"My Customers Can't Afford to Buy Twice. Now What?"

0:00business and we sell mainly through socials. We run paid ads but it's like I'm lowest ticket 30k. >> Okay. >> How do we increase tact LTV? >> You'll probably need to increase LTV for the the space that you're in. >> Right. >> So can you explain more about what you actually sell? >> Yes, we have the few different tiers to the business but essentially it's a property buyers agent we buyers agency where we buy assets, we renovate them on behalf of clients and then we manage them at the other end and then the whole idea is we should be able to buy more assets for that client.

0:29>> Okay. >> restrictions around like bank lending so some clients can't borrow more money to buy more assets which means they can't you know >> Yeah. >> another fee. >> And your back end of the project is the is the management? >> Yeah, but it's a low ticket back end. So we have a high ticket front end and asset management's like >> But the turn on that's probably very low. >> Yeah, they don't turn but they just don't that we don't charge another 30 or 40 grand to buy them another asset and then we obviously make a margin on the renovation as well on the building. >> Why don't you charge more for each additional asset?

0:55>> We do but we can't the restriction around getting them to buy again is whether the >> They just can't get enough money to buy another asset. >> banks, yeah. Some can but the majority can't. >> Yeah. >> So we were thinking like could we self liquidate with education on the front end or a product on the front end so we have a lower cost per acquisition purely from paid or would you have a a better model? >> Um So [snorts] it sounds like so I'm just if I were to pull this whole business apart, you guys are good at renovating and then renting out properties. That's like what you guys are good at.

1:29>> And creating a lot of >> value. >> Like we buy something for a million bucks we spend 300 on renovation it might be worth two at the other end. >> And then you and then you still rent it out at a way higher rate than you would have been able to normally. Like you're not flipping the houses. >> No, no. I mean in Australia it doesn't really work with taxes and stuff. >> Yeah, right. Um sorry. That's our future America. Anyways, um Anyways, um Okay. So you need to increase LTV. Um the thing is is that it basically it sounds like you're you're bringing people on more so as capital partners. Like you don't need them to do anything besides give you money, right?

2:06>> Yeah, but they buy the assets in their own names. >> Well, yeah. They give you money. I mean fundamentally like they provide capital and then you do all this work and that's it. Like that's more or less the exchange, right? I could give you I could write you a check and then you just buy this property, do the renovation and then I get checks every month after that, right? So, [clears throat] I don't know what the investor returns are, but it sounds like you just have would have a would be better served with just a fund structure.

2:31>> Yeah, potentially. I'll have explored that, but we we kept hitting roadblocks cuz the IRR wasn't strong enough. >> Okay. Um >> [sighs] >> Honestly, it's like like why isn't the IRR strong enough? Like if >> Actually, they have a higher IRR in commercial than in Cuz cuz in residential assets in Australia, it's it's not for income, it's for capital growth. So, like the the gross rental yields might be like 3 or 4% where in commercial land it might be 6 or 8% net.

3:04>> Mhm. >> Um so, people hold these assets for a long period of time and then they'll they'll end up, you know, liquidating when they retire. Um >> What's your profit per month right now? >> Um we're at 30% net, give or take. >> 30? >> We're running at like, yeah, maybe 3 to 500 depending >> I mean, I don't think you have anything necessarily wrong with the business. Um I would probably if I'm in if I'm in your position I mean, I don't like the whole the the IRR isn't good enough thing, but um I would probably go down the more route, which is okay, how do I need to go from selling 30 or 50 units a month to selling 200 units a month.

3:39Do you have the capacity on the back end to service 200? >> Yeah, I mean, we just got to hire more staff. So, that's >> Well, Right. >> That's what I mean by rapidly, yeah. >> But that would be like that wouldn't be a problem for you? >> No. I'm just worried about the front end like cuz I saw yesterday I'm we've been scaling ads and >> I'm worried that if we continue to scale and our LTV is only 4.5 or 4.4. >> Can you take a rev share on the back? >> Uh potentially, but then they'd have to pay us out. I don't know. Yeah, we could we could. Yeah.

4:05>> Yeah. Well, if you're if you're cuz that would just be well, they wouldn't necessarily have to pay you out if you had like a tech platform that managed the payments. I'm sure you have something like that. And then you could take your piece before you remit payment to them. So, I'll probably try and solve it from that perspective. Like if you generate if you if you help people acquire a cash generating asset and then you get the tenant and you manage it. It's like you can you can control the cash flow.

4:32>> Yeah, but there's no in Australia they're not cash positive. Real real estate in Australia is cash negative residential. >> Okay. >> Yeah, so they got to cash flow it every month. >> So, they spend money every month to keep this property. >> That's right, but like long-term historical growth rates in Australia are like 7 to 10% per annum. So, that it's all capital focused. >> All right. Well, then I think though I mean in 5 minutes of talking to you, um I would probably go the more route. >> Okay.

4:58>> I'd probably just be like, how can I how can I spend more to acquire customers? I mean, you're profitable. It's not like like you have 30% margins. There's nothing like that's fine. Um typically it gets in the way of scale, but if it hasn't been an issue for you up to this point, then like I wouldn't break I wouldn't break what's working. That's my as as short of an answer that I can give right now. >> Thank you. >> No, you bet. I feel like I didn't really help, but thank you. Yes.

5:23>> Uh cool. So, um >> That one bothers me. Sorry. I like figuring out what the issue is. Keep going. Sorry. >> That's all right. So, we are a residential roofing company. >> Mhm. >> And a pretty classic more better new problem here. Obviously, we have to make ourselves a better business in terms of the valuation formula you gave us, but just long-term directionally speaking, what is the best uh what's the way to get the highest enterprise valuation in terms of is it more locations? Is it uh going up chain, acquiring a distributor, getting cheaper materials?

5:59Is it franchising? Is it a roll-up? Is it other services, solar, siding, gutters, windows, doors? Like what's just so directionally long term we're correct? >> I would do three of those five. >> Three of them. >> So, and not all at once. So, I wouldn't franchise. I wouldn't enter new products cuz both those sound like new things. I would be okay with you growing and opening more locations.

6:25I would be fine with that via you doing it organically or you acquiring existing roofers who are, you know, 65 and don't care anymore and have a good business, which is probably the best route. Um in terms of increasing the multiple, demonstrating M&A uh will typically increase the multiple by one to two. Uh I don't put it on the sheet cuz it's like not worth including. Um but that will typically in- in- increase the multiple. Like if you can demonstrate that you have the ability to acquire other businesses and then roll them in.

6:53Like that makes your business more viable. It makes it more of a platform already. Um >> Acquiring other roofers or acquiring >> Other roofers. >> or a distributor. >> Other roof- You could also do the distribution thing cuz that would just increase your EBITDA margin, right? So, your margin percentage would go up. That'd be vertical integration. And so, uh basically one's horizontal expansion, the other's vertical expansion. Either of those would make the company more valuable. I would choose either of those paths before doing franchising or other products.

7:19But um the last point that I was going to make is that uh enterprise multiples are are kind of like the opposite of wholesale discounts that exist in like consumer goods. The bigger the EBITDA, the higher the premium. >> [snorts] >> And so, it's really like you just need to make more money. >> Yeah. >> And you can expand horizontally, you can expand vertically. If If to do this in order, I'd probably go vertical first because then when you do all of the add-on acquisitions, you have an immediate alpha that you can add to their business.

7:49>> Yeah. >> Uh that you wouldn't have if you did it later. The flip side is that the later you do it, the bigger the alpha is immediately when you make when you make the move. So, that's kind of the trade-off. But, you said you're like 6 1 or something like that. So, it's it might be a it might be an okay time um to look at that. And the vertical integration will absolutely make the company more valuable from a acquirer's perspective. >> Got it. Thank you. >> Yeah, you bet. >> Hi. >> Hi.

8:13>> When you think of building your movement behind your brand uh with what you did with Gym Launch, The Noose Nation, are there like three to five instrumental strategies that you found have really contributed to that effectively? >> Haven't really thought about building a movement. Uh >> [laughter] >> So, if if there was one that was built, it was not uh by design. >> Okay. >> Um I think I'll chunking up, I think the big thing is just um whether people relate to you and that you are consistent. Um and that who they see on camera is who you are in real life.

8:48And I think the closer those two things are, the more likely it will stick long-term because word of mouth from the people who do meet you in person will carry huge weight for the people who haven't met you yet. And I think that's what kind of compounds over time. And it just takes time for that to happen. That's just my opinion. If you are business owner and you are not growing as fast as you like, I'd like to give you a free gift. So, my team and I put together the $100 million scaling roadmap, which is basically 200 hours of us looking over all the portfolio companies we've had and what stages of growth they went through and more importantly, where they got stuck and how they got past it. And so, we broke it in these 10 stages and we made this little kind of quiz thing where if you put in your business information, it'll tell you where you're at and the most important part for you, what to do for each of functions of the business across product, marketing, sales, customer success, recruiting, IT, human resources, and finance. And so, no matter what you're struggling with, someone else has already struggled with it and solved it. And so, I'd like to give you this thing absolutely free. You can go to acquisition.com/roadmap, plug in your business information, and if you want us to actually help you deconstruct the business and you're trying to scale, we'd love to help you out. On the thank you page, you can book a call with my team and we will look at the business, see if we can help, and if we can, we'll invite you out to Vegas and we'll do this in person live.