Christine McDannell's SHOCKING 10+ Company Empire Built from Scratch!

Summary

Christine McDonnell shares her extensive experience in entrepreneurship, discussing her journey of starting and acquiring multiple businesses, particularly in the cleaning and wellness industries. She emphasizes the importance of strategic acquisitions, effective negotiation, and the role of mentorship in her success. Christine also reflects on the challenges faced during business sales, including legal issues, and how she transitioned into becoming a broker herself. In this conversation, Jon Stoddard discusses the evolution of his business, The Magnolia Firm, and the dynamics of selling businesses in today's market. He shares insights on the challenges faced by service-based businesses, the importance of transforming companies for sale, and the current trends in the seller's market. Jon also reflects on his personal journey as an entrepreneur, emphasizing the need for work-life balance and the significance of partnerships in scaling businesses.

Takeaways

Christine started her first company with just $300.
She believes in acquiring businesses during tough times.
Negotiation is key in business acquisitions.
Christine emphasizes the importance of client lists in acquisitions.
She had a successful exit from her cleaning company.
Mentorship has played a crucial role in her growth.
Setting clear goals is essential for team success.
Legal challenges can be daunting but manageable with the right support.
Christine transitioned to a broker role after helping friends sell their businesses.
She highlights the value of being proactive in business opportunities. The Magnolia Firm was named after a personal connection to a spa.
Microquire is a valuable platform for finding business leads.
Women are increasingly starting businesses, but men often lead larger exits.
The current market is a seller's market with high demand for businesses.
Transforming businesses for sale involves addressing operational challenges.
Real-time feedback from buyers helps in pricing and selling businesses effectively.
Most buyers are cash buyers, especially in the $300K to $500K range.
Business owners often need help to scale their companies beyond their initial success.
Work-life balance is crucial after years of entrepreneurship.
Partnerships can help scale businesses more effectively.

 Watch the Interview:

Transcript:

Jon Stoddard (00:00.462)
Welcome to the top &A entrepreneurs. Today my guest is Christine McDonnell. Christine has started 10 companies, bought, acquired 10 companies and just launched a broker intermediary site last year and has sold five businesses on it. So pretty impressive record there. Welcome to the show. Yeah, I know. Thanks for having me. Yeah, the five was just in the month of December, which is crazy.

That's crazy. We've done a lot. Yeah, we did 10. So average of 10 transactions in 10 months and it's been a fun, fun ride. So I love it. I love everything about business. Yeah. So let's kind of rewind and talk about how you got here. Starting businesses. I've done that too, but that's not really what the show is about. It's more about, unless you've acquired a business or those startups. So let's talk about a little bit of what, when you acquired a business, was it tuck in? Was it.

Brand new, what was it? Yeah. Yeah. My first, so my first company was cleanology was, which is a house cleaning company here in San Diego. And that was back now I'm dating myself 2003. I started it and I rolled in two cleaning companies over the years. Cause we were doing such a limited tight, you know, area of downtown. And then I acquired a company that did the whole count, the whole county and then another little one. So, and then my wellness spa I had in 2012. Yeah. To 2017.

I did three roll-ups into that one. Small, one was bigger, one was smaller. I got incredible deals. Cause a lot of times these owners are just burned out over it. And then I picked up two spas during COVID, one for free, just unbelievable. So one at a very cheap price. And again, they, you know, I think that there's wartime generals and there's peacetime generals and I'm a wartime general. I like the bad times. I think that's where I've made the most money.

is having these companies during bad times. And then I flipped both the spas like in last year, 2021. I knew eventually COVID would end, right? Yeah. What about those cleaning companies when you started out? Was that you're talking about cleaning offices or homes or what? Residential. You're at the girl that was cleaning every single day for the first year and a half.

Jon Stoddard (02:15.789)
And with a couple of women that spoke Spanish and I didn't know Spanish, they didn't know English. was fun. And I bartended at night. So it was definitely a bootstrap. $300 they started with. I was like 23 at the time. You're kicking ass. That's awesome. Yeah. And was that a company you started or you bought? And how big was it? Yeah, I started that one from scratch with 300 bucks. And then we became the largest privately owned right before I sold five years later.

I exited that, but on those roll ups, it's ironic because I was almost the mafia in downtown San Diego. I would see flyers of other cleaning companies. I would call them up and say, Hey, look, can you stay out of downtown? And in return, I'll give you all my leads from the rest of the county because we're only downtown. And, know, I became buddies and friends and they laugh. They go, okay, cool. We'll do that. And it worked. And then that guy, I acquired his company like a year or two later. So all those referrals I gave him, I technically got back.

We rolled the team in, the manager didn't work out. It's always an integration on an acquisition, right? That's usually the complicated part. What kind of financing stack did you acquire that? Was it just to tuck in or just buying? That's a great question. It wasn't too much. was 40K. He wanted 100. I got him down to 40 because I love to negotiate.

I think I did as we didn't have the I probably did as an axion microloan or I did SBA. Yeah, that's pretty small. Yeah, yeah, yeah. He's staying with it or do you take off leave? No, no, no, he was done. Yeah, no, he was having major health issues, so he need to unload it quick. So worked out. But yeah, we just that's the I mean, that's how you grow the fastest, right? You just grab market share so quickly.

that way and it works out really well. That second tuck in same thing or what would that look like? Yeah, that was a way smaller one and actually paid. So another way, there's so many ways to do these deals. You know that that's what makes them fun. I paid, we paid her off per cleaning for the first year or two. So like all her clients that actually came in stayed with us. We paid, I forget how much per client that transitioned over. So it was a win-win for me. Yeah, both of us. Cause I think she was going to walk.

Jon Stoddard (04:34.955)
Right. And just shut the doors. So I always want the client list. Business is going to shut down. I'm like, no, just give me the client list. Give me equipment, whatever you have. Don't it breaks my heart to see businesses shut down. Right. There's value. There's always some sort of value. Yeah. When you took over, was there a pretty big transition between, I'm the new owner or did they not care or you know, the, your customers? No, no, no. Everybody was great. I mean, we had enough.

impeccable reputation. So we did a great letter, you know, introducing ourselves. And so that integration with clients is always really easy for us, because usually, you know, we're kind of, you know, they're moving up as far, it's the prices though, because our prices are high. I'm always charging a premium in my companies. So sometimes I think we had to adjust for that, right? So we probably had to grandfather them in on their cheaper rates, just to make them stick. And so yeah.

How big were you when you sold it? had two acquisitions and. Yes. So we were still again, I was, I was still in my twenties. So I think we're, we're rev we were right under a million. I was trying so hard to hit the million number. And so we didn't hit it. I forget what the EBITDA was on the bottom or the SD on the exit. Yeah, I can't, I was so chill. And that was 2010. That's 12 years ago and lots of companies ago. Did you sell that through a broker site?

I used, yeah, I used, no, no, no, I used an actual broker. Again, I didn't know how to sell a company back then and just speaking with them and they were condescending. It was so hard to find a good one. I ended up with a decent one. And then that was the only time I used a broker. So all my transactions, was doing all, I just took that same purchase agreement and ran it through every exit I've done, even larger ones where my mentors are like, you need a broker, you need like, I would have lost like 240K.

on one of my ex, the spa exit, because they, it was like, cause it was 580 cash. These brokers were telling me you'll never get more than like 410, I think they were saying. And I sold it all cash within five weeks flat, which is great. And then of course I had to call and tell them that that's, I mean, had $140,000 worth of credit gift cards and prepaid on my books, right? And not the money sitting in account.

Jon Stoddard (07:02.38)
So then I made a deal with the buyers, hey, 60 % of our gift cards actually ever get redeemed. You could see it in the computer. You could look at the history. How about we settle, you know, and I give you that. We put it in escrow count and you pull from that. And then if there's any leftover, we split it. And they used it all perfectly up. Did you like, when you sold that cleaning company, did you like that process? I mean, this is going to come full circle because a few years down the road, you're a broker yourself.

Yeah. So what was that process? You got a cleaning company. It's under a million bucks. I'm pretty sure the pro, I mean, the numbers on that are consistent and city to city. Or did you were on the higher side? for my purchase price? Yeah. I was on a higher, what was that multiple? Cause for service you're getting like two to three typically. And I, I can't remember on the multiple on that one. I know my spa one, cause that one was crazy, crazy high.

So on the cleaning company, the experience with the broker, again, I had a decent one. I don't feel like he underpriced it. I do feel like we got an offer that was too low and he was kind of like, I'm gonna fax it over to you. This is how long ago it was. Like, okay, we're faxing it over. said, and he told it to me on the phone. I said, decline it. Don't even fax it to me. I'm not, you know, so again, sometimes it's unfortunate, but a broker wants the deals done quickly.

And a $50,000 difference in my purchase price is only a $5,000 difference on his commission, right? So I have to stay strong on my asking price, which I did. And that guy ended up buying my business, right? Did you have any reason to sell or are just tired, out from it and wanted to sell? I love the chaos of the startup world and creating something from scratch. I just get these ideas of stuff that needs to be innovated. that was...

Cleaning back then was like, nobody would answer the phone. People didn't speak English. People wouldn't let your dogs be at home. And I love pets. So our girls would like bring treats and I'd always tell my clients, no, your dogs are fine. Don't worry. So we just like really leveled up. So yeah, that's the part I like. So you got your sale in. Was that the first big sale ever? And you're just like, wow, this is fantastic. I hit my bank account. Yeah, that one was important.

Jon Stoddard (09:24.43)
In your twenties when it's a quarter of a million cash in your account, you're excited back then. Again, now it's not that much money, but yeah. Yeah, it's like, you know, I had 37 employees. So you have that weight off your shoulders, right? Cause it was such responsibility to keep them busy and a paycheck and all that, you know, that's during the, so keep in mind that was wait. So I started in 2003. So, so we went through eight and we actually grew 10 % during the recession. Cause we just kind of shifted our focus.

from people in their vacation homes that they were selling or getting taken away to women, to husband and wife that had it, the wife had to go back to work, making maybe a salary of 5K, 10K. So they're gonna pay us to clean their house, right? Cause they're not home and she's working. So that was a justification. So that we shifted really quick to that. And that was good idea. And so it was easier to sell too because, and again, we sold in 2010.

And it's still, we weren't all the way out of the recession. We're still in it. And yeah, we sold it because of those reasons. We were growing during our, we were growing every year. Yeah. I ran across a business. got a, I got a client that's in the cleaning business in the San Francisco area. And we ran across a business that's cleans for Airbnb's and it's really good revenue, reoccurring revenue. yeah. And it's reoccurring. It'd be daily, every three days, weekly. It's very Austin. That is great money.

Yeah. So what did you, this wellness center, how did you come about that? Why did you get into that? And that talk about that growth. Yeah. So that was the next one. So I knew nothing about wellness. I couldn't even spell the word esthetician. That's just ironic. And, we built out Mission Valley, you know, massage and facials and saunas and all these really cool wellness things again, 20 or 2012. That was 2012. And,

And wellness wasn't as hip as it is now. So luckily we timed it right. And Clonix, which is colon-hydrotherapy, that was kind of my main focus. I was like, why can't, it's always in a clinical setting, that service. What is that? I'm sorry. I don't know, people can Google it. Yeah, it's probably hard to explain on this show, but it's just the way detoxing your, yeah. People, most people know it, but yeah, it's that.

Jon Stoddard (11:47.48)
could be done in a spa setting like I knew it could be. So that's kind of what we built the spa around. We were five stars on every, you know, on Yelp and we just had so many reviews and we had an amazing team and that was 30, about 35, 30-some employees when I sold it. We had opened a second location only two years later. The first location we expanded because our neighbor moved out. I mean, that was like hyper growth craziness, but fun, fun the whole time. I had it for five years.

Acquired three businesses under that? Yes. Yeah. What were those? Are competing businesses or ancillary type businesses? What kind of, would that look like? Direct competitors. So again, one was, one was real small. I said, I don't know the details on that one. The second one, she did colon hydrotherapy. had her own center, small, and she just, she was miserable. You could tell the way she talked to me. She came into my spa and kind of was venting and

like hated her company essentially. I'm like, Tracy, I'll buy your company right now. And she was like, wait, what? She was so taken aback. And it was like a week before Christmas. And I'm like, I will. And she's like, just like that. I'm like, yeah, just let me know. And she's like, well, no, no, no, I'm not ready. And then like a couple of days later, she circled back around. And again, that was a really great deal. Her client list, she was self-employed owner operator. So I just took her clients and her equipment.

So that was a really good one. And then I think I paid her upfront or payments. The third one was incredible. She was going, I opened the second location. turned out somebody down the street really knew about us and freaked out knowing we were right down, coming in right down the street. And so she called and said, Hey, I have a sauna. I'm closing down. I have a sauna for sale. Do you guys want to buy it? And I'm shutting down. And I literally got on the phone. I was like, it was an email. And I said, I will buy your whole company.

And then you just have to grab these opportunities because, you know, if you look at BizBuySell, if you look at the listing sites, you know, those people usually price high. But if it's a desperate seller that's burned out, that's usually about to shut their doors, that's where you get the deal. She came in as my manager, her whole team came in, they were great. She came in as my manager. She just didn't want the stress of owning business anymore. And she's a single mom. And then to this day, she's still there. So she's been there for eight years now.

Jon Stoddard (14:11.502)
She's still their manager. It's so funny. And we were so close and worked so well together. But she made, I made payments to her month, tiny payments. So the revenue I was generating the net income from, from rolling her in like was 10 X my month, payment to her. So yeah. And what, what was your negotiating style of that? It's like, because you didn't have the cash or had the cash and didn't want to use it or just like a

Hey, it's better for you because it's better on taxes or what? Yeah, great question. And that one was an insane deal because I got her equipment, everything. I think it was like 17 grand. I paid for everything. It was nothing. We had the capital, but I don't want to use. would rather, you we were getting a five to one return on every dollar I'd put into the marketing machine. So I even personally, I barely took anything out because we were growing so fast and it was just like a slot machine at five to one.

So for her, and I don't know if I paid interest or not, probably, you know, I just, she was cool with the monthly payment. So yeah, I did it that way, but how I came up with how I negotiate and how I did the deal, I sat with like a, like a notepad came in for the first time, met her, saw her spa, saw the equipment, saw her database with the clients, saw her revenue. And I just took one piece of paper and I just know the numbers so well. I took a calculator and piece of paper and I just crunched numbers real quick. And I knew what it would bring in for me.

and just offered her a price, right? Kind of start low and go from there. Yeah. Did you have to do anything with this client list? Like say, it sounds like you are like to be on the high end of the prices because that gives you more margin. Did you have to do anything there, move the prices up? They were priced, she was priced pretty close to me. So, I mean, I forgot this part. In hindsight, the bummer was I never, I would have taken her whole thing over.

We were down, we built out from scratch and cost like so much money. God, it was like 90 K. I was like, dang it. If I knew she was going to close down two months prior, right? I wouldn't have built one, but yeah, you don't know that when it happens. But yeah, her pricing was very close to ours. That was again, I'll just grandfather people in. I'm not going to piss anybody off. I want to keep them. And we, and then we, we'd sell other services. We cross sell, right? Cause she only offered like sauna massage body wraps.

Jon Stoddard (16:34.338)
We brought in body wraps to my spa and additional service. Yeah, no, just, yeah, don't fix what's not broken. Don't rock the boat. You know, keep the salaries the same and the people coming over or even increase them, you know, to match everybody else. Yeah. Did you fire anybody? I mean, I was like, just like take it. I don't want to date this, but you know, Elon took, takes over Twitter and just blops off the head. Three executives right off the top. Do you have to fire anybody? Let them go.

the cleaning company, I said, the cleaning company manager for sure within like a month. Yeah, it was not good. So that was fast. The others, I don't think so. No, I don't. And I don't know if any quit. had a great, again, we have an amazing team and amazing culture, right? And I'm easy going as a boss and you everybody's type A, everybody loves to like be surrounded by type A people, right? That are just working so hard.

and happy clients, great clients. I have like a no a-hole rule. So, and my team knows if anybody's an a-hole, like they're out as a client and I'll tell them, I'll just say like, hey, I'm sorry, this isn't a fit, but there's another great spa over here. And if my client and my team appreciates that, right? Like I don't want them to deal with any headaches. Yeah. Who are you going to for advice? Like somebody, advisors or mentors?

Yeah, no, great question. I, Henry Evans, who's local in San Diego is like a dear mentor of mine. you know, he was the leader of the GK, GKIC group, which is Dan Kennedy, big marketer. I know I saw that and Dan went on for interviews. So excited to see Dan again on stage. so, so Henry Evans kind of, you know, started that chapter here and he's marketing genius, sales genius, just, we became close friends. He's mentored me.

right after the cleaning company. 12 years so far, yeah. Is that a formal relationship? Like you pay him or just a good friends kind of? No, I'm in his mastermind. So I paid for that. Okay. Yeah. And I've given him equity. I've given him, I've done different things with him on different companies, right? So sometimes I'll do hard money promissory note with interest and then

Jon Stoddard (18:55.7)
Yeah, a little piece of equity in the spas that I flipped. He got a good paycheck. I didn't know that I'd them so quick and one for triple what I paid. So he got a good check on that one. So sometimes, yeah, I'll give him equity because again, he helps. Like I would never be able to grow these that fast without mentoring. Yeah. How do you go to them? Do call them just any time with a problem or do you have a set time or? I know right now.

things again, I like not them say outgrew him, but yeah, I'm kind of like don't need mentoring currently. I think cause I'm back in startup phase with the brokerage firm and it's all kind of handled. know what I need to do. I don't really need that, that coaching. So yeah, I kind of go on YouTube now and follow. watch everybody else's doing like Cody sent you this or something else. Yeah. Yeah. I love watching like Alex Hermosie. I'm a big fan of his stuff right now. So yeah, I want to, I want to still learn, but I don't

necessarily need coaching or consulting currently, but that could change. Are you, say you're a type A personality? Are you setting goals? Say, Hey, I want this kind of income or this lifestyle or for me personally, or as a company, both. mean, okay. The spa was insane. we use Trello is like our project management software. It's super easy to use. I've used it for years and a 10 year old can use it. on Trello.

every single, so we had a monthly goal, right? We had an annual goal, which I distilled the monthly goal, which I distilled weekly and then down to the day to the hour. So like we'd have a daily goal, right? To hit our monthly, which fluctuated based on how much sales we did each day. So we'd change, I'd calculate a first thing in the morning, every morning, I throw it on Trello, my team sees it and I'm like, hey, this is what we got to hit today.

And all the team members every few hours will like update it, right? They'll pull a report out of the software and they'll update where we're at. And we just push, push, push, push so hard. We had these like super goals we'd set some months and I would take them all. whole team, the La Costa spa, we hit it. Just these massive stretch goals. They broke a hundred K the month I was in Europe. This was towards the end. I was in Europe. They never called me. They never bothered me. This was my first vacation in like five years.

Jon Stoddard (21:09.038)
and they broke the a hundred K marks. So they had their biggest, that's like a very big number we wanted to hit. They broke it without me there. So that was the point where I'm like, okay, they don't need me anymore. I was sad, you know, like, I'm not needed really anymore. There's three managers in place. They got it. So that's when I was like, I'm ready to sell. How are they compensated? They compensated financially on that or? Yeah, they're hourly plus commission. So.

Yeah, so they were paid really well and they got bonuses and they got, yeah, we would do all sorts of fun stuff, but we had a big lawsuit. I was in the middle of for a year and a half, so I couldn't list it yet. I had to wait for that to be done. So I couldn't list it until six months later. So what happened there? What was the lawsuit about? That's a crazy one. I'll tell that story real quick. What point $2 million? Somebody was in a wheelchair. What was that again? $42 million? No, no, no, no, no. The magic number. $44 billion.

Elon. So, yeah, it was 1.2 million. Okay. And he came around two years later, and yours truly had thrown out the consent form with the signature already. Right. I don't I don't hold paperwork like I'm supposed to. And so he was in a wheelchair. He went to use infrared sauna. He sat on the floor of the sauna instead of the bench. And he burned his butt. This is a true story.

$100,000 worth of skin graphing he had done. Cause again, he was paralyzed from waist down. He didn't, he didn't feel it. And it was a lit, when this came up, they were like, is this fake law? I'm like, I bel, I don't know. I believe it. He's never sued before he works at Kaiser. He's in a wheelchair. I like, just knew it was legit. And my lawyer got the pictures of the skin graphing. And he said, said, I don't want to see him. Like, don't he still emailed. I still do this day. I'm gonna open it. A couple of friends look just the look on my friend's face when they opened it. I was like, I don't need to see that.

It was mediation. It was insane. Like it was stressful. And at the same time, you've got to like, I've got to be motivated. I got to be happy. My team couldn't know. Yeah. that farmers, thank God, I had amazing insurance with farmers and they cut a check for 600K. And we did a trial.

Jon Stoddard (23:23.15)
When you seek an advice about this, do you used to go back to the GKIC guy, Henry Evans, or is that a different person? what did I do? don't know. I'm a lawyer. Somebody that's wise and has been through rough waters before. you like. had other mentors and colleagues, friends. I'm around a lot of entrepreneurs and even back then. So yeah, I talked to some.

I don't think, Henry's never had a lawsuit on a business. So I went to the ones that had big lawsuits and they kind of coached me through it and you can't work, it is what it is. luckily I didn't, it is like, can't, I just can control how I react to it. It is what it is. Am I going to get stressed in my, like, I'm just going to concentrate on growing the company and it'll sort itself out. Is it the deposition, the one where they like interrogate you pretty much? I don't know. Yeah, I think it's called deposition.

That was the hardest thing I've ever done. That was like eight hours straight of just an attorney grilling me, how horrible of a business owner I am, et cetera, et cetera. How did you let this happen? So yeah, but farmers save the day. Woof. Yeah. Well, that's why you have insurance. you sold that one through a broker or how did that happen? No, I did that one. And like that was the story where I talked to my first broker. I talked to another broker.

They both were coming in way less. so I was like, I know I could do this on my own. I know I could get this much. I priced it high because I left room to negotiate. And so, but I still remember where I was sitting when I got the email, when it was a five-muget week site, only had three meetings with three sellers. So I put the ad on Biz by Sell. Let me mention that, right? Cause that's what a lot of people do. So that's why I Biz by Sell spent probably two days writing the copy on the ad.

So was super descriptive. did a full pitch deck. You know, people when they sell their company or when they're raising capital, they do this fancy pitch deck for some reason. I was like, why aren't people doing this when they sell their company? People are visual. So I sat with these, the husband and wife, and I ran through it on a Sunday and then they came into the spa as like clients and then yeah, full price. So that was a 4.7 multiple, which should have been like two to three.

Jon Stoddard (25:43.31)
And yeah, I didn't get to negotiate. So part of me was like, bummer. And then, I told the brokers, this is what I got. And a little bit, a little bit more money. Then you got into spas. No, that was my spa. That was just spas. Okay. So how did you decide to get into being a so I saw how bad the industry is.

And I was doing my own deals, right? I've done all my own deals except the first. So a couple of girlfriends, know, one was doing like 25 million a year, had the company for 20 years. And she's like, Hey Christine, can you just help me? Who was that? Somebody who was doing 25 million a year? Yeah. Yeah. Okay. I can't say which company, but yeah. A staffing firm, large staffing firm. And so she, and she's a friend of mine. She's like, Hey, can I just pay you to consult?

And I'm like, yeah, sure. love this stuff. So I was actually writing all the negotiation emails and stuff. She was negotiating in person, but I was coaching her through it. And then I was writing all the emails with the acquirer. So was a huge company acquisition. So I'd write all the emails and then she'd put her name on it and send them. So I was kind of behind the scenes on that one. And then my next friend, another friend, like mutual friend was like, my God, help me sell my company. So I did that.

And then a third friend at brunch was like, I'm closing my business down. was like, Sarah, you've had it 20 years. It's a PR firm. She's like, yeah, but I'm losing clients. I'm too busy doing something else. I'm just going to shut it down. I was like, no, let's list it. She's like, well, if I get 150K, I'm happy. I was like, let's list it for 300. So she got 300 cash. she said, how much is she? 10 % or 20 % on that deal. was 30. I got like 40, I think some more was at 12%.

that deal, but I was charging hourly as a consultant, but it racked up. Yeah. I didn't do percentage on any of these deals. I was doing hourly, but the hourly like racked up. mean, most of those were pretty much the same percentage. And then, yeah, I was like, let me make this official. What do I need? Turns out you only need your real estate license in California, which blew my mind. This is so weird. And I've had it for 22 years. I had it. I don't use it. I kept it active. Thank God. So we were off to the races last October.

Jon Stoddard (28:02.094)
And yeah, we closed five transactions. if you can just- So this is by the way, this is called the Magnolia firm.co. Why was it called the Magnolia firm? Because my first spa, was gonna, that was the second choice of name for my spa. Instead of Eco Chateau, but my second favorite was the Magnolia house. So I finally got to use it all these years later. I know that's funny.

Yeah. I like where people get their names. How did you find these businesses to sell? We're getting a lot of leads from Microquire and I know you had Andrew on and they're amazing. I love them. It's a great platform. I love what they're doing because somebody- How are you getting these leads from Microquire? Because they give, there's a directory of advisors. So I had to do a bunch of paperwork in February application, they check references.

really great advisors in their directory. So there's directory. So I have a profile there. It shows how many deals I've closed. So yeah, we're getting a lot from there. A lot of women, I think, cause I'm female, mostly my clients were all women in the beginning. And then now, and we are marketing was, it said females all over our website. And then guys were like, well, I want you to help me sell my company too. And I don't discriminate. So was like, okay. So we stripped off female across the board.

I mean, hate to, mean, it's a fact is that men have larger companies right now to exit, but women were starting companies, you know, more than men a few years back. So they'll exit down the road. Yeah. The bigger up going up market, you know, when we're at the 3 million, you know, purchase prices now that those, those are usually led by men. Yeah. And all our buyers, you know, telling you earlier there, 95 % of our buyers are men too.

You did five transactions in December. We closed. Yeah, one of them was my own. One of them was the spy picked up in covid and it closed last. Thank God. I just wanted the other four to go through. Right. Boom, boom, boom, boom, boom. And then mine was on the twenty seven two days after Christmas. So it was a good Christmas. How are you? mean, these advice, these people that come to you through a micro acquire and there are lot of tech firms. I see some e-commerce companies and stuff.

Jon Stoddard (30:24.562)
How are you seeing that different from your service-based businesses, cleaning, wellness, spa? Yeah, because we did a few brick and mortars locally. And so we did three and like, it's just a different beast. And again, I'm used to selling those. it was, yeah, but it doesn't make sense when we could work internationally right now. We have a tech company, a great company in Romania. I just got back from Europe. I went and visited them in person even.

And so, yeah, just we can meet virtually. It's more the multiples are higher. It's easier. And I've done software too. So I have that background in SaaS. Cause I had a software company too. That was the last one. That was the most stressful one. So I know that industry really well. Ecom, we have one Ecom right now. I've never had an Ecom business myself. So those get a little trickier. There's different nuances.

but we're bringing on a manager, managing partner and he knows Ecom really well. So yeah, right now I'm just being picky. We have a wait list. We've had a wait list. A wait list, a list. Yeah. Yes. It's insane right now. It's such a seller's market. We've had one, our fastest close is one day flat, which is insane. So you got this, somebody called you from Microquire. You listed it for some number and a day later it sells.

Well, we found the buyer, she was listed three months, but we found the buyer in the morning and we got him to do due diligence the same day. And then wire the money the very next morning. That was like the fastest from, know, LOI to close money in the bank. We've had others where we took them to market and we've closed within, so listing to close 21 days. We've done that twice.

Again, are small, like keep in mind, these are 300 to 500K purchase prices. These are cash. People are pulling home equity lines. People are pulling from their 401K with the Rob's. People pulled out at crypto before it crashed in stock market. So it's just really busy. Those are volatile investments. And that's when buying businesses is more stable. So people will actually during the bad times is what I hear from other brokers. They said 0809 were like their best years.

Jon Stoddard (32:42.764)
Yeah. Where, where, where are you getting the buyers? How are they finding your sites? I mean, the reason I'm asking is that there's so many people coming into the market, trying to sell businesses, micro require Flippa and you know, Latona's to FE international. There's a ton of them out there. Yeah. It's you, Maven. You should bring Raleigh on. You just launched like six months ago, a couple of months ago. It's called DLM.

Okay, cool. Now he's rad. So we're on there. I know he's just starting out. So we're on that platform. We're on Flippa. They take a massive commission. So I'm always kind of going back and forth. I won't put my listings on there unless like we're a couple months in and for some reason it's not getting enough action. I'll put it over there. That one day close was from Flippa. So it's not that bad of platform, right? They 18,000 buyers. Yeah. I know I was watching that your interview with the CEO. That's insane. What's a massive commission?

Cause I sold the site on Empire flippers and they took a massive commission. they do. They take 15%. Right. Yeah. So I sold it within 48 hours. Kind of like I listed it and it sold and I go, man, should I have probably charged more for that? Yes. Yeah. Wow. And then do they do the entire process for you though? Like LLY purchase agreement, da da da. I mean,

At that point, they had enough history to understand what the valuation is of a business. you know, everybody asked me about this. You know, they asked, there's this one intangible, how many hours you spend on it, and you say 60 or 40, it's not a business they want. If you say four hours a week, it's a business that's going to sell fast. Exactly. Yeah, exactly.

A lot of ours, these owners are genuinely only working 10 hours a week, like genuinely, if even that. So that you're right. That makes it easier to sell. It makes it easier for the owner to ride off to the sunset. I don't like to do earnouts. I don't like to do seller carry. It's very rare at most 20 % down. Again, cause we're getting multiple offers, right? One of them had, well, one came off Empire Flippers. She got locked in the six month thing. They went in 15 % and never sold. That's the one we sold within 21 days.

Jon Stoddard (34:58.668)
So she was like, my God, what was I doing with the Empire Flippers? So yeah, I mean, we had six offers on that 300K PR firm that she was gonna close down. Six offers I had to kind of battle against each other for two weeks straight and everybody kept outbidding each other. And then it was acquired by a larger PR firm. yeah. She's your best friend. I know, right? She's like very happy and we have amazing testimonials on our website and I'm super grateful for that. And yeah. Where's the traffic coming from?

Yes. So, so my sellers are now we didn't turn on. We're too busy to even spend. Right. I was like, why would we turn on marketing quite yet? Which sucks because I'm such a marketer. So now we're starting to turn on. We turn on social media now. I think we've got some Google AdWords running. We get word of mouth. So we get referrals. We just got a client because we did outreach trying to sell another company and she goes, no, I'm not interested, but hey, I want to sell my company. And that was through LinkedIn. So yeah, I don't want it like, like depend on one source.

know, Microquire offers, they're doing them now for 5%, you know, and we're charging 12 to 15%. So yeah, which is fine. They're still sending leads, it kind of slowed down, but now they're overwhelmed that, and we're overwhelmed. He's getting massive. Do you owe him anything if the lead comes from you as a... Yeah, 10 % of my commission, which is super fair. Flippa wants 4 % of the purchase price, just to bring the buyer through.

I negotiated down and again, our commissions are so high already. We're expensive, right? So it becomes a big amount for them. And then we got it down to 2%. So we're like on a higher tier. So you negotiated with Blake? With Amber, who's been there for a while. She's awesome. She's our rep. Shout out to Amber. Yeah. So yeah, I yeah, it's the different sources. So again, know, microquire, if they bring the buyer, it's free, like

So you only, and you talk to them, right? So they're making their money on buyers paying a subscription. it's the buyers pay 2.99 and they- 3.99, yeah. Yeah, so down the road, I'm sure they're gonna start charging more whatnot. And that's fine too, but we're grateful. They send great leads. Yeah, I mean, a lot of them we have to turn down, it's cause again, we're being so picky, which I'm grateful for, but yeah. Yeah. And so what do you do when you see these companies that come to you?

Jon Stoddard (37:23.982)
I don't know. Do you know Marty Fonky? The name sounds super familiar. Is he in Epic also? He's in Epic and he's also one of you for Andrew Gudzicki. yeah. He's advisor. Yeah, I heard good things about he, you know, he takes a look at these companies and go, well, you need to, for, make this sellable, you need to do, do this, this, and this, and, and we'll help you market. Interesting. Yeah. We're just taking them and we're fixing them as we go.

because I'm getting real-time feedback. So I price it appropriately, a little high, most of them actually, based on where they're standing right now. A lot of the ones we're working with, these are people in their 30s, they're young, right? This is their first exit. They've had the company for six years. So they want to sell now. There's no, entrepreneurs didn't do, you know, everybody gives a hard time about an exit strategy. you should have done an exit strategy the last six months. Us entrepreneurs started our business overnight. There was no planning strategy, right? So are they really going to do that? No.

They come to me, they're like, we want to sell right now. I'm like, okay, then we'll get you listed within three, like we could get them listed, build everything out within two to three, no, 10 days. It's crazy. The deck, everything, data room, financials, all that we put together for them. have an amazing team, so I don't want to take the credit. And then we hit the ground. We're fixing the company as we go. It's crazy. Cause I'm getting real time feedback with the objections, right? The buyer's like,

They don't have a biz dev person in place. And then we put the biz dev person in, the CEO is doing too much of the work. So then we start taking them off their plate and give it to somebody else. my God, the owner, know, the company's wrapped around the owner. Those are the ones I've, I mean, I like a challenge. So I've done a few of those already, but we're stripping the owner's face, you know, the owner's face is all over the website and everywhere. And I'm like, we got to strip it off. Like the company's wrapped around you and you're not staying. Yeah. So.

Yeah. And those personality ones, they are high margins, but you got to extricate yourself from that picture. Yeah. Or it's not sellable at all. Or we got the Nate, we got people that are selling software that dumped so much money in and they didn't hit revenue and they want to sell and they want to get what they dumped in 80 K to build an app. And they're like, well, I'm going to sell for 80. And I'm like, I don't know. What's your argument there when you have these discussions? Cause, man, I put three years of coding there. Yeah. I don't care. Yeah.

Jon Stoddard (39:46.112)
No, neither will a seller. I mean, or buyer. No, they're usually not. I mean, it's going to shortcut, you know, the time and the money it took to do that, but you're never going to get what you put into that. Right. Especially if you're not at revenue and nobody, won't ever touch a zero revenue. We need at least 200 K net profit for us to even consider a listing. Right. And then usually we get about a three X, you know, so usually we can list. So two and a half, three X depends on the company on the net. So yeah, that's a bare minimum.

I know it's like you tell their baby that they're, Andrew said it too in his interview, I laughed because that's how I feel. It's like you just told their baby is ugly. Ugly baby, really ugly. Yeah, right. But I try to be very nice about it. So we just turn them down real quick. Yeah. Are you getting leads, any listings from other places? Yeah. Biz by sell. And this is a fun fact, interesting fact. All our buyers, I'd say 90 % are coming off biz by sell.

And I know a lot of advisors, people could look down on that platform. I love it. And it's- I don't know if you noticed, I mean, they used to have prices ranging from, you know, $20,000 a franchise doing zero to, you know, you know, $10,000 to $50 million. Now that the filter just shows 3 million top line. that's the biggest company you could sell. I know. Yeah, that's true. Is it three though? Cause I have a 3.2 on there right now.

Well, that's just a filter. Yeah. interesting. gosh. Well, that's not good. Yeah. So buyer and then my big spy sold was off this by sales. I'm a massive fan of that platform for buyers. That's where we're getting the buyers. One came off of a micro-cry. I don't think we've gotten a buyer yet from there. Some great potentials, but

Yeah, we do a lot of pre-qual. We have a whole automation. have CRM, we have digital NDA that kicks the CIM automatically. So we've built a lot of automations out. So that's the other reason why we can do more listings and more sales and flip them quickly. So what's your plan for this? Do you like it so much that you're to keep doing it for another three, five years and keep it this time or flip it?

Jon Stoddard (42:01.345)
I never can answer that question, but just by chance, it's usually a five year. It seems to be like that's how long it takes me to build systematize everything's managers are in place. I'm not needed. It used to usually is a five year mark, but I never like plan on like, you know, if it's fine, I'm to keep doing it. And so right now, and we haven't really announced this yet and it's almost official. we want to, I want to scale really big when I build something, I want to be the biggest.

cleaning company in San Diego. I want to be the biggest spa in San Diego, which happened. Like I go big, but I, this time around I was like, I'm exhausted. You know, been an entrepreneur for 18 years, 19 years. I go, I'm only going to do it if I bring in like a great partner and then we could go really big, really fast. This market's wide open for innovation. And so yeah, right now we're doing business dating. That was his term. I love it. Right. So it's a couple of months he's in my firm, he's working for free and making sure we work really well together.

And then we'll have an operating agreement and all that fun stuff soon. But yeah, I mean, we can really blow it up. He's great at operations. He's great at tech systems. And I'm like the sales and marketing. Yeah. So it's a good kind of pairing I'm really excited about. So yeah, we're going to go real big. We already have international listings. So how did you know what you are missing or you're, you're not good at to be able to turn it over to somebody else?

Yeah, because I've had partners before in my, so I'm always like on the fence, right? Because the exits I had that were the biggest, I didn't have partners. So I could do all that and I could, I could hire someone to build out automations, you know? I can manage a team, I could do, or I could put a manager in place to do operations, like a COO. So yeah, in this case, again, I just, yeah, in this case, I was like, this makes more sense for me. I could do it all, right?

but I'm like pretty tired. I don't wanna work those 80 hour weeks anymore. I've done it enough years. I'm down to 20 to 30 right now, which is nice, right? That's what I want at this point in life. So yeah, and he kind of has the same ethos of like travel and not working, like this hustle, the hustle mentality, you need that in the beginning, but after a while you're like, okay, like time out.

Jon Stoddard (44:19.469)
So what do you do with the rest of the hours in your day? Where are you located at? I'm in Tucson, Arizona. Okay, cool. Well, yeah, I live in San Diego. So it's like, you know, go for a walk around the beach. It's workout. It's, know, hang out with friends, happy hour. I mean, all the stuff that I didn't do for so many years. I mean, I didn't take a vacation for years. didn't date for years.

I've been working since I was 11 years old, which is pretty crazy without really a break at all. My dad had his own company and I would be the little secretary answering the phone when I was 11. So I've been working since then, right? And I love it. I love business. What kind of company was that? That was HVAC, which is crazy. HVAC is so hot right now. That's why I was like, so... It's hugely hot. It's crazy the rollups in that sector. I love telling the story of HVACs because there's a buddy I know that owns

a whole bunch of HVACs. He's funded by a private equity firm. And he goes, look, these guys that just come out of high school, don't go to college. I'm making them multimillionaires. Because he's rolling up their companies. He's right. He'll buy them for 15 or $25 million that they've owned for 15, 20 years. I make them multimillionaires, you know, and they're just usually military guys or just high school graduates. They're no college graduates.

Yeah, I know. And that was my father. barely graduated high school. he, you know, for 20 years, he still climbed on the roof. He loved it. And it was in Lancaster. I mean, it gets 120 out there. I would, at 11, I would get people cussing me out because there's no air conditioning. It's 120 out. My dad grabbed the phone. He's like, do you know you're cussing out an 11 year old? And I had this like voice. And to this day, everybody calls it, know, Christine's phone voice.

Cause my voice will change when I'm on the phone, right? Like more professional, more older to this day, right? And it, yeah. was The reason I was asking like, what do you do the other time? I was talking about the Tim Ferriss where he forced himself like, I'm working too much. I'm going to focus on my life, which makes me focus on putting the right people in the right spots to run the business. That's my all time favorite book. That changed my life. That book when it came out in 2010, I think it came out.

Jon Stoddard (46:35.181)
Yeah, the four hour work week. That's, that changed everything for me. I left for Thailand. was running my cleaning company, worked insane hours, but I had a manager. I was micromanaging her like crazy. I feel so bad for her in hindsight. I do not micromanage anymore. So I left for Thailand for two weeks and I was 25, never left the country after reading that book because he had that list of countries that were least expensive to travel to. And again, you got to step out of your business. You can't be in the mix. can't, you got to work on it. Like micro.

you know, Michael Gerber teaches too. So I'm a massive Tim Fiala book changed my life for everything. I just got back from Europe this week. So I was in Europe for two weeks. Where'd you go? I was working a little, my team was like, man, you were working a lot. They thought I thought I wasn't working much. I don't know how much I was working, maybe like two or three hours a day. I went to Croatia. I went to Romania. I stopped over there to visit my clients that are there. So that was fun. And then went to Turkey. So Istanbul and Izmir.

And those were three countries I hadn't hit yet. was the- You know, there's a business over in Croatia. Would you sell something over there? Yeah. If the net, if the margins are good, but it is a struggle. So even this one, right? It's going to be a US buyer. I know for sure. But there's a little bit of hesitation about it being Romanian company. everybody outsources to Romanians already. So, and these, the workers is behind, they do mobile app advertising.

And so, yeah, if anybody listening wants info, me know. But they work directly with the large agencies. 70 % of their clients are in the US. They got clients in UK, Dubai, around the world. No clients in Romania. So it's gonna be a great, you know, that's an acquisition without a doubt. That's a big agency that's gonna grab them and roll them in because it's strictly maligned. Yeah, their risks are mitigated. I mean, they can control those, you Yeah. Yeah, some guy over here in the United States just go,

yeah, I'll just hire all the programmers and take this $1 million business in Croatia and not know anything about the landscape of, you know, employees in Croatia. Yeah. Okay. Yeah. But again, a lot of companies outsource already, right? So, you know, they're loyal, they've had a team forever. So it's like, you're buying the structure infrastructure. They've got some proprietary tech, they're building more. so yeah, it's a great company and the founders are really cool.

Jon Stoddard (48:56.941)
So they're gonna go again in their thirties, they're gonna go on it to web three and NFT and crypto, right? So we got three listings right now where they're younger, know, guys in their thirties, co-founders, and they're ready to go into that world. It's getting popular right now. So I'm looking at your site right now. What's the coming soon mean? Profitable premium activeware, you're doing some pre-ads on this.

We have, yeah, we're so, we have signed agreements with them, engagement agreements. So, but again, we need 10 days to like launch each one. but they, yeah, they're on the wait list, but they've already paid. So I was like today, I was like, Hey, Lauren, put those up as like a teaser because we don't, we don't have the valuation exactly dialed in on one of them. Like we were writing the ad copy. So it's like just a little teaser on both of them. Cause you know, people go to our website. Yeah.

And what about this top rated subscription box and men's niche? Subscription box are so hot right now. We sold through two or three back to back super fast. It's really hot. Reason being it's like it's recurring revenue, right? You've got that recurring revenue model. You can work from home or anywhere in the world. You could just have a fulfillment center doing the fulfillment. Some of these owners were doing it.

at their home to save money. And they were already like one was netting 170K a year. And so they still were doing for her poor husband was doing it actually. So they're hot right now for some reason, but that's the first men's those were female ones. This is the first men's one we're doing. They get a lot of product donated to them. So their cost of goods is like nothing, right? Cause they want to get these those companies want to get the product in the hands of guys and.

So they're getting a lot of it donated into those boxes. Yeah. So. So this one I'm looking at right now, the customer support consulting agency, how is that sold to somebody new? Is that big enough to that the owner's not involved? And we just listed two weeks and we already have one LOI, the deadline, we extended the deadline from today to Monday because we have so much action on it and everybody's in the data room and everybody's trying to rush looking at the financials and everything.

Jon Stoddard (51:11.233)
And we provide a lot of due diligence upfront, which is rare, just everything transparent so they could write an LOI that's strong and they're comfortable with, and then it makes the PV process easier. So that one we listed two weeks ago, the owner is staying on, which is super rare and he's amazing. So he's staying on the team. Why does he want to stay on? He has a full-time job and he's doing this about 20 hours a week. He just, this is the number one reason like.

Most are listings. Like I said earlier, they just don't have the skill set to take it. They took it to this point. They did the startup part from the ground up and now they're stuck, right? They kind of topped out because they need a different skill set to take it from there to the next level. And, know, five, six years in business again, young, you know, we get bored. We just do the next thing. So yeah, that's very rare that an owner will stay on as the operator, right?

Yeah, I was tempted to grab that one. Are they all you said talked about that earlier, all cash offers or some of them contingent upon financing? Yeah, when you're at the 300 to 500 K mark, it's all it's all cash. Again, they're coming in with cash because there's multiple offers and I'm kind of like upfront. Like, we got multiple offers coming in. Full price all cash right now on the table. Like, yeah, you got to be at least there. We have one.

It's a million dollar listing that just went under LOI last week. And they're doing SBA, which that's the first one. I always try to talk people out of it. My spa was an SBA loan took three and a half months. It just takes forever. And they just like, woof, they'll rip everything apart. So yeah. call it a financial proctology. I bet that was unpleasant. And then told that even with your credit score at that time, 850 and

You know, I had the financial position. goes, you're just not strong enough. It's a $2 million business. So I had to bring somebody on. man. And it's funny because they base it more on the person individual than the company necessarily. Yeah. It's like, wait, wait, wait a minute. thought the business was buying the business. Yeah. Cause you need to be strong enough just in case like, well, how was that going to happen? I mean, I'm going to pay off the loan pretty, you know, the dirty little secret that a lot of people don't know. I didn't even know.

Jon Stoddard (53:34.189)
until I went to the conference, the international conference for business brokers is that we get 2 % of that loan. If I say, hey, let's do an SBA loan buyer and like, I've got a great banker, like let's use him. We're getting 2 % of the actual loan amount on top of like our other commission. And so, and again, I'm still turning people, don't want my seller to with It just longer, it just takes too long.

takes way too long. just don't, especially in this market, it's just not too fast paced and time kills deals. That's my favorite saying. Like we got to run. You know, I had one seller that was just so stressed out during due diligence. We were going to close in three days. And she's like, I need to take a personal day. I was like, you can't take a personal day. Like you could take unlimited personal days in three days. Like we're, have to close and we have to wrap this up because there could be

any sort of war, 9-11, I mean, I can name a million things, you know, maybe the buyer gets super ill. Like the deal could blow up at the last minute. Thank God all of ours are gone through from LOI all the way to the end. Cause I'm just pushing and pushing, pushing and like, yeah. So I'm relentless. I'm act like something's gonna happen the next day, right? It's weird. I think you have an A type personality. Yeah, I do.

Well, that's very cool. And we've already hit an hour on this. So Christine, thank you so much for being on top &A entrepreneurs. Thanks, John, for having me. I appreciate it. That was fun. Yeah. Well, good deal. Let me

Thanks for watching this video. Make sure you're a subscriber by clicking on this button right here down below. And if you want to watch more serial acquirer interviews, click on this button right here. If you're ready to buy your first business, get my course at dealflowsystem.net right here. Take care. Cheers, John.