sense of who you are, what you do, how you succeed, and what are your failures. Let's just start with what do you do now? I know you've got a great career, I've seen that. We've talked and I've seen you on video.

 

Marty: The easiest way to describe it as I create money out of thin air. Whether that be through marketing strategies or whether that be through investment strategies, mergers, and acquisitions, I find ways to put money into company owners' pockets.

 

Jon: So you're looking at a company, what size the companies do you work with?

 

Marty: : The range is pretty broad actually between 1 million and 175 million are the deals were working on completing in the last year. So it's a pretty broad range. 175 million is the biggest one so far and of this past year, the biggest ever I've done was about 300 million.

 

Jon: That's amazing. You came on as making money out of thin air as consultant or contractor with that one or was what was that?

 

Marty: If I'm coming in approaching it from my consulting and management advisory, I can basically walk into any business and find where they are leaving money on the table, whether it's through increasing revenues increasing profits. Sometimes, there's more money to be made in just efficiencies than there are in increasing revenues because if you've got a bad system then, you're just exacerbating the problem with increasing revenues. And then from the investment side, helping business owners find ways of raising capital that aren't always the traditional ways that they would think of. Most business owners, if they need capital, they think of banks which is debt, lending, right? They think of SBA Loans which is debt. They think of private equity, they think of VC, and there are hundreds of other options out there for raising capital that I can help business owners find if they need funds to grow.

 

Jon: When you raise funds or use alternative methods to raise funds, what are you looking at as the best scenario or possible case? Let me give you an example. I had this conversation with a guy earlier this morning that the business needs to raise capital and I said, "Well, what's it going to be used for?" Because a lot of the times I've seen people come wanting to raise money because it's going to solve all their problems, right?I said "No." Where I've seen the best success is if they already know what their metrics are, cost of acquiring a customer is, and if it's $100 or $1,000, then you ask, "Well, what if I give you $100,000, would you still have the same profit margin adding all those customers? And what if I give you a thousand or a million? Am I going to turn a dollar into $5?"

 

Marty: Right. And that's question that always needs to be asked because quite frankly, I would guess it's probably 80-20 rule, right? 80% of the time when you ask that question, you get an answer that's less than satisfactory, right? They're usually trying to throw money at a problem. That should just be fixed first. And then you can put money into capitalizing on fixing that problem. So, definitely I'm always asking the business owner what is the problem they're trying to solve. And that's why it can be any number of things. It could be fixing something that's broken. It could be everything's right, they just need more customers which is a marketing and sales problem. Or it could be that they have something that definitely needs capital, whether it's equipment or inventory capital, etc. There are times when just truly, cash is needed and so going in and understanding that and helping that business owner to really look at what is the money that they need and why do they need it is absolutely great advice. So, you're right on that.

 

Jon: Let's go back to the Epic course. This is where we met you and this is an Epic course started by Roland Frasier. It's basically an M&A course which turns into kind of a mastermind because we're networking with everybody. So, what did you think of the course?

 

Marty: It was life-changing for me. So, I am not a take-a-course kind of guy. In my 35 year career, I've taken a sum total of 4 courses in my life. I limit myself to one per decade, apparently. So, I'm not one of those that jumps on every guru. I'm not a big guru guy. I'm not a big course guy, etc. But I do a lot of business in and with China. And so, I could see at the end of 2019, well before most people, what was coming to the United States with regard to the Coronavirus already. My factories were being shut down. I was seeing all sorts of issues and I was starting to warn people like something's coming and it's going to be a huge disrupter and you need to be ready. Well, I knew it was coming and from a personal standpoint, there were things I could do to prepare from a business standpoint. There were some things I could do to prepare but I didn't know exactly what to do to fully prepare for what I knew was coming. But, I was ready. So we are recording this literally almost to the day one year after the world started shutting down and I kind of sat there. Basically, I got lucky because some of my businesses that I work with were able to capitalize on the lockdown. So one was a company that produces calming sleep music. Well, everybody had such high anxiety that product was selling like gangbusters. I mean, record levels. But other products and businesses I had were suffering. I do a lot of TV and radio advertising for a lot of my businesses so there was an opportunity that came along where all national advertising for things like movie theaters, car, restaurants, etc. all stopped. They pulled their budgets overnight so almost every single TV and radio network out there was went from cranking along and one of the best robust economies we had to every budget being cut overnight. So, there were huge opportunities with media I was taking advantage of but I was watching to see what's the long-term ramifications here. I knew that businesses were going to be shutting down and going out of business. I knew that entrepreneurs were going to be struggling. I knew that a lot of people in my circle of influence we're going to be hurt because they were in restaurants or other types of businesses that there was no way they were going to survive an extended lockdown. And I knew it was going to be extended lockdown. A lot of people fell for the 2 weeks to flatten the curve line. I knew it wasn't going to be 2 weeks. I knew it was going to be months or years. So I quickly was looking for how can I help people? How can I survive this? How can my businesses survive this and how can I help others survive this? It was less than 30 days later. I think it was only 3 weeks later that I got an email from Roland. I was actually signed up to be in his Traffic & Conversion to go to the VIP dinner with Arnold Schwarzenegger and and Marcus Lemonis. I think there were only 15 or 20 of us that were signed up for that. And so I was kind of upset that had all gotten canceled because I had a specific reason why I want to meet Marcus Lemonis for a project I was doing. So, I was on one of Roland's very first emails and he said, "Hey, I've got this course, would you be interested?" And I'm like, "Yeah." It's the 5-day course, the Epic Challenge, and it was brand-new for him. He had done 1 live version before but he hadn't done one virtually. So, I was on on that. I was 3 days into that 5-day challenge and I knew this was it. I knew this was the way I could help people.

 

Jon: So you're epic number 1?

 

Marty: First one, yes. I didn't hesitate at all. The second I got the email from him. I was like, I know where this is going. I could just see it. [crosstalk] Yes, go ahead.

 

Jon: You knew Roland before or you were a part of digital marketer before?

 

Marty: Yes. Traffic & Conversion was a very important conference for me. It was one of my most profitable conferences. I had a lot of business partners that I met out there. I went out there for networking. I went out there for Education, etc. I had met Roland. I wouldn't say I knew him, but I had met him. And then like I said, there was a VIP dinner that was scheduled that I was signed up for with Arnold and Marcus and that got canceled. So I was already kind of working with Roland and his team and Deanna and things like that. I think it's why I got kind of the early bird sneak preview. Like, "Hey, we're thinking about doing this. Would you want to- we were in the beta group were called because we all the kinks aren't worked out yet." 3 days into the 5-day challenge. I already knew this was absolutely game changer for me. I went ahead and did the 8-week full full course and any time I've ever done a course, like I said, I don't do very many, but any time I've ever done it, I always tell myself, I want to see an ROI from that. So, I put a couple thousand dollars into it. And I said, okay in it's an 8-week course. In 8 weeks, I have to make back my $3,000 and I always do that. In anything I do, I was putting our I2[?].

 

Jon: By the way, it's not $3,000 anymore.

 

Marty: I don't know how much it is. Is it a lot more now? I don't care how much it is. It's worth it. It was probably cheaper for us because it was beta. I made my money back by the 2nd week.

 

Jon: Well, okay, so tell me about that. Did you acquire a company?

 

Marty: Yes.

 

Jon: Well, what kind of company was it?

 

Marty: It was my bookkeeping company, the company that did all my bookkeeping for my other businesses. And we learned about a technique called the Pipe Wrench Technique, which is basically you go to a company you're already working with, well, backing up. How do you find businesses to acquire? The starting place is who do you already do business with? Who do you write checks to and who writes checks to you? Your whole supply chain is an opportunity for investment. So, the Pipe Wrench Technique is basically going to a business that you already do business with and saying, "Hey. I have a new, I have a new motto and that is I only do business with companies that I own a part of. And you already have several of my accounts. I'm going to be acquiring a bunch more companies, I will bring all those companies to you as new business. Your business is going to grow but I want to own a part of your company. It was 1 phone call and 2 emails and that deal was done.

 

Jon: Oh my God, that's great. What are we talking about? A bookkeeping service. It was it a CPA ?

 

Marty: It's a BPO. They do all the QuickBooks. They do taxes. They're not a CPA, they're bookkeeping firm. It's funny, literally an hour before this call, I just got my February profit share from them.

 

Jon: How did that work out now? How are you doing? Like the profit first? Like Michael does?

 

Marty: Oh, absolutely. Yes. Absolutely. Every deal I do is different. That particular one was structured so I get paid monthly, I get paid annually, and I only get paid if the company's ever liquidated which- I don't anticipate this one really exiting anytime soon. This is a small business. There's 4 employees. It's one of those that- [crosstalk]

 

Jon: CPAs. My I have a buddy in the M&A world for CPAs and 4 employees, about 600,000 to a million.

 

Marty: Yes. They're nice business. Some of them that I do these kind of deals with, it's like, okay, you have a specific goal of exiting in 2 years or 3 years or 5 years. This one's like they have no intention of ever exiting. I don't care.

 

Jon: Our long and live and like or dislike doing taxes.

 

Marty: Yes, exactly. So my very first deal was within the 2nd week. And by the time the 8 weeks had completed, I had completed another deal and that one was, I'm gonna think about it. It's been a year. I've done a dozen deals in a year so I got to think about which one

 

Jon: You've done a dozen deals.

 

Marty: I've done a dozen deals in the last- Oh that was my beekeeping one. I've told that story actually a couple times on some other interviews. That was the CBD Honey deal.

 

Jon: Yes. I think I saw that on your interview with somebody else.

 

Marty: Yes. I did tell that story. It's a great story though because it's so perfectly frames how this all kind of can work. But that was my second deal. So that happened on like the 4th week. Probably, and again, that was a very fast- That was another like, 2 phone calls and an email kind of a deal. And so, I thought you made it look easy, right? Obviously, I have other deals. I just closed one yesterday that we started. I started last July. Not all of them are that quick. Obviously, some of them take 6, 8, 9 months. And then we've got others that I'm nurturing.

 

Jon: And what's this big? The one you just closed?

 

Marty: The big one is not closed. We've hit it a bit of a hiccup and I'm actually not going into too many details about it because of where it is. It's in a really weird place. Basically, it was $175 million asking price for a particular company. We raised a 175 million in about 6 weeks. We raised a 150 million in first 3 weeks and took about 3 more weeks to raise the last 25 million. We had the full asking price for the seller. For certain reasons, we had a non-exclusive LOI because there were a couple of exceptions that were in play. While we were trying to get everything finalized, and we were that close, somebody came in and offered $65 million more than we did

 

Jon: Cash?

 

Marty: He took us out of the deal. No, it's not cash. And so, we firmly believe that deal is going to unravel and we're going to get back in that's why I'm not going to get too far back in.

 

Jon: You and I talked about this and I'll be very discreet about this too is, oddly enough, I know one of the guys that owns it. The son of the guy, he went to NAU, I went to U of A. We're in the same fraternity, we knew each other. That's very odd. Very small circles.

 

Marty: Yes, it's a crazy situation. They have 3 more weeks to close that deal and then and then we're back in.

 

Jon: So they're probably out trying to raise the funds.

 

Marty: They're out trying to raise the funds, right? Yes.

 

Jon: Yes, and they're not doing it. Are you coming back with more funds to help them or are you staying with the same offer?

 

Marty: We're going to lower our offer if he comes back.

 

Jon: Okay. All right. Interesting. Have you still had conversations with them?

 

Marty: We're in communication.

 

Jon: Awesome.

 

Marty: It's a great big game of chess, man.

 

Jon: Yes. It's interesting, man. It's emotional, right?

 

Marty: Oh God. When I got taken out from underneath, I literally was like sitting at my desk for about 20 or 30 minutes, just speechless. And then I shook it off and I was like, "Okay, this can't be what just happened." And so I started doing some digging and some researching and made some calls and had some conversations with some smart people like you who gave me some things to think about and then that's when I realized this deal isn't dead yet. There's there's some extenuating circumstances.

 

Jon: It's odd that I called you within hours of that happening.

 

Marty: Yes, I think it was that afternoon. They just like your recalls. I want to bring this up. Like I was reading something in Ink Magazine from back in 2012. It was Tony Robbins' business and he's talking about Peter Gruber. You know Peter Gruber from Hollywood, was at Sony? "I've had many cataclysmic and painful failures in my life," Gruber says, "...emphasizing Tony Robbins, but he helped me overcome and move through them faster and more efficiently. Like the fact that the uncertainty doesn't threaten me." How did you get through that and say it's not dead or I'm just going to let it go or there's too many opportunities out there?

 

Marty: Like I said, I literally sat there for about 20 to 30 minutes, just completely speechless and then I got back to work and just said, "You know what? Either this deal still going to come around and I'll make it happen which is great or I will learn a lot of things from the deal." So, one of the things I learned is that if I need to scrape up $175 million in 6 weeks. I can do it.

 

Jon: Since then, you made those contacts to do that?

 

Marty: Oh, absolutely. Yes. Absolutely. I've got the intent letters and everything. Now, I've learned where to go and how to put that kind of money together for the right deal, which is great. That's because that's bigger than any kind of deal I've ever done by myself. I've done bigger deals as part of the team, but by myself, I've never raised that kind of money. In the end, to do that in 2020 was, to me, impressive. Now, I know that that actually isn't that impressive because there's a ton of dry powder out there with regard to investment so it's actually a great time to be to be looking for cash to buy companies or invest in companies. I chalked it up to look at the deal never happens, I learned some things that I would do different with the deal process to guarantee surety of close. I've made some amazing connections. I've got tens of millions of dollars of investment capital in my back pocket for the next couple of deals that I'm working on, which I'm working on other deals. And it's been fun right now. Do I still want to close that deal? Yes, I'd love to keep it down my pocket because business is minting money. But if it never comes back, then it wasn't meant to be. I've learned some great lessons from it. Made some great contacts from it and I'll go do another deal.

 

Jon: Good. Good for you. I do want to ask you about that process because we go through Epic. We learn how to purchase companies with no money out of pocket or other people's money, but there's a big gap between some of these companies. As you grow larger, they're going to say, "I want some down payment, some deferred down payment so you have to find that. What did you do about going and finding that dry capital and say, you don't talk in Investment Bank or a, "Hey, Marty you're purchasing this company. Let me know when you come to the next deal. Here's the letter of intent for $25, $50 million. What was that process?

 

Marty: We started with looking for actual equity investors. And we, when I say we, I say, I've got a particular partner who he and I worked together for several years. We've grown a couple of companies to $30, $40 million together and so we worked on this project together. The first thing we do is reach out to people that were high net worth individuals and some family offices that we knew would have equity. We raise the first $30 million that way and that was fairly quick. We knew who to call and we've been working this network for years. And then from there, the rest of it was going to be debt and so as a matter of talking to the right banks with the right the right mindset and we very quickly got 55 million committed right away. Actually one of our earlier phone calls was a bank that was- they were sitting on so much capital. They were begging us to be and their ceiling was at 30 million. So they committed 30 million in 1 phone call and literally begged us, "Please take my money because this is a deal we can make work and we got to get money out there and please put us in the deal." So, okay and It'll twist your arm. We pretty quickly had over a hundred million then we just kind of kept stacking it up from there.

 

Jon: That's a lot of dry powder. Are you upping your level about who you're going for? Because this is funny. I read a lot of books on Berkshire Hathaway and Warren Buffett. He starts at See's Candies at $26 million and now it's like to move the needle, I need to make a $40 billion acquisition.

 

Marty: Crazy. I have different levels that I'm working at. I have my own personal acquisitions that I'm doing and those are on the smaller scale. I have two different partnerships. One is in the healthcare space and we've got $30 million committed there and we're specifically looking for businesses in the, basically, maybe, $2 million to $4 million range in that. Because that's a sweet spot that we want to find them. We're doing a roll up on that and then with other partners I've got, we are open to anything up to hundreds of millions, if it's the right deal.

 

Jon: And of course you leave that management in place. All of it, is it all of these companies you look at and say., "Hey we leave manage in place, keep doing what you're doing."?

 

Marty: No. I had 3 different kind of deals that have that I've kind of done in the last year or tried to do in the last year or so. The first one of my first closings was a company where the owner wanted to retire and and leave the business. But, I had an operator in mind who I've known for many years and I trusted who when I saw the business for sale, I brought it to my friend and I said "You'd be perfect for running these companies." "Yes, I would." So, that worked out great because we were able to do that position, put somebody else in a great job, let the person who owned it retire, everybody wins. So I'm not always mandatory that the existing operator has to stay or the existing management has to stay. On most deals. I'm doing less than full acquisitions. I'm doing anywhere from 20% to 49% acquisitions. In those ones, obviously, I'm keeping the management in place. We are looking to them to continue, to run the business, run it efficiently. We're bringing to the table a lot of resources whether it be partnerships, business development, doing business with all the other businesses in our portfolio, and our partnership portfolios. Business develop. And I'm I consider myself the number 1 salesman for most of my portfolio. I'm almost out there-

 

Jon: How many years is in your portfolio now?

 

Marty: Right now? Well, as of yesterday, 13.

 

Jon: That's amazing. So since last year, when you started Epic, you've made 13 acquisitions?

 

Marty: No, I've made 12 acquisition system after epic. But I had 3 already before I started epic and then I spun off two of those and kept one. So total 13.

 

Jon: That's amazing. Can we say you're a star student of Epic?

 

Marty: No. There's plenty of people doing plenty more deals. I'm just enjoying life man.

 

Jon: That's cool. I love to hear that. Is there any deals that you did for- you just like I would love to own that company. Some people get very, very rich because I've got to own that Sports Club.

 

Marty: Well, there's this big deal I'm working on. I was working on the types of deals as far as management and stuff. So there's been mostly deals where I keep management in place. There's been 2 deals where management is left and I've replaced him with operators and the big deal that I've been working on, I actually was going to take that over. I actually want to run that company because I clearly can see how that company can triple in revenue and I know how to get it there. I've got the vision everything so I was actually going to run that business for about 3 years because I think I can get that to be a billion-dollar business without too much effort. So obviously, I'm not going to go run a million-dollar business, but I will run a $200 million business, if that's for me. So those are the 3 models, whether it's the owner-operator stays, the owner-operator leaves and I replace them with somebody I trust, or whether I become the owner-operator, which is going to be a very specific deal and if another one comes along that's almost that perfect. I'll do that one, but we are not looking to run most any company. So my involvement generally tends to be as a strategic advisor and as the chief salesman. I'm always looking to grow any businesses I work with but from a strategic advisor standpoint is I'm the coach. A lot of times the business owners that are currently there, even even though they maintain ownership there's a reason they sold part of their company to me, right? They're in trouble or they plateaued or they're doing good, but they want to grow faster. Whatever it is, there's some reason why they were open to an investment so what I always do is look for opportunities where the company has some very specific issues that I know I can solve and help that company to unclog and in grow faster and scale.

 

Jon: All of them or most of them are non-controlling interest. Do you have a put-call agreement in place and the profit first kind of deal?

 

Marty: Yes. Some of them have, I usually put an option in there. I have a buyout option down the road which is tantalizingly high for the seller and I use that as a leverage on the on the front end. I kind of use it as a bargaining chip to get a better deal on the front end. There's several that are specifically going to be growth opportunities for the next 3 years and then they specifically want to exit and they're really designed around doing that. And so, I'm going to increase the value and my profits going to come from my ownership shares of that company.

 

Jon: Do you have any plans to take any of these company’s public?

 

Marty: There's a couple of them I think are right for a reggae plus or other things. The healthcare business that we're working on that we've got the funding for is specifically is going to be- 30 million is just the initial C. We definitely have a goal of taking that into a billion-dollar valuation and through a couple of different strata-

 

Jon: What kind of healthcare companies?

 

Marty: We're going to focus on home healthcare companies, companies that are going around. There's somewhere between 12,000-15,000 home healthcare businesses in United States and most of them were started by some sort of medical professional, usually a nurse who's sick and tired and fed up with the medical system and in hospital system, and they want to make a difference and be more personal and hands-on. And so, they start this home healthcare business so they can go into people's homes and take care of them. All great, right? But the reality is that's a brutally tough business and a lot of them have- they're great nurses but they aren't great business people. I can't tell you how many deals I've had pitches, I've had conversations where the owner of the business- I mean, they got 25, 30 employees and they're literally driving down the road in between patients with their entire business on the passenger seat of their car in file folders and milk crates trying to do paperwork in between calls and then take calls from us and beg us, "Please help me figure out how to do this right?" There's a lot of burnout in that space right now with the COVID thing has really been brutal so that space is very interesting to us because there's a lot of business owners who are thinking about selling. It's a business that's critical today and will become more and more critical as the peak of the Baby Boomer generation hits their critical mass with healthcare problems in 2030. So there's 9 more years before the healthcare system just completely overwhelmed. And so, we're positioning that business to be on the forefront. What we want to do is build the Nordstrom of home healthcare, basically.

 

Jon: Well, anytime you have a fragmented industry. What's his name? Wayne Huizenga from Blockbuster saw that fragmentation- [crosstalk] Fragmentation’s opportunity.

 

Marty: Yes. And if you are interested in home healthcare for yourself or for your parents or whatever, and I say, what's the brand?

 

Jon: Yes, there isn't, there is none.

 

Marty: There's brands in managed care facility, so "A Place for Mom", right? But that means you got to holler to a place but there is no national brand for home healthcare. So, my partner and I are setting out to change that.

 

Jon: Oh, that's awesome. I like that. I want to go back to your developing these relationships with the family offices. Very specifically, how did that look like? You created a pitch act or an offer deck? Or did you just- this is just phone call and it's in the back pocket and say, "Hey, next deal I want to do..." What does that look like?

 

Marty: On the front end of this, it's been a couple of personal relationships. So I know some people who have some fairly good-sized family offices. So in the early days of doing this in 2020, making phone calls to say, "Hey, I'm looking at doing this. I'm looking to do an acquisitions. If I need capital, what are you interested in doing?" And then they've told me and it's been- in the early days of this last spring or summer of 2020, it was a whole lot of, we aren't putting any money into anything, we don't know what's going on. But very quickly it by the fall, they were calling me back going, "Okay, we've got to deploy funds and we we're interested in what you're doing?" And so, the conversations definitely did not go great at the beginning because I was too early. Everybody was just hunkered down and nobody was deploying capital anywhere. But, I stayed on them and so picked up a few of those- some of them are people that I've worked with before. Ironically, one of them is one of my earliest acquisitions who went on to I think that acquisition was $2 million and that's 20 years ago, $2 million and then he went on and built another business and it was acquired for 700 million. And so this guy knows how to build businesses and sell them. I bought as $2 million business, but I didn't buy his $700 million business.

 

Jon: He said I got to get out of here because I see bigger potential and some other stuff.

 

Marty: Exactly, exactly. You can have my little $2 million business. So, I have some connections with people who have connections and I've just been working them so when that great big deal came along, it obviously got much more aggressive. It was interesting because there was no pitch deck involved. There was no nothing. It was literally call those people and nobody- no one family office or no one bank is going to put in all that money. They all want to do some sort of syndication, right?

 

Jon: Yes. It's under waiting for the 1st guy to "Okay, I'll do it."

 

Marty: Yes. We had our first group, and so from there it was like, "Hey, so-and-so and so-and-so, you good 2 million or 5 million or whatever?" "Yeah, absolutely." But it was interesting because people who normally wouldn't have probably taken our calls, it was a very back-of-the-napkin kind of thing. Here's the business, here's the money, here's the EBITDA. And this thing is just throwing off cash like nobody's business and it was crazy how quick that went.

 

Jon: How did you source that deal? Where did it come from?

 

Marty: Another Epic member.

 

Jon: Oh, awesome. So, collaboration?

 

Marty: Collaboration. Networking and working with other investors and other people who are Lemonis space, everybody's got something specific they're looking for and everybody has something specific they are not interested in and there are plenty of deals out there to go around. And so, I've got my self plugged in pretty well to several people who are bringing me deals on a pretty regular basis.

 

Jon: I brought you 2 or 3.

 

Marty: Yes. So that one came to me from somebody who was fairly fresh into the game and so they picked up on it and they found it cold calling.

 

Jon: No, that's awesome. What is their split in a deal? Did they-

 

Marty: I don't-

 

Jon: If it goes through?

 

Marty: If it goes through, yes. It was depending on how the deal closed. Now we were closing this one as independent sponsors. Our independent sponsor success fee was going to be 2%. He would have gotten half of that basically. So 1% of 175 million.

 

Jon: I think everybody would take that.

 

Marty: Not bad for a cold call. I mean, 1% doesn't sound like much when you're talking numbers like that-

 

Jon: $175 million. It's a lot.

 

Marty: It's a lot of money. So, networking has been my number 1 source of deal flow, without question. Number 2, though as been podcast just like this. A lot of people have reached out to me and asked me to do interviews and every single interview I do, I just watch the web traffic spike up and then the phone calls start coming in. The last interview I just released about 2 weeks ago, within 2 hours of the interview dropping, I had 3 really interesting deals contacting me. So that's been kind of cool.

 

Jon: That's good. Have you watched the Jason Calacanis and Chamath and Frieberg and Sacks- Silicon Valley investors.

 

Marty: No:

 

Jon: It's awesome. Chamath is just wicked smart. He's wicked smart. The analysis he puts over situations, just amazing. That is a great podcast.

 

Marty: I'll check it out. Thanks. So, my 2 primary sources of deals has been networking and word-of-mouth. And and doing interviews with really smart, cool people like you.

 

Jon: The collaboration- I have to share this story. We just partnered up with Adam Lyons. He's one of the other instructors. You know him, right?

 

Marty: Yes.

 

Jon: We're partner up with another business but I was listening to one of the conference calls and he said, "I was helping another Epic member try to do a $6 million deal and we got stuck on, some snag, right? And the guy wanted to see proof of funds for some amount. I don't remember what it was. So, Adam reached out to another guy who had a lots of cash, took a screenshot of his bank account, send it to him, and Adam gave him 6% of the deal and they closed with the LOI. It's pretty cool, just for that. 6% of a $6 million company. You just want a screenshot.

 

Jon: That's awesome. Wow.

 

Marty: So, what's next for you? You like to get this company but do you have any big deals coming in? You're going "Oh, this is really exciting. I've got I got a I got the seal team deal team in place. I got grand. I got all my accountants. I got my own bookkeeping. I got funds ready to go." You're now on the precipice of something big, huh?

 

Marty: I don't know what's next because I haven't seen the next really big deal. I've got several kind of small to medium deals happening. I've got a $22 million seller who literally won't leave me alone. She's begging me to buy her business and I'm just like, why should I get it? This would be one where the owner, she will exit. She needs to exit the business. She's burnt. She's been in the hospital twice with stress-related illnesses.

 

Jon: I've already met 4 or 5 of those types, like health. I got to get out.

 

Marty: So it's like, "Okay, now if the terms are right, we'll do it." It's right in my sweet spot. It's a business category. I've already done. I don't know, $80 million to $100 million in sales personally, so that one might be interesting. We just got to work out the right price and the right terms, but that just came about recently. And and I've had 3 people today, call me and say, "She keeps calling me. She wants you to call her and close this deal." We'll see, when the price gets more [inaudible].

 

Jon: Valuations too high?

 

Marty: The issue there is that her books aren't very clean.

 

Jon: Okay, so we don't really know the-

 

Marty: Yes. I'm willing to take a gamble on fuzzy books, but I'm only going to do that if the worst possible scenario is what we base the numbers on. She's kind of wanting to base the numbers on the best possible scenario. And I'm basically the same. Let's just clean up. Clean up the books. So, we'll see. You know, that's one of those that's not going to happen overnight.

 

Jon: Can you ask for the bank statements and just say, "Hey, let's we're going to go off the bank statements," but that would cost you a lot of money-

 

Marty: You're doing due diligence before you got a deal. We'll get there. I'm confident in that one. We'll get there.

 

Jon: Well, good. Let's do this. I've probably taken up your hour and I love this. I could probably talk for another hour.

 

Marty: You have 10 questions and I think we're only able to like we're at 3 or 2. You want to try to do this in 15 minutes

 

Jon: Crazy.

 

Marty: Over estimated that, all right?

 

Jon: I think Patch Baker said that too and he goes, "I'm not going to do 15 minutes conversation with you." It turned out really stupid to say, "I want I'm gonna cross fire you with these questions. You're going to answer it." That didn't work out.

 

Marty: It could have been fun. We can still try the format some time. I was kind of practiced. I think I could have nailed it. I don't know how much of value the content would have to the listener, but it could still be done. I think it's still be interesting to try that. [crosstalk] by the way, rock stars. How many rock stars? Patch is crushing it. Holy moly.

 

Jon: Yes. So many told me I join his 3 p.m. Thursday- [crosstalk] He's done 4-0 for the acquisitions. I heard.

 

Marty: I believe. They steamroll though, like once you start doing a couple that all this, they just- I used to have to go out and find deals and now they're coming to me faster than I can even keep track of them. And so I can believe that he's really doing awesome.

 

Marty: Let me ask you back personally. What has it done for your confidence or just who you are as a- like, you walk in the door and doesn't matter. The prettiest girl in the planet would look at you go, "That guy's powerful." I still drive a Toyota actually drive 2 Toyota's. I have a truck and a car. What it's done for me, it's done two things - it has made me feel good about myself, knowing I'm helping others. I have saved some businesses. I have literally saved some businesses and literally save some jobs. Not as many as I had hoped, I had these really grand visions of doing a lot more saving. And in a lot of my deals, I'm saving some jobs, but other ones, they're making more efficient. I'm almost losing jobs because I'm making the business more efficient when we don't even need as many people. So, I'm frustrated about that. But I am helping people and I know that. And that's the most important thing to me because that's really why I did this. Second is I am having a ball. I am having so much fun right now. My mom called me this morning and she said, "Do you realize that you haven't talked to me in 2 weeks?" And I'm like, "Really?"

 

Jon: Naughty boy.

 

Marty: "Didn't just talk to you, 2 days ago?" and she's like, "No, it was this day and this is what happened. And you were going to dinner." And I was like, "Oh, wow, I'm going a million miles an hour and I'll have to slow down, but I play hard too. I take a lot of vacations and I get off the grid and fairly frequently to the point of my partners get annoyed with me. But I'm having so much fun that a 14-hour day of Zoom calls. I'm exhausted but I go to sleep with a smile on my face.

 

Jon: And wake up and go, "Hey, let's do it again."

 

Marty: "Let's do it again. It's at 6 a.m. yet. Let's go." And so that's the coolest thing I think. This stuff can be so fun and every deal is so unique, there are no 2 deals like- you got to be creative. You've got to think outside the box and look at it from every angle and understand the needs- I mean, this is the stuff I learned back as a salesman-

 

Jon: Maybe you're up to a very excited because I think that's why you're so excited because it's new every day. I mean, if it was the same thing every day, you just grow boring of it. I think it's because it's different.

 

Marty: Yes, there's no question that. I am not a person that could work on an assembly line and do the same thing every day, day in and day out. God, I love the people that are- Thank you very much. I'm a huge huge fan of micro and the jobs out there that I could never do, the skilled labor jobs and what not. But for me, I just have to be creative and I have to be innovative and this has given me the ability to- Doing mergers and acquisitions and been scaling businesses has given me so much opportunity to get just totally be cray. Be an artist but an artist with businesses, I can't draw a straight line to save my life. I can't sing. I don't have any of those kind of artistic abilities but my artistic ability is in business and growing them and scaling them and making them more profitable. And that's my canvas and I love it every single day.

 

Jon: That's beautiful. And I am going to end on that because that's a beautiful note right there. I want to appreciate your time, Marty. I hope we can do this again.

 

Marty: Awesome. Thanks, Jon. Well, for your first one, I hope that you know, I hope that I set the bar at least reasonably high so that when people like Patch or whatever, show up they don't you don't look back and go, "Wow, man, that first one with Marty- [crosstalk]

 

Jon: That was boring. I got 100 views and Patch gets far 4,000. Because like no, no. No, this is this is going to be great. I really appreciate it. So I'm gonna stop recording.

 

[END]