"How Do I Know If I'm Charging Way Too Little?"

0:00All right, Amanda. Let's rock. You guys doing a little home run on the hotline? >> Hello, Amanda speaking. >> Hello, Alex speaking. How are you? >> Fine, great. How are you, Alex? >> Excellent. Tell me about the business. What's the problem? >> Yeah, so I was kind of put in a very unique situation about 2 months ago when the workplace I was working for decided to close their doors. >> Okay. >> of customers who loved what they were doing and wanted to keep going.

0:27>> Okay. >> But didn't have anywhere to go when they decided to close. So, I decided to start up my own business. >> Uh-huh. >> And basically I run off-market. Thank you. Basically I run off-market deal sourcing campaigns for um M&A professionals. >> Uh-huh. >> Cold email outbound marketing. >> Yeah. Yeah, heard. >> Sorry, I was just walking. I had to stop at a bench here and talk to you. >> No, that's great. Okay, so you're finding deals, you're sourcing deals, and then you get what, a finder's fee?

0:55>> Basically I run 2K a month per campaign per client and I have several clients right now. I know I can only scale this to a certain point with just having me here and I've got a lot of things automated, so I can probably scale it to about 30K 30 to 50K a month just myself. >> So, each of them pays you $2,000 a month. Is that correct? >> Sorry? >> They each pay you $2,000 a month? >> Yeah. >> Okay, so they all pay you 2K a month.

1:21>> to >> Got it. >> can probably do about 15 to 20 clients roughly by myself before I needing to hire on more people. >> How many you got now? >> Uh right now I've got about three. Most of the people that wanted to sign up are holding off till September just because M&A summer is slow. >> So, you have three. >> to double that next month. >> You have three and then you're going to get to six. >> Six to 10 next month, yeah.

1:46>> Okay, got it. Okay, cool. So, you'll be at you know, 12 or more, right? 12 plus K a month. >> Exactly, yeah. >> Okay, fantastic. All right. So, what is the what is the question here? That sounds like a decent plan. >> question is as I'm growing a business, I'm kind of curious if I should continue to focus on the campaigns that I know run well, do well, or should I look for some sort of upsell to capitalize on the existing clients that I already have, um or should I be focusing more on you know, referrals to private equity groups, things like that. I've already got about 200 million in businesses that are in my pipeline right now that are potentially ready to sell um that I've sourced personally that I'm connecting with private equity groups about. So, I'm already doing that.

2:29>> you're just your money model's off. I think you just make your your monetizing the wrong way. Like you you give a very valuable service if you really do indeed source deals for M&A. >> Yeah. >> $2,000 a month $24,000 a year and especially if they're taking off like some months, skipping months, like call it 20,000 a year is what is what your you know, net net per customer. That feels really low for what you're doing. You know, if I'm going to write a you know, if if you source me, you know, four deals and I pay you $24,000 for it, that's like insane.

3:01>> Yeah, exactly. It's just a lot of the time I find the people who are jumping on these sorts of offers tend to be the um like they're looking for minimum a million dollars in EBITDA, but you're looking at some of the smaller firms like you know, Sunbelt, Transworld, you know, that sort of stuff. >> Heard. Yeah, I got you. I mean, I would still look at like a What What's the average deal size? >> Uh like I said, minimum 1 million >> No, I know their EBITDA, but what's the average transaction?

3:29>> Uh most of the times the revenues of the businesses are about 5 to 20 million. >> Okay, let me ask you differently. What check do they write to buy the businesses that you source them? >> Sometimes it depends on the industry just cuz of the uh the >> Give me an average. >> I'd say most businesses are being purchased between 15 to 30 mil. >> Okay, got it. Yeah, you're way underpriced. I think you got to be looking at 1% acquisition fees or more.

3:58So I would try I would charge the exactly what you're charging and charge an acquisition fee. I'd be like we're 24,000 a year paid annually up front and we get, you know, 1% of the and the way you write the contract by the way is you do it on the enterprise value not on the cash value of the deal. So cuz the way that the way that it's going to work is they'll do like let's say it's a $10 million deal for simple math. So you have a $10 million deal and they're not they're not going to write they typically won't write a, you know, a $10 million check if it's a $10 million deal. They'll say, you know, we're going to put, you know, you're going to seller finance 20%, you're going to do an earn out for another 20 and then, you know, 60 we'll pay you in cash, right? Something like that. And so you want to get paid on 10 not on six.

4:39>> I do that for private equity groups and, you know, family offices and that sort of stuff, but for brokers I just do the flat fee. So for private equity groups I charge the retainer of the 2K a month plus I charge success fee on a Lehman scale. >> Okay, why would you not do that for the other guys? >> They tend to just say no to any sort of success based fee. It's either one or the other either a success based fee or a monthly fee. Um most of the time it's a flat out no from

5:06>> Yeah, I think I think you just need to go up market. >> Okay. >> Yeah, I mean like if you you provide a valuable service and you're selling partially to broke people and partially to rich people, sell rich people. I mean that's that. It's the same work for you to source a $100 million deal as it is to source a $10 million deal. Sometimes easier. >> Oh, exactly. Yeah, I mean it's the same proven formula on the back end for me. It doesn't make a difference as the targeting. It's kind of what I charge people

5:34>> Exactly. So that's the So that's the work that's required then like screw the other ones. Just source the big deals. >> Okay, in the short term because I am a new business, you know, this is my main income. Should I keep a base amount of clients to keep my monthly income coming in based on the setup I have right now and then work on moving up market like you're talking about to do that. >> my marketing, all my advertising would be getting private equity and saying this is the this is the new way we do things. Yes.

6:02>> Okay. >> Cool. >> Okay, great. Thank you so much. I appreciate it. >> No, you bet. Congratulations on the business. Very cool. >> Thank you. >> All right. Rock and roll. If you like this video and you're a business owner who wants to break through your current revenue ceiling, I distilled every lesson from scaling 10 businesses past 10 million and three businesses past 100 million into a completely free scaling roadmap that I've used to go from zero to one, zero to 10, and zero to 100 plus. And so you can click here and you can check it out. Again, absolutely free. And since you're a business owner, I appreciate you and enjoy.