10 Things We Can Learn about M&A and Entrepreneurship from Our Interview of Jeanette Holm - Award-Winning Entrepreneur E12: watch here
Here is what my team and I learned from this interview: (These are notes from team members, writers, sometimes AI, and even listeners who submitted what i learned loosely edited and shared here) - If it seems a bit unrefined, you're reading our notes, so. yeah. -Ron
Concept 1: Start Small, Dream Big
When it comes to starting a business, it is easy to be overwhelmed by the thought of the potential risks and obstacles. However, it is important to remember that it is possible to start small and dream big. This is the approach that Jeanette Holm, an experienced and award-winning entrepreneur, has taken. With fifteen years of experience starting, growing, buying, and selling businesses, Jeanette is passionate about building value in a business through innovation and empowering people.
Jeanette's story began when she was 19 years old and had to take a class in school that taught her how to start and run a business. She and her classmates decided to go to Paris to an area outside the city called La Santiere, where they could buy clothes cheaply. After having a lot of fun and buying clothes, they returned to Sweden and sold them for double the price. This experience was Jeanette's first encounter with being an entrepreneur and it was also the most fun class she had in school.
Jeanette then went on to live in the United States for five years. She completed her university degree in Santa Barbara and San Francisco and worked in San Diego for one year. This experience was valuable for Jeanette, as she was able to learn from the American culture of pushing people forward and giving them positive reinforcement. After returning to Sweden, Jeanette's confidence had grown and she decided to be an entrepreneur and make it big.
Jeanette's journey has been one of success. She started her first company when she was 27, but quickly realized that she didn't have the skills or resources to make it a success. She then decided to take a different approach and started small. She began by selling items online and then grew her business to create almost 10,000 jobs and over 1,000 employees at a single company.
Jeanette's story is a great example of how it is possible to start small and dream big. Her experience shows that it is possible to be successful in business without having to take on too much risk. Her core strengths of strategy and vision, leadership, creating systems, order, and healthy finances, and increasing shareholder value, have all helped her to achieve success. Jeanette is now a founder at Adventos, a small investment firm that buys and rolls up small to medium companies in Europe.
Concept 2: Learn From Mistakes Quickly
Jeanette's story is an inspiring one and proves that it is possible to start small and dream big. With the right mindset and determination, it is possible to create a successful business. However, it is also important to learn from mistakes quickly and not let them define you.
Jeanette was able to start her business by identifying an opportunity in the Swedish market and utilizing her knowledge and skills to make the most of it. She worked hard and the business quickly grew to the point where she was able to put a CEO in place and focus on learning how to build businesses.
Jeanette then decided to grow her business by buying other companies, even though she had no idea how to do it. She was able to make two successful acquisitions, adding 25% of revenue to her business and increasing her profits. However, she then made the mistake of buying a toy company without knowing anything about selling toys online.
This mistake cost her time and energy, but it was a valuable lesson. Jeanette was able to learn from her mistake quickly and move on. She was able to recognize that she was not an expert in the toy business and that she should focus on her strengths.
Jeanette's story is an inspiring one and proves that it is possible to start small and dream big. With the right mindset and determination, it is possible to create a successful business. However, it is also important to learn from mistakes quickly and not let them define you. Making mistakes is inevitable, but it is how you respond to them that matters. Learning from mistakes quickly and moving on is the key to success.
Concept 3: Acquire Businesses To Create Value
Jeanette's story is a great example of how to acquire businesses to create value. After running her own businesses for 12 years, she realized that she wanted to do something different and sold her five companies to her two CEOs. This was a great move for everyone involved and enabled Jeanette to take a break and reflect on how she could have done more.
This reflection led Jeanette to form the Advantage Group with four other partners from Norway, the UK and Germany. This group focuses on buying and building businesses, and they have already closed their first big deal, an HVAC company in the UK. They have also identified a huge gap between entrepreneurs and those looking to buy businesses in terms of how they view value.
To bridge this gap, Jeanette created the POCS formula, which stands for profit, owner dependency, cash, size and structure. This formula is designed to help entrepreneurs understand how to build value and get more out of their businesses when they are sold. It also encourages entrepreneurs to think smarter and build value, so they can get paid for their efforts.
Jeanette's story is a great example of how to acquire businesses to create value. With the right mindset and determination, it is possible to create a successful business. By understanding the POCS formula and learning from mistakes quickly, entrepreneurs can create value and get paid for their efforts.
Concept 4: Maximize Profitability For Buyers
The POCS formula is a great tool for buyers to maximize profitability. This formula stands for Profits, Opportunities, Capabilities, and Structure. By understanding each of these elements, buyers can make informed decisions about the business they are buying.
Profits are the most important factor in the formula. Buyers want to buy businesses that are profitable, as this is the best way to ensure that they will make money. The value of the business is usually set by a multiple of profits, so it is important to make sure that the business is as profitable as possible. This can be done by looking at the company's financials and understanding what is driving its profitability.
Opportunities are also important to buyers. They want to be sure that the business has potential for growth and expansion. By looking at the competitive landscape and understanding the trends in the industry, buyers can identify potential opportunities.
Capabilities are also essential for buyers. They want to make sure that the business has the right capabilities to succeed. This includes understanding the business's processes and systems, its marketing strategy, and its customer service. It is also important to make sure that the business has the right people in the right positions.
Finally, buyers need to understand the structure of the business. This includes understanding the legal structure, the ownership structure, and the corporate governance. It is important to make sure that the business is structured in a way that maximizes value for the buyer.
By understanding the POCS formula and applying it to their business, buyers can maximize profitability. By looking at the profits, opportunities, capabilities, and structure of the business, buyers can make informed decisions and create value for themselves.
Concept 5: Increase Profit Through Optimization
The POCS formula stands for leads, conversion rate, average transactions per year, value of each transaction, gross profit margin, operational overhead as a percentage of sales, and lifetime value of the customer. If a business owner can increase each of these levers by 10%, they can increase their profits by 158%. Although this may seem like a daunting task, it is easier than it seems.
Leads are the number of customers that enter the business. Increasing the number of leads can be done by increasing the business's visibility, such as through advertising or marketing campaigns. Conversion rate is the number of leads that become customers. This can be increased by improving customer experience, such as by providing better customer service. Average transactions per year is the number of times customers buy from the business. This can be increased by offering promotions or discounts. The value of each transaction is how much each customer spends. This can be increased by offering more expensive products or services. Gross profit margin is the revenue minus cost of sales or cost of goods sold. This can be increased by negotiating better prices with suppliers or by increasing the price of the products or services. Operational overhead as a percentage of sales is the cost of running the business. This can be reduced by streamlining processes and reducing waste. The lifetime value of the customer is how much the customer is worth over the course of their relationship with the business. This can be increased by providing value-added services or by offering loyalty programs.
By increasing each of these levers, businesses can increase their profits. However, this is not enough to make the business sellable. The entrepreneur must also separate themselves from the company. This can be done by putting a management team and a CEO in place. This is important to buyers, as they do not want to buy a business where the entrepreneur is the most important person. The buyer also wants to see normalized profits over the last three years, so the entrepreneur should focus on profit before they sell the company.
In conclusion, increasing profit through optimization is possible by understanding and applying the POCS formula. By increasing each of the levers, businesses can increase their profits by 158%. However, to make the business sellable, the entrepreneur must also separate themselves from the company and focus on profit. By doing this, buyers can maximize profitability and create value for themselves.
Concept 6: Size Increases Value Significantly
One of the most important levers for increasing the value of a business is size. Size increases value significantly because it attracts institutional buyers and financial buyers. As a business grows to a certain size, usually five to ten million dollars in revenue, these buyers become interested in the business. At this point, the business is usually valued at 8 to 12 times profit, which is a significant increase from the 3 to 5 times profit a smaller business would be valued at.
This size increase can be achieved in several ways. One way is to buy multiple small businesses and combine them into one larger business. This can be done by either merging the businesses or buying them and running them as separate subsidiaries. Another way to increase size is to grow organically. This requires a lot of time and effort, but can be done with the right strategies.
Size increases value significantly because it attracts institutional buyers and financial buyers. When a business reaches a certain size, these buyers become interested and the business is valued at 8 to 12 times profit. This is a significant increase from the 3 to 5 times profit a smaller business would be valued at. To increase size, entrepreneurs can buy multiple small businesses and combine them into one larger business. They can also grow organically by applying the right strategies. In either case, size is an important lever for increasing value and should not be overlooked.
Concept 7: Build a System, Not Dependence
One of the most important strategies for building a system, not dependence, is to create a culture. A strong company culture can be the foundation for a system that runs without the owner’s direct involvement. Jim Collins’ book, Built to Last, is a great resource for entrepreneurs looking to create a strong culture that will drive the business forward. A strong culture can help employees stay focused, motivated, and engaged. It can also help attract and retain top talent, which is essential for building a successful business.
The next step is to create a structure that can support the business’s growth. Michael Gerber’s book, The E-Myth Revisited, is a great resource for entrepreneurs looking to create a structure that will allow them to scale the business. A structure that is designed to support the business’s growth can help the business run without the owner’s direct involvement. Mike Michalowicz’s book, Clockwork, is another great resource for entrepreneurs looking to create a structure that will allow them to scale the business.
The last step is to create a critical output. This is the measure of success for the business and is essential for creating a system that runs without the owner’s direct involvement. This measure of success should be measurable, achievable, and realistic. It should also be aligned with the company’s mission and values.
In conclusion, size increases value significantly and is an important lever for increasing value. Building a system, not dependence, requires creating a strong culture, a structure that will support the business’s growth, and a critical output that will measure success. By following these steps, entrepreneurs can create a system that will allow them to scale their business and increase value.
Concept 8: Measure Everything For Success
Measuring everything is essential for success in any business. Whether it’s a babysitting business or a tech company, having the right metrics in place to track progress and make informed decisions is key. Measuring helps entrepreneurs identify problems before they become too costly and can provide valuable insights into what’s working and what isn’t. By measuring everything from website visits to customer satisfaction, entrepreneurs can get a better understanding of their business and make better decisions.
Having an effective measurement system in place also helps entrepreneurs feel more in control. With regular reports and key performance indicators (KPIs) in place, entrepreneurs can quickly identify any issues and take corrective action. This can provide a sense of calm and confidence, which is essential for any business owner.
Finding the right CEO is also important when it comes to measuring success. The CEO needs to understand all facets of the business and be a culture bearer. This means they need to understand the values, processes, and goals of the business. It’s also beneficial to train CEOs from the bottom up, as this helps them understand the business better and be more effective.
Ultimately, measuring everything is essential for success. By having the right metrics in place, entrepreneurs can identify problems quickly and take corrective action. This can help them feel more in control and confident in their decisions. It’s also important to find the right CEO who understands the business and is a culture bearer. By following these steps, entrepreneurs can create a system that will allow them to scale their business and increase value.
Concept 9: Leverage Other People's Money
One of the most important aspects of growing a business is leveraging other people’s money. This is a strategy that is often overlooked by entrepreneurs, but it can be hugely beneficial. By leveraging other people’s money, entrepreneurs can reduce their risk and increase their potential for success.
Leveraging other people’s money can be done in a variety of ways. One way is to use a bank loan. This allows entrepreneurs to access capital without having to put up any of their own money. This can be a great way to get started, as it allows entrepreneurs to access funds without having to take on too much debt. Additionally, it can be a great way to finance a big purchase or expansion.
Another way to leverage other people’s money is through venture capital. This is a form of financing that is provided by investors who are willing to take a risk on a business. This can be a great way to access large amounts of capital without having to put up any of their own money. However, it can also be a risky proposition, as investors may not always be willing to invest in a business.
Finally, entrepreneurs can also leverage other people’s money through mergers and acquisitions. This is a great way to access capital and to expand a business quickly. By merging with or acquiring another company, entrepreneurs can gain access to a larger customer base, more resources, and new technologies. This can be a great way to increase the value of a business without having to put up any of their own money.
In conclusion, leveraging other people’s money is a great way for entrepreneurs to reduce their risk and increase their potential for success. By taking advantage of bank loans, venture capital, and mergers and acquisitions, entrepreneurs can access capital and expand their businesses quickly and easily. With the right strategy in place, entrepreneurs can leverage other people’s money to create a successful and profitable business.
Concept 10: Focus On Profits And Growth
One of the most important lessons for entrepreneurs is to focus on profits and growth. When starting a business, entrepreneurs should focus on what they know and become good at the skills they need to buy and roll up businesses. Additionally, when buying a business, entrepreneurs should not make too many changes in the beginning as it can disrupt the value of the business. After buying a business, entrepreneurs should take it slow and charm the pants off everyone. This will help ensure that the business is not ruined after the purchase. When making changes, entrepreneurs should be careful and make sure they understand what is going on. Finally, the POX formula should be followed: focus on profits, make sure the company is not dependent on you, focus on cash flow, and create a well-oiled machine. By following these steps, entrepreneurs can ensure that their businesses are successful and profitable.
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