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May 11, 2021

E3: Top M&A Entrepreneurs Mark "I Buy Revenue" McRae - 10 Acquisitions

 Mark "I Buy Revenue" McRae  10 Acquisitions,  3 since EPIC, another EPIC OG. Started his first business at 7 years old.  Made more money than his parents at the swap meet.  His model:  He buys "Revenue".  A Warren Buffet fan.   Buy boring business, 10 years old, never a losing year,  healthy margins, management stays.   Acquires for time freedom.  Outsource and put systems in place.


Jon Stoddard: Welcome to the Top M&A Entrepreneurs. I have a guest. He's another EPIC member. What EPIC group are you in, Mark?


Mark McRae: I was the original.


Jon: Oh, another OG.


Mark: Yeah. The Beta group.


Jon: The Beta group. Great. Mark McRae. I'm reading this bio that you sent. Serial entrepreneur... has started and owned over 30 businesses. Born in Glasgow, Scotland in 1964. And the first business at the age of 7. So, I have to ask you, what was the business at age 7?


Mark: Well, it's funny... My mother and father were market traders. So, they used to sell things in the flea markets. And my job was to help them in the flea markets every weekend.


So, what I decided to do one weekend was... I noticed that everybody who came into the market always came unprepared because it was some kind of social event. So, they wouldn't bring bags to carry things and things like that. So, I bought... I remember correctly, I bought bin bags. You know, these black bin bags you get at 10 pens each and sold them at 20 cents. I stand in the corner and just sell black bin bags. And within a month, I actually made more money than my mother and father.


There were days where they had this whole apparatus around them. And I was selling these plastic bags and I made more money.


Jon: That's so cool. I've got to tell you if you characterize this, that's a picks and shovels business. Like, gold mining. None of the gold miners made any money. The only people that made money were they sell the picks and shovels. You were a pick and shovel there. That's very cool.


Mark: Yeah. I've owned different types of businesses since then. Even when I was in school, I sell chewing gum, or I'd sell you know, sweets or deal and vinyl records as they had them in those days. Your audience might not remember those.


Jon: No. I'm in the same age group as you, so we remember those records. That's just like, say you can't walk around the house, you can't stomp around the house because it skips.


So, tell me about this... You're EPIC, and you've made ten acquisitions in your career and three cents M&A. Why did you take EPIC if you're already making acquisitions.


Mark: I think it's like anybody who's interested, I mean that I still buy books and finance, I still try and learn every day, I still would never purport to be an expert, as a passion. And also the way that I tended to do pre EPIC was just brute force and ignorance. It was just buy something. Whereas EPIC, you learn a lot of different strategies about how to finance things, how to produce together, how to try and do it with trying to take money from your own pocket. So, anybody who has a passion about something really has a kind of eclectic knowledge that they've got from everywhere.


So, I think that EPIC is a great starting point for somebody who's never been in M&A. And I think M&A, generally, is a kind of a misnomer. I think that the deal maker is probably a better description of it because the M&A, that whole industry is actually very old-fashioned... hasn't kept up with the times. And I think that somebody who sees an opportunity and can see a way to exploit it or to add value to or to bring together those resources... which is probably the true definition of an entrepreneur, the ability to bring together resources to make something happen. And I think that there are quite a few people in the EPIC group who sort of the pessimize[?] that deal-making process.


So, I think that the true M&A, the lawyers of the big banks, and institutions who are going after $100 million deals and upwards. I think that's a different animal from the people who are in the EPIC group.


Jon: Yeah. So the companies you purchased before, the sheer brute force and ignorance... And now you go to EPIC, you get this training and it shows you all kinds of new ways to no money out of pocket. So, what do those deals look like? I mean, the size of them and... Take the first one for example. Tell me about that one.


Mark: I think pre EPIC was probably a health food business and in terms of size in the US, it's probably about, I don't know, $250,000. And it looked like a good idea at the time. So, I just bought it.


I mean, obviously, I think that in order to be successful, as a deal maker and mergers and acquisitions, I think you've got to have a core skill. And otherwise, I see a lot of people who struggle that come in from things that are either not financed or not a business. They've had a traditional, the work... I don't know, say a school teacher or something, and they haven't been exposed to that. I think they really just struggle because there's a lot more that goes into most deals than most people anticipate. They think that if you can do a deal, that's the deal over whereas it's just the beginning of the story.


So, having on so many different businesses in different countries gives me a broader perspective on how business and finance works. And it gives me a lot more touchpoints. So, whenever I bought a business, I was always looking to apply that philosophy of business as a machine. And if you make that machine work better, it gets more productivity, it goes faster. So, I'm looking for businesses that are kind of old clunkers that I can turn into Ferraris.


One of the things I look for is not so much the industry. And I know a lot of people like to try and keep their businesses in the same universe. There's a lot to be said for that. But I'm more interested in the people. And it's a kind of built-to-last philosophy. You know, that book that it's more important... the people who are on the bus than where the bus is going because if you get the right people, you can point them in any direction.


So, I've had a team of people around me now where the majority of those people have been with me for fifteen years plus.


Jon: Are these employees of your company or...


Mark: Yes.


Jon: Okay.


Mark: So, my core team has been with me a long time. They know my strengths. I know their strengths. I know I think we can add value to deals. And I think I've got a gut feeling. You know, it's a very visceral thing sometimes when you buy a business. It hits that button... you just know that's going to be good.


Jon: How did that start? Because there's a lot of people in EPIC that look at this and go, "Okay, I'm outside the industry. I don't have knowledge but how do I start building this team and the expertise?" And I see Patch Baker does a great job at it. Adam Lyons does a great job. Obviously, you got 15 people working for you and use them on the same deals. How did you just start doing that? Going... I know that's what I need first, or we should have that guy, or this person.


Mark: It depends. I mean, I think Patch and Adam are great people to learn from. And I think that people who are just starting off should start off... I see people who have never owned a business who want to come in and do a $10 million deal. And I haven't seen any of them work yet.


In fact, I've been called into two or three EPIC. One is to try and help salvage some of those deals. I think this should get the feet wet. Take over the administration rights for some Facebook groups, buy some forums or blogs or something to get that sense of what it takes to run a business.


See the sort of normal journey or course that I see people who want to do mergers and acquisitions is... They see the idea that it's a way of making a lot of money quickly. So, then the next jump to me... 'Cause well, I need marketing. So, they think, I need to acquire a marketing company. And that's usually a mistake because it's a very specialized field, and marketing today is not where it used to be.


I spoke with over a hundred and fifty marketing companies last year. The industry is not for people who don't know how that works. They'll get eaten alive, basically.


So, to answer your question... it's a bit of a long way to answer that, is that my own journey has been... I've added people as I've needed those skills. There was a deal last year where I wanted a board for credibility. So, I literally designed what I thought would be the perfect board. So, I needed a very high-profile person as a chairman for credibility. I needed a mergers and acquisition lawyer. I needed somebody who was in accounting that was familiar with that. I needed somebody who was in a similar field from the acquisition that I was targeting. I handpicked those people from LinkedIn. I didn't know any of them. And I got them on a zoom call like this. And I had a little slide deck, and I said, "Okay, this is what I'm trying to achieve. This is why I think you would be the right person for it. And this is the reward you're going to get if you agree to come on board." And of the 5 people that I handpicked like that, all 5 agreed to come on board. So, there are different ways to do it.


I think mergers and acquisitions and deal-making in business, in general, is the... I would encourage anybody to do it, regardless if you don't know what you're doing. But I think that your expectations should be realistic.


Often I find somebody who will ask me to help them on a deal because they've got past that initial introduction. They've done the letter of intent. And now, they actually have to run the business. And they don't know what to do because they've never owned a business. And it's common sense.


So there are different stages at which people get stuck.


Jon: When you look at those businesses, and they come to you, are these EPIC members? Or are these just other people from all over the world?


Mark: Well, lately, it's been EPIC members because that's the environment I was in or quite active in, last year. But previously, it was scattered. It was just word of mouth or introductions. Most people will do most deals through some kind of connection. The cold outreach doesn't work that well. But it does work, it's just much harder.


Jon: Takes longer. Yeah, definitely. And more numbers.


Mark: Yeah, exactly.


Jon: When somebody at EPIC comes to you... because I'm seeing a lot of that, a lot of collaboration between EPIC members because you described a perfectly. A lot of these people... some haven't owned a business before or a completely unrelated field or not familiar with sales or something than in the process of a funnel. How are you coming in? Are you coming in with an earning? Or are you asking for something? Or what does that look like?


Mark: I always come in with no intention. In other words, I'll tell people that I'm happy to help with no hidden agenda and no intention of getting any kind of percentage or reward because my hope is that during the process to realize my values. So, they'll offer me something. But in the process of that, it allows me to let people let the defenses down because I'm not trying to make money from you. A good example is that when somebody is getting close to closing a business, and they actually have to deconstruct that business in order to understand it and figure out how they can scale that business. That can be a sticky point for a lot of people because your businesses are all similar. They're a vehicle to make money. But the mechanics of it can throw a lot of people. And certainly in deal sizes.


So, there's one kind of sector of DLC $10 million-plus, where most of the management is in place. You'll never need to understand that much about it. And then, you've got those deals that are, obviously, between 1 million and 5 million or below. Getting deals below 1 million is hard because the financials are usually very lumpy. The businesses run really badly, and it's very hard to get your head around whether there's actually anything there.


Of one of the smaller businesses, you almost inevitably have to get involved. You know, there's no such thing as a totally hands-off hands-free I bought this business and it's going to kick out something.


Jon: I don't know how he says that but it's not true.


Mark: Exactly. That's usually how I find myself involved with businesses. It's through some kind of... they've asked for advice. And it's not that I'm some kind of genius. I've just screwed up more than anybody else. So, in the process of all of the businesses, I've made all the mistakes I've made... the school of hard knocks.


Jon: Yeah. So, if I asked you how would that look like... We got a couple of businesses we are looking at to acquire it. One was in the $6 million range in revenue but I think the guy's too involved in the business. So, we'd have to replace him and I don't want a job, and my other partner doesn't want a job. So if we brought a business to you, you'd look at it and go, "Hey, no, we could scale it but we need to put the C suite in place."


Mark: Well, it's interesting you say that. There's a couple of businesses I've looked at for other people, where they are determined to try and make a business work that is failing and will fail.


So, an example of that... There was a business that I was asked to have a look at, where they made $26,000 per year. And the group wanted to add sales, add marketing, add this, add that. And why even bother. This just doesn't make sense. Trying to put all of these resources into something that fundamentally probably won't do any more than it's doing now. So, some people get this idea in their head that just because somebody will do a deal that you should do a deal.


So, if you have a $6 million deal, I assume there's a reason why you want that particular business. And then, there must be enough of the distributable profit to make it interesting for you. But once you remove that person from... And you always have to assume that they're going to leave anyway, regardless of whether they intend to stay on or not.


So, what is the market rate for a manager or CEO in the industry? And do you have enough knowledge of that business to oversee that transition? So, that's what I mean about there's always usually a point at which you have to know something about the fundamentals of how a business works.


Jon: I have to point out, and that's like, what Warren Buffett says, "I only buy things I understand." And it's really true, because if you look at a SaaS business or a marketplace, business, technology stuff, both of those have two different KPIs and drivers that build a business. And if you don't understand those, you'll never be able to grow it. And if you've never done it, it's just going to be a very expensive process to learn.


Mark: I was listening to an audiobook. I can't remember the entrepreneur's name who specializes in SaaS products. Smith is his surname. And it's L Smith but I can't remember his first name, might be frank. And he discovered that in SaaS, for example, that most of the companies are very badly run. So, what he added to it was processing procedures for how those companies can, and should scale. And now, he's got a billion-dollar business.


Jon: Oh my God. Who's that?


Mark: It's L Smith. I can't remember his first name. I'll write that down. Yeah. So, his whole thing is about how you run a business. That's the value that he added. That he could go in there, take a SaaS company where there was a bunch of programmers. And the value that he added was proceduralizing the whole process because SaaS companies are terrible. Another thing that I... terrible to work with and terrible to run generally. I've had a couple and I don't enjoy them.


So, a lot of people aspire to have a SaaS company because they think they're going to be the next zoom or they're going to be... Something like 99% of SaaS companies fail.


Jon: 'Cause, it's frothy multiples they get on them.


Mark: Exactly. Well, that brings me to another point about multiples. So, you can get a sheet that will tell you what company multiples will sell for. I don't believe in that at all. So, I don't care. And the reason I don't believe in it is that a lot of my deals are self-funded. And if I can't get all my money back in 3 years, I don't care what you call it. I'm not interested. So, you might have the best SaaS thing in the world. And if you give me a fifteen multiple, good luck.


Jon: [inaudible] fifteen years. Fifteen years.


Mark: Yeah. I'm not going to wait that long.


Jon: I'm not going to be on the planet that long.


Mark: People say, "Well, this should have that multiple, and that should have that multiple." It's great to sell it, and I might have the same argument if I was selling one. But to buy it, I like to focus on all companies. I'd like them to be going for ten years plus. I'd like them to have had no losing years. So, I want steady growth. Preferably, at least, 10% per year. And usually, they are boring. And that suits me great.


Jon: What kind of business is that? What does that look like?


Mark: I find them more offline now than online. I bought a medical aids supply company last month. And not particularly exciting.


If I was having a conversation with you, and you told me, "Listen, I've had this business 30 years, and I'm thinking of retiring but I don't have any children. What should I do next?" And we have a look at the financials, and it looks interesting. That's a business for me. So, something that's uncomplicated because I'm uncomplicated. Something that I think is going to be there next year, as Warren Buffett says. He was a big investor in Gillette. People... men will shave [crosstalk] always.


Jon: Every day.


Mark: Everybody's chewing gum. They're going to chew gum for a long time to come. So, I'm not looking for complicated or the next big thing. I'm actually the opposite. I'm looking for something that has longevity. And I don't buy to flip. I buy forever.


Jon: So, at least, you've owned all these businesses forever?


Mark: Most of them, until I've got the... Something happened have morphed into something else, or somebody has come along and offered me something. But I've never gone and actively said, "I've got a great business. I'm going to try and sell it for four or five or ten times what it's worth. I'm looking for a hedge fund to invest in, or I want to do an IPO." I'm not that. I'm more like Warren Buffett. As long as it's doing okay, and it's making money, I'm happy to own it forever. Because what am I going to do? I mean, once you sell the business, you're going to go buy another one.


Jon: Yeah. How are you setting that up? You know, getting paid back. Well, let's talk about how you buy them now. I mean, let's say... Take the first three, post-EPIC, how are you buying those now? Are you using the same strategies that Roland taught?


Mark: No, not really.


Jon: Or [inaudible] of what you've learned over your career?


Mark: Yeah. So, let's take a marketing company. So, of the hundred and fifty plus marketing owners that I spoke to... And it's another thing I think is a bit... I think people think they're going to talk to people who want to exit all the time. Of the hundred and fifty people I spoke to, only one person wanted to exit. And that was for digital marketing agencies. And of those hundred and fifty people, one wanted to exit, one was looking for money, and the other 99% of them were looking for ways to grow their business. They will be prepared to give you a piece of their company in exchange for growth. And that's what most people, who will cold call or knock on doors for businesses, are going to find. It's not going to be that everybody's putting their hand up to say I want to leave. Most business owners are not looking to leave when you call them. Unless there's... I call it 'push and pull'.


So, when you're trying to find businesses, you'll find that people aren't looking to sell. But if you've got some kind of deal for funnel where people are approaching you, that would be different. So, then they would be looking to...


Jon: You're perceived as the Savior or the money...


Mark: So, that's a different thing. But of those companies, the digital marketing agency... and we'll take away the extremes of people who earn 40, $50,000 a year or 18, 20, $30 million a year. But the majority of our digital marketing agencies' revenue is a million dollars per year. And the seller's discretionary earnings are $250,000 per year, 25% for a typical digital marketing agency, if they're a CEO company, where they generate their own traffic, then the margin would be 45 or $450,000 a year. And on a business or a deal like that, then it's fairly easy...


So, I would buy that company myself without asking anybody else to invite them in. And hopefully with some of the strategies that I learned in EPIC not put... For example, if a company is earning $250,000 and $750,000, not put 750 upfront... Be creative about how that was financed. And for deals that were over a certain amount, I have a small group, not a big group, where I know that, for example, this person would be happy to invest with me for 100,000. And that person, maybe 200,000. And most of them are ex-partners.


So, people who have worked with me before... If I tell them there's something good, there's a small group of people who would trust that because I don't invest in a lot of things or buy a lot of things anymore. And I'm a very conservative person, and I think I'm a good husband of money. I keep mentioning Warren Buffett. But he would probably think I was stingy.


Jon: I don't think there's anything wrong with that. I mean, the guy has lived in the same house for fifty-plus years. And this at the total of... I've got 4 or 5 books on Warren Buffett that people wrote about him. And he's only spent, like, a couple $100,000, after over fifty years, just on supplies for his business that's running a $300 billion empire.


Mark: And I think like that. So, if you look at some of the things that I have been involved with, I've been remarkably frugal. I've never been a person who would walk in and say, I'm going to deck out this new office. I'm going to buy this office building. I've always been the type of person that... can we get secondhand from the [inaudible] What's the minimum we can buy? How do we make this run well?


I can be extravagant outside of business. But I think the measure for me... If I measure a businessman, it's how well he runs that business. And if you can run your business in the smell of an oily rag, and produce something phenomenal, that to me is admirable. If you're going to work in a Lamborghini, and you're worried about payroll, I just don't understand that philosophy.


Jon: Now, these businesses that you bought, that's EPIC, do the owner stay in place or your team takes over?


Mark: Both. So, typically, when you buy something that you're already in, and for me, it would be marketing, then either you buy something as a platform and you bought things on to it, or you're absorbed. And every deal is different. So, I might have a conversation with you, and you say, "Well, that's interesting, I'd like to do it." And I can see the reasons why there's a lot of synergy between us, then you will stay on. And that's why I buy revenue. I don't buy the future. I just buy revenue.


So, if I know I can count on x, I'm happy to have that person run it forever. I'm not an egotistical person. I don't need to own things, so I can say that I'm the owner. I'm looking for money at the end of this.


Jon: Yeah. And how are you making your money back when you invest in the business? How are you structuring it where a percentage of cash flow is moved to a different bank? How does that look?


Mark: Well, again, it depends. Everyone is different. Some of them are specifically for that. So let's say you buy a business at a million dollars, and it's making easy $300,000 distributable cash. Now, is that money more valuable in that business? Did you see something there that there's a reason why you can turn that 300 into 600 next year? And that's why you bought it. You had moved that money in there. Or you could have bought it for... this as a good cash cow. I'm going to take that 300, move it over to this business where I can get a better return. So, it's really money management. It's where is that cash most valuable? Where can you use it...


Jon: Where can you get a better return on it? Yeah.


Mark: Yeah.


Jon: And are your businesses in an ecosystem when you buy? I had this conversation with Patch... the last call we did. And he does Richard Branson's Virgin, where he's got an airline to take people to his islands. he's got a phone that people can buy, he's got this tourism business, and he's got music. And they're all buying in this ecosystem.


Mark: I think maybe... Patch is a much larger operator and he has a great strategic mind. I think also if you'd asked me that question ten or twenty years ago, I'd probably think more like Patch or Richard Branson, where you can go and do all these things and travel here and put together things like that. I really want to try and do it from my laptop. If I can't do it from Zoom, I'm not that interested.


Jon: It's a good rule. It's just like if I do this business... buy this business from Zoom. That's it.


Mark: And all of the deals I've done in the last year, I haven't seen them or met the people in person. So, it's just been in Zoom. But I don't buy a thing with the intention of I have a tourist company, and I'm going to add an airline too, and then, I'm going to add loyalty programs and all that. I buy a thing because it's making money now. And that's all I'm interested in. That's very basic.


Jon: Yeah. Again, you said, "I buy revenue and it's just boring businesses." That's what Warren Buffett calls it too.


Mark: Yeah. So, I don't think of I'm going to buy that. And strategically, I'm going to add to that from here. Naturally, the natural evolution is that if you're in whatever space it is, whether it's Saas or marketing, you tend to attract people that are similar to that. But I will look at any business just because I've had such a diverse background. I've got good knowledge on a lot of different topics. I'm very good at Trivial Pursuit because I'm constantly reading about all this stuff.


Like, you know, why did you take EPIC? I try and read a book in a week that's related to business or finance. I attend a lot of virtual summits. It's a passion. So, I'm still interested in it. And if you were to say to me, if we took away all of the money aspects of it, I'll probably still like to do this because I'm fascinated by how a machine works, how that engine of a business works, and how you can improve on it.


A lot of the time, people don't know what they don't know. So, when I'm looking at, for example, a marketing company, and I can see that the business is usually divided into two parts. It's like, how do you get business? And how do you run a business? So, when you're deconstructing that business, if you first look at how do they get business? And I can see that they've got one stream of income or one stream of new business, their funnel. And I have experience of another ten ways to do that, I'd be pretty confident that when I buy that business that's already profitable, I can multiply that.


Jon: Yeah. So, where are you at with how your funnel looks for acquisitions? You said that they just come to you now. Do you have an active funnel? Take a look at Roland's funnel, EPIC, and he's on course eleven now. Thousands of people come to him and his podcast... a million downloads. He's got a fantastic funnel, and he takes the cream of the crop of businesses that he works with.


Mark: Yeah. Funnel as a Warren Buffett, right? So, he's kind of in that Jay Abraham, Warren Buffett. He's at a different level.


So, as an investor, for example, it would be egotistical and naive to say that I could buy shares and be as successful as Warren Buffett. I'd like to think so. But the reality is, it's unlikely. So, if you're going to enter any industry, let's say mergers and acquisitions, it would be naive to try and have as much deal flow as Roland. And then, you want to be that person. I don't want to be Roland. He's a very busy man. I'd like to plot through my day.


So, in terms of deal flow, I was very active last year. And I put together a team specifically to do cold outreach, and growing businesses to me. And that resulted... So, you put so much and I got so much back. And this year, I'm sort of taking it easier. I don't look for any deals at all. About once a week somebody will contact me with an idea or they want to talk or they've got something. And I'm comfortable with that.


I like to really plan things out. If I'm going to work with you, I want to know I have enough bandwidth to commit to you and have enough time to think. I really like to... before I move that chess piece, be convinced that's the right move. And if I feel under pressure, I don't operate as well. So, I won't take on a lot of things if it makes me so busy that I know I'm not going to do well.


Jon: Yeah. This is the time factor. It's the only commodity you can't buy.


Mark: And I'm very jealous of my own time because I have a very leisurely day. And before EPIC, I used to joke with people that, I would eat when I was hungry, I'd wake up when I felt like I'd had enough sleep. There was no real structure to my day. People will say, "I have this. I have a very structured day." I wasn't one of those people. If I want to go to the movies, then I'll go to the movies today.


And when I made it really structured, I got a lot of results. But I wasn't enjoying it that much. I felt that by... Zoom call 150, I hated it. I was like, this can't be bought. And the thing that bothered me the most was the structure of the timetable. So, if I'm looking at a deal, for example, I will look at the deal. And I'll go away and think about that. I'll kind of stick pins in it all the way around and go for a walk. But when I have a Zoom call every hour on the hour, for 5 or 6 hours during the day, I always felt I was not quite on top of it all. So, that's why I kind of backed off from it. A, because the businesses that I have are reasonably okay, and I have enough deal flow trickling in to keep me content.


Jon: Yeah. Are you doing any deals with other EPIC members right now?


Mark: No. The one I kind of fell over about two weeks ago that the owner backed up... But no. I was very active. I still look in on EPIC whenever I go into social media. But I'm not on social media every day anymore. I find that very distracting too. I'm very productive when I work. So, if I'm going to work for an hour, everything gets switched off. Phones... The door is locked. I have no noise. I like absolute focus. And that's kind of how I... When I do work, I'll say, well, I'm going to do four hours today. I'll work for an hour, take a 10-minute break, work for another hour, take a 10-minute break, and try and achieve... There's usually something I have to get done.


Jon: It's freedom. I think we're all working towards that, right? Wealth and free.


Mark: Yes. That's a good point. And at what point... You got to ask yourself, what do you want to get from this? Would another zero in your bank account change my life? It wouldn't change my life. I wouldn't do anything different, really, from what I'm doing at the moment. Maybe another four or five zeros. [inaudible]


Jon: Everybody has a price.


Mark: Yeah. That may do it. But the other spot, Jon, in life where I'm very content and I want to be with and work with people who are real... I want to like the person I do business with.


I did a deal with somebody, recently, who turned into a nightmare. That person became somebody else. In the first 30 days, I 10Xed their business. And they thought that their IQ went up when the business was 10Xed. And that became a problem for me because I didn't enjoy the conversations anymore. Just when I'm talking to them, it wasn't fun. So, I want to only spend time with people that I enjoy. So, if you have a business, and I can make $10 million from it, and you're a real asshole, I won't do it, regardless of the amount of money.


Jon: Did you sell that business with that guy that you 10Xed?


Mark: We're in the process of untangling ourselves.


Jon: Okay.


Mark: And that is the only reason really... We are diametrically opposed in our beliefs and what we want to achieve from something.


I have a good track record. I don't think I've had a business that's failed. But they might not be meteoric like everybody else's. But people who are in and around my universe, have been in and around my universe for a very long time. There's nobody who I've been a partner with that wouldn't be my partner again. Most of them have become lifelong friends. And that also helps, in terms of mergers and acquisitions. If you need an opinion and you can go to your network, and say to people, "What do you think?" Mergers and acquisitions is a team sport.


Jon: I believe it is because you have to have all these different opinions. Like, I could see points of the deal where we need to bring in or we could do or we could offer.


Mark: Yeah. I think the original question was about deal flow. It kind of happens organically for me.


Jon: For now, yeah. This is a big question. And I fall for this as kind of a weakness... It's extricating myself from $5 tasks, to focus on the big stuff where you put systems in place. I mean, do you ever have that problem? Or were you always in... I need to put the system in place. I need to put people to do this.


Mark: You know, one of the things I did in one of my first careers was with casinos. And one of my prospect deals was to own a casino. It taught me from an early stage that everything must be proceduralized. So, when you're in a casino and you're a dealer or a croupier, the first thing you do is you show your hands to the camera that you've got nothing in them. You've got no turn ups[?] or there are no pockets. Every move that you make is in a very proceduralized way.


In the old days, you used to go count the money. There was a procedure for everything that you did. You put it into certain denominations that had to be the right way up that paperclip, had to go over a certain way, very proceduralized. And I've taken that forward in every business that I've owned. It's how do you proceduralize that.


Now, in terms of when you start growing, the first question... And that's one of the interesting things, Jon, is that when you take over a business, you'll inevitably find that the owner is doing things he shouldn't be. So, and one of the things that...


Jon: You can see those things though, right? But the owner can't see those because he's been doing it for so long and the customer... or that's the way it should be done or whatever.


Mark: So, I like to tell people to take a week off, and they're like, "Fuck, no. The business will fall apart if I'm away. Well, let's see. Let's see what holds together and what falls apart. Take a week off. They probably hadn't had a week off in the last ten years. But they'll find that their team usually will hold it together. But it allows me to see where the actual problems are, and what's really necessary. And you've got to ask yourself, why am I doing this task? what's the end goal?


So, in companies like Upwork, the outsourcing companies. And that particular company, I think, have hired over five hundred people now, and probably outsourced people, over a thousand people for various tasks. And one of the things I'm quite proud of actually is when you hire people in Upwork, you'll see that you get to give them a score, but they get to give you a score. So, my score and apart for example is 4.8 over say five hundred reviews of some people who have been hired. So, I get a good score. It's because everybody knows exactly what's expected, and how they're going to be measured, and how they're going to be monitored.


And that's another thing that I think I can add value to in a business. It's how do you proceduralize processes and procedures in place where they can be scaled. Because you can't scale if you don't do that. You can't have a franchise company and a hundred franchises in a year if the engine is wobbly. Because the faster you go, the more wobbly it's going to get. So, you've got to get that nailed down.


So, first, as a business owner, or as an M&A person, or as somebody who's interested in business, your biggest leverage point is thought. Your biggest leverage point is thought. So, if you have an idea here, and you execute it, you get the result 6 months later. But if this part over here is wrong, you get a bad result. So, thought is your highest form of leverage.


So, I like the business owners to be thinking about, where do we go and how do we get there? And I actually have a course that I put together for business owners that I call VSPOE, which is you've got to have a vision about where you want to go. You've got to have a strategy to get there. You've got to have the right people to get there. And 'O' is one of the most important things. It's one decision, and that decision should be, will it get me to my goal faster? And you can apply that to anything that you ask yourself. So, should I go to the restaurant tonight and have a beer? Will that get me to my vision faster? No. So, you don't do it. So, you could ask that one question of every single thing. And there's a reason why that question is there, which we probably don't have time to go into. And 'execution'. So, how do you execute to get to that point?


You have operating systems like the Entrepreneurial Operating systems or measure what matters or different approaches, frameworks that you can apply to businesses. My own personal one is the one that I invented because I think there are stages. Smaller businesses don't need the Entrepreneurial Operating System. It's suites businesses that are maybe 50 people plus, where you start to have that division of tasks.


And one of the ways to do that, if you're asking for yourself, Jon, is to keep a time audit for a week. It's just write down everything you do during that day, and see what you really need to be doing. If it's done on a computer, you probably don't need to be doing it. So, that's number one.


And there was a time a few years back where I went through... I had this notion that I wanted total... they call it 'utilization of staff'. So, in big companies, they have a number... Let's say you've got a thousand people, and they want to know how productive they are over that eight hours... the utilization of staff. So, they'll find they're not very productive.


If you have a marketing company... There are virtually no marketing companies that have all of the original people sitting in an office. It's all outsourced because you don't get utilization of staff. If you have a full-time Facebook person, you might not have enough work for them for the whole week. So, they tend to be all contracted out.


So, I installed software to see what people were doing. And if you work for Upwork, they record your computer screen for any error that you charge. So, if you're an Upwork outsource person, and you go for lunch, you don't get paid. You go to the bathroom, you don't get paid. So, it's a 100% optimization of labor there. There are a lot of arguments for and against that but the reality is that it's a lot more productive than if you're in an office for ten people, and you go in and you have a coffee, and you find out her auntie Sady's doing or the latest drama or what traffic problems you had. You're lucky if you get a few hours of work done during the day. Even before Covid, that model was kind of dying,


Jon: And social media is just a waste of time, I swear, too.


Mark: I found that... and I don't monitor the staff anymore, that exercise that we did, something like 60% of the time was on... You're gonna like this, Jon. At that day, it was on YouTube, and Facebook, there was no Tik-Tok, and porn. That's what people are looking at when they're working for you.


Jon: Oh, my God.Really?


Mark: When you're working in operations... I owned a call center at one time [inaudible] call center. And it's a very measured environment. You have things called Predictive dialers. And what they do is monitor how long the average person takes to make a call. And then, it dials somebody before you finish the call because your average time is three minutes. And so, you don't have even a second before your next call. It's like bang, bang, bang, bang.


So, in environments like that, where there's a lot of metrics involved, you get better utilization of the people who are working for you. And it comes back to that, again, Jon, making your engine work well. You don't need to be anal about all of the information. But you don't want a lumpy engine. You don't want to be away from your business and worried that somebody is not doing a job.


Jon: They're not doing their [crosstalk] job.


Mark: There should be measurements and processes in place where you can look at a dashboard and say... on your iPhone. Yeah, that's gone okay.


Jon: Did your key people own equity in the businesses?


Mark: No, none of them do. And again, I don't believe that you should have partners. In the old days, or even now, I still see it. You get a guy with an idea who doesn't know how to design a website who brings in a web designer, as a partner, because he can design a website.


Jon: And that's a commodity. Today, it's a commodity.


Mark: Yeah. It's a commodity. So, anything that's a commodity is the wrong reason to have somebody as a partner. It's either insecurity or you don't know what you're doing.


There are times where I've had partners, where it made sense, either financially, I needed the money, or they had some unique expertise where it made sense, or on occasion. It's because a friend and I just want to do something for fun, we'll be partners. But if there's no reason to have partners, then I don't believe you should have partners, if you can hire the person.


Jon: Yeah, I get it. Mark, we're almost at the end of the hour. And I want to thank you for joining me today. This is fantastic wisdom for Mark McRae from Scotland.


Mark: From Scotland. Bonnie, Scotland, Jon. And it's been a pleasure. Thank you for having me.


Jon: No, thank you so much. My relatives are from Scotland. McAllisters.


Mark: There you go. And Jon, if anybody wants to reach me, they can get me at 'Mark McRae'... just my name '.com'


Jon: I'll tell you what. Right now, it's going to happen because I do these interviews. And I did it with Marty and I did with Patch, and people reach out to him for guidance, and advice, etc, coaching.


Mark: Great. So, if anybody wants to have a chat, they can say... I'm more interested if there's something that would be interesting for me and that person to work together. They can reach me at either 'markmcrae.com', or my email, which is 'markmcrae.com'.


Jon: And this call was, I mean, a really clear indication of how to work with Mark. I mean, boring businesses, buying revenue, Warren Buffet typestyle, and putting systems in place.


Mark: So can I add some... Yes, that's exactly right, Jon. So you've done a few of these interviews, right?


Jon: Yeah


Mark: What are the three most important things that you picked up or were epiphanies for you, or the light bulb went on in those conversations?


Jon: Well, the systems in place, and hiring the people, and using up work. That's definitely an affirmation of the style you do. I love what Warren Buffett does, and his ability to make a deal with a handshake. He'll call somebody, send them a letter, I like the business. They send him their documents, and he likes it and makes an offer. And it's a handshake deal.


At some point, like how do you become somebody that can know the other person on the other side of the table, or on the outside of the table, and say, this is a good person, this is an ethical person, and I want to do a deal with him?


Mark: I think that you got a sense of that, as well, from when you talk to somebody often enough, or frequently. And numbers don't lie, right? In the trading game, in the finance game, they used to say you can't be half pregnant. So, if you've got the numbers, and you can show them, it's hard to avoid that. I'm very much like that as well.


So, why I say I'm more interested in the person. I don't care. If it's the right person, whether they're an employee or a potential partner, or whatever it is, and you can see that there's genuine intent to try and make something happen, then I'll overlook a lot of stuff. You don't have to have an MBA or a degree or anything. I'm not looking for that. I'm looking for somebody who is trying to get somewhere and has more energy than me. Business is energy. So, as I get older, I have less energy. I'm looking for people who want to do all the night shifts and do the crazy hours, and go and do all the stuff I don't want to do [crosstalk] anything.


Jon: I'll prospect it for you. I'll find...


Mark: But that's what's important, right?


Jon: Yeah.


Mark: So, if that thing about procedures was one of the biggest things that you learned, what was the thing that you learned that you shouldn't do?


Jon: Back to this, it's the procedures. I mean, I shouldn't be doing any of this stuff. And I need to ask questions before... Like, can I outsource that to Upwork? I really should be doing that, and putting those systems in place. I think it's gonna change my business and who I am if I have more confidence in that.


Mark: Then I think you should look at... You know that book, 'Measure What Matters'?


Jon: Yeah. I've got it and I use it now. I read it a couple of months ago. I build my business around that now. And it just worked on the objectives and the key results.


Mark: Then you're going to get there. So, the first thing is acknowledging that... As I said, you don't know what you don't know. But once you say, okay, I've got something missing, and you start that journey to finding the missing piece, that's the first indication that you're going to get there. Because you can't start the journey if you don't know there's something missing.


Jon: Yeah. That's right. If you don't see it.


Mark: Yeah. So, the realization that there is something missing is you've done fantastically just with that part, Jon. And have you enjoyed your EPIC experience?


Jon: I love it. I love it. I mean, it's really given me an eye-opening about... I mean, literally, if I'm looking at a puzzle, and I didn't see what the picture was, it now gives me a picture, and I just take the puzzle pieces and put them in place.


Mark: Well, great. Jon, thank you so much, [crosstalk] and hopefully, we can do this again.


Jon: Thank you.