Freddy is a travel hacker. Scaled a 7 figure business and exited in 2019. Also, he started and bought 2 other businesses.
He's been an entrepreneur since the day he was born. His passions include anything that a small business owner has to keep up...
Ronald P. Skelton - Host -
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Ronald Skelton 0:06
Hello, and welcome to the how to exit podcast where we introduce you to a world of small to medium business acquisitions and mergers. We interview business owners, industry leaders, authors, mentors and other influencers with the sole intent to share with you what it looks like to buy or sell a business. Let's get rolling.
Hello, and welcome to the how to exit podcast. Today I'm here with Freddy Lansky. Freddy is a serial entrepreneur with one exit and two acquisitions. And we're going to chat about the lessons and stuff he picked up from those. Man, thanks for being on the show today. You're coming in from where like Mexico or Mexico City?
Freddy Lansky 0:25
Yeah. Yeah. I grew up in Atlanta, Georgia, like the suburbs. And I moved to Mexico City about seven years ago after just being nomadic for five years. And I was working on my first business and freelancing. But yeah, just kind of around, 30th birthday, which was about five years ago, six years ago. I just got tired of moving around constantly. So I ended up with Mexico City as a home base, which is nice. It's very close to the US, but it gets all the same benefits and tax benefits, healthcare, savings, etc. Living abroad.
Ronald Skelton 1:20
It's interesting. So let's kind of start off with the origin story. Now, this is a acquisitions and mergers type of podcast. So you've done so many things, just kind of keep it to the acquisitions and mergers. But how did you, I always joke around so you were born and then now you're on my show. Can you fill in the gap on how you ended up on an acquisitions and mergers podcast?
Freddy Lansky 1:41
Yeah, well, probably you found me because in 2021, I was looking ferociously to find a business with an SBA loan. I got pre approved for the loan at different banks and things like that. But at the time, the market was red, red hot. And it turned out to be a blessing in disguise, because a lot of those businesses that were selling, especially in the internet business space, like you know, SaaS and E-commerce, let's just say a business that was selling for 2,000,000 in 20 21 is now worth a million in 2022. Even if the revenue and the profit is the same, because this, the valuations were so high. So I was kind of going on a podcast, read networking, just trying to find this, this beloved off market deal that never happens. I ended up with a much smaller acquisition this year. And then for that reason, I ended up on a lot of podcasts and reviews, and that's probably how you heard my name. Since then, I've bought a much smaller business off market. It's a ecommerce site that teaches people how to resell sneakers. Going back to my origin story, I got fired from a bunch of corporate jobs. Then I moved to Buenos Iris to just improve my Spanish and it was there that I had met the first, well, there were digital nomad didn't exist in 2010. But I guess you could call it proto digital nomads, people living there with internet businesses and, and a lot of freelancers as well. And so that started giving me ideas of trying to start my own internet business. And I linked up with a friend of mine who was already teaching chess online, find clients through word of mouth and Craigslist and said, look, there's this new website called YouTube that you can just upload videos. Why don't we upload you know, chess videos and use that to promote your classes. Then we had a website and social media. And we started with just selling his time to selling actual classes on Skype. But then we actually started selling the videos themselves and putting the previews of these chess videos on YouTube and hiring other chess masters. And then we ended up moving up to some of the most famous players in the world. And we by the time I had sold that business, we had 1000s of courses on and every single other company that was doing what we're doing wanted to list our third courses on our website as well. So we worked a lot with affiliates. And yeah, we had we scaled it to low seven figures. I sold for mid six figures sum. Started another business called Points Panda. I acquired a very few small blogs to get the SEO going. But really it was starting that business from scratch. And the main product on that business was teaching, like a consulting service, teaching people how to you know, open the right credit cards and how to transfer their points to get on business class flights for basically free. And that business was going great until COVID hit. Basically killed that business. Since then, I've just been working on the SEO side of things making a little bit of money with credit card affiliate sales and
yeah. And then, and then I've moved to try and get an acquisition, failed at it. Thank God I failed at it. The market was so over jacked up in 2021. I still hope one day to get a, you know, seven figure business with an SBA loan, you know. Now that the market is cooling off, I think that's going to be a project for 2023. Right now I'm just working on getting this business. That's the trailing 12, about 50 grand profit on 100k revenue. My goal is to get it to about 200k profit, sell it for maybe 800k to a million profit. And then I'll have not just one major exit, but two on my back. And I talked with a lot of investors, they said one isn't enough, they said two is the magic number. If you have two good exits from either starting a business from scratch, or from buying one and you have, you know, tripled or quadrupled the profit and the revenue, then investors are willing to talk to you and try to do some kind of mix of getting a business with a mix of investors and SBA loan. I guess, like I said, it was a blessing in disguise, that I think the market was just insane in 2021. I mean, people are paying a million dollars for a business that was doing 100k net profit. The numbers made no sense. I mean, it was the world was upside down. People were paying more for passive investments than they were for active ones. Right? So then like literally all my friends that just stopped working because they're like, well, I can make more money in crypto and stock trading and literally just doing nothing than to invest and deploy that capital into an active business because the multiples were so high, right? Like, why are you going to pay a seven or 8x multiple on a business that takes tons of time to run, when you could make the same amount of money on a single family unit of real estate, right? It didn't make any sense. But anyways, upside down world is over the last few months, the whole markets deflated and things are a little bit back to normal. So everybody's going back to work apparently doing productive things.
Ronald Skelton 6:51
Yeah, I actually think it's gonna come down a little bit. For the old, you know, the space you were talking about is like software, SaaS, websites and stuff. They were overpriced for a while. And I haven't looked at him, I kind of just ignored them because they were overpriced. Been focused on the kind of what I referred to as boring companies, right. Brick and mortar, mom and pop businesses that are doing seven figures. Does those still held to a multiple of 3x. You know, between 1x and 3x, depending on the industry. There were a few outliers there that were a little bit higher than that. Right now, let's just jump back into this talk about your exit for a little bit. What was the biggest lesson you learn from the exit? Was there anything you would have done different when you, you know, sold the, the, the chess company to your I think you showed up to your partner, right?
Freddy Lansky 7:40
Well, like most people that sell yeah, my partner bought me out. And then he ended up selling to a much bigger company. So in chess, a lot of businesses, especially in Europe, they're not actually profitable. They're just like, funded by these, like billionaires that do these massive nine figure funds. And they just basically they make money by like getting money from those funds, or whatever. And so I sold to him, he sold to a bigger company, and then he ended up working for that company. So he got a little bit more than I did or not, I'm not really sure how much he got. But he also had to continue working in the chess industry. And my partner was the chess player. I enjoyed playing chess, but it's not like my my passion like it was for him. I was ready to move on to something else. I did for eight years, right? Made a lot of mistakes along the way. Probably the biggest thing I would have done is prepared the business to be sold, right, or at least I don't know, I wouldn't say like things were in a bad terms with my partner, but like, things are getting a little bit tense, because he had quit his corporate job about two years earlier. And he was really trying to grind on this 50, 60 hours a week. And you know, I'm not lazy by any means. But I have other hobbies. I was trying to you know, he has a family, wife and kids and none have really other things going on. He just wanted to narrow focus on the business and I had other things going on. So I didn't know that he was working a lot harder than I was, a lot more than I was. And I think rather than just asking him to buy me out or that I didn't want to work there anymore, I probably should have approached it more from a look, you know, I don't want to work this hard. And I want to sell the business. Let's focus on you know, cutting down the expenses while squeezing out the revenue getting rid of anything optional we don't need. And then maybe getting that, you know, net profit, you know, because that was another thing that was frustrating is the profit was trailing at the peak at around a little over 300k on you know, 1.2 million in revenue. But the last two years I was there it was just stuck at about 200k net profit and we had disagreements and why it was there and things weren't bad by any means. We're both making 100k year is great. Mine tax free, living abroad in Mexico so, but it's still from like ego or selling standpoint, let's say, you know, I still had this idea that we could get it up, you know, but at that point, I was just ready to check out. And I think that was a huge mistake, right? Because if we had, just spent a couple of months cutting things down, we probably could have gotten the net profit from 200k to 300k. Maybe sell for a little over a million, you know, and then for my half, I would have ended up getting close to double of what I got on the exit. But I think every person who exits always feels that way. I got a great multiple six figure cash offer for my partner. He ended up with a great exit as well. I had a coach at the time training me on keeping the peace. I did so many podcasts on that on making sure things don't get ugly during that exit and start blaming one another for this and that, and we're still good friends. We talk from time to time and, and that's really important as well as if you have a partner and you're trying to exit you know. You really it's, it's, it's you got to be really careful on the breakup. Because if things get ugly, the business is going to tank and everyone's going to end up with nothing, right? You need to swallow your ego, swallow whatever.
What's the right word for it? You know issues that you think you may have, like, it's, it doesn't matter at that point. The point is like, alright, we're gonna sell you're either gonna already buy me out, buy you out. Let's just keep the peace, focus on the business. And that was a really good experience for me, taught me a lot. And yeah, you know, I feel everybody feels they should have gotten more on their first exit. But I'm still proud of, of my accomplishments. And guess the only thing I might have done different is just prepare to sell it. And instead of having a partner buy you out, especially in the internet business market, you're probably better off selling in a brokerage. Even if they brokerage, takes 10 or 15%. The market, it's cooled off a bit, but it's still really, really hot right now. From a seller's perspective, it used to be like two or three years ago that finding a buyer for an internet business was a giant pain in the butt. It was always set a buyers market, right. So they had a lot more leverage, it was a lot more likely they would accept an SBA loan. Now, if you try to do SBA loan to buy an internet business, they're gonna laugh you out the door. Even now in 2022 of the market cooled off, they're like they have all these funds that are just paying cash, etc. You could sell an internet business within three to six weeks. Where it used to take three to six months, right. So if you are going to accept the buyout or considering buying out your partner, I would definitely get a couple of valuations from websites such as Empire Flippers, or quiet light brokerage, FE International, website closers.com. Those are the four big ones Flippa obviously as well, beige. Flippa is more for smaller businesses or less bedded businesses. Whereas those other first four I mentioned are more for that Internet businesses. They turn down a lot as well and get a valuation and make sure if you are going to get a buyout, it makes sense. And probably, you're probably better off convincing the partner to just sell with you. Cutting down the expenses down to the wire and getting a good buy a buyout from a separate buyer. But on the other hand, if you have your partner by you out, I mean, from the time I told him, until that time, that multiple six figure check, check came in. Only about two and a half to three months with no earnout, no nonsense, no nothing, just the big fat check. So if you are trying to get a quick exit, it might make sense for you. But, you know, that's kind of jumping in a couple of different topics. Yeah, but that figure out what your options are, I think would be the main, main thing, right?
Ronald Skelton 13:49
I think the biggest lesson there is, you know, you think divorces are bad. Wait until you decide to sell a business with partners involved. Right? I've done it, I've done it not once, but twice. And the last one was really ugly. We, you know, it just one of those started off with he said, she said things. Everybody, you know, acquisition, you know, accusations that, you know, you're doing this, and I'm not doing this, and it just got ugly. And, you know, those men, those relationships are just hard to restore afterwards. You know, I'm still talking to the guy and we still consider our friends but there's some resentment because of some of the things that were said and done along that process. And, you know, by both parties, I won't say I wasn't, wasn't in the wrong. I can get pretty spiteful when you start calling me names. And, you know, that said that there's a very valuable lesson. There's like, when you're ready to exit, there's a conversation that needs to be had with that partner. Get them aligned with that. And then the huge process of going through it. I can see in the software space having a broker would be intelligent because it's a multiple offer scenario, right? You're going to have multiple people come up make offers, you might even get a decent bidding process going. Depending on how you do that. In the brick and mortar space, I can see where it doesn't make nearly as much sense because the buyers, there's less buy in, there's fewer buyers, and the buyers are more, you know, in tune with, they want a very specific thing to occur. And on your point on this small business administration, I know what the software companies are not interested in that. The process is I just have one of the guys here on here that that's all he does is SBA loans. I had him on here, the process of closing one is a lot of scrutiny. For the software company, their books about run the SBA almost as their own full due diligence. And they're gonna, they're gonna asked for things and want things a certain way that software companies don't think they do because they've got other people that are willing to pay cash without having to do all that stuff.
Freddy Lansky 14:01
Ronald Skelton 15:48
So, but not impossible. The other thing is don't ever think you're going to close a software company. I mean, an SBA loan in less than 90 days. I've never heard of it done. This guy says he's done one in short, you know, the guy that that's all he does, for a living closes, you know, five, six a month, he says, oh, yeah, I've closed them less than 90 days. But you know, if you look at it, if you look at some of the ones we talked about one or two, the ones he closed in less than 90 days, the guy had already felt it to other SBA loans. So he had everything ready. It was just his, a lot of people don't know that SBA loans are not just the government bank. The local bank is the deciding factor, is just an insurance policy by the Small Business Administration. So the previous two small business, the banks that told him no, he knew exactly what he needed to have in place. And so he came really well prepared. But that closing process is brutal. And they want you to sign you're gonna have all kinds of personal guarantees. There's no such thing as an SBA loan without personal guarantees. So, you know, they want the right to your first child, and just you name it, it's crazy. But, you know, the reason people do it is it's, you know, 10% down, up to $5 million, and it's,
Freddy Lansky 17:15
With 30 years to pay it off. (inaudible)
Ronald Skelton 17:20
30 years, if there's real estate involved, it's actually 10 years or something less than that.
Freddy Lansky 17:24
Oh right, right. Yeah.
Ronald Skelton 17:25
Real Estate doesn't make,
Freddy Lansky 17:27
Still 10, 10 years. I mean, it's a long time.
Ronald Skelton 17:29
Yeah, it's actually the debt servicing makes it more manageable. So, you know, we were talking a little bit about before the show that you're out, you've got, you've you did a, the I'm gonna get this wrong. It's Points Panda. Is that right?
Freddy Lansky 17:44
Ronald Skelton 17:45
I got it right. So Points Panda, you actually kind of grew from scratch. But you, you did some acquisition for growth here, You bought,
Freddy Lansky 17:51
Tiny ones. Tiny ones. We're talking about like some Mom and Pop blogs that, they had great SEO, they weren't selling anything. But they had lots of best backlinks and top ranked articles. And I managed to get two of these in late 2019, early 2020, just before COVID hit and then I just jumped ship on the project. But that's a really good strategy as well, if there are some smaller blogs in your space, and they have great backlinks and they have, you know, you're acquiring the articles and everything. And you know, I paid one, I think it was about four or $5,000 for a website that had a 200 articles. And it also included about 25 articles that were reviews of airline business class seats. And those are really valuable because you actually have to take the long distance business class product in order to properly be able to do that blog article. Otherwise, it's just not going to come out as good. Like people want to see photos of the seats and the amenity kit and the food and the entertainment system and so on. And those were really valuable and some of them like, like it was on page one for Emirates business class. It was ranking like number seven on page one on google. I'm like, wow, this is a really valuable keyword. So I had a two of those. And yeah, it worked like a charm. I just 301 redirected it to points panda jacked up the juice little bit. The issue was the main product that was making a few grand a month was my consulting service. Right people were paying me about $1,500 a year for unlimited advice about which credit cards to open, which credit cards to close. For anyone listening, that's not in the US, in the US we have really, really profitable credit cards with massive signup bonuses equal to 1000s of dollars worth of airline tickets or hotel points or whatever it is for just one credit card signup. As long as you have very good credit and so I teach people who have this very good credit to start taking advantage of these and opening and closing the cards and, and teaching them how to use these points to get business class flights by transferring them to airlines instead of using a portal or a statement credit. right. So, you say 100,000, a Amex or chase points might only be worth $1,000 to wipe off a statement credit. But if you transfer it to certain hotels and airlines, you could get four or $5,000 in value, right. And I was going great until COVID hit. I had 30 clients in February 2020. By April 2020, I had zero. And it stayed that way until very, very recently. It was only the last few months like early 2022 people started, because it wasn't just domestic travel. The main value of that service was long distance international travel, which really didn't come back until early this year. It was, was long. It was a long winter. Lasted almost two years, but it's starting to come back now. And then I also make money selling credit cards like through affiliate links, but it's not my main focus right now. It lost a lot of money in 2020, a little bit of money in 2021. Just recently became profitable. The traffic continues to grow and long term I still have, I'm not going to use the P word that you guys always buying and selling businesses, the potential word right? (inaudible) I rolling in real estate brick and mortar or internet. Go to one of those houses, all the windows are bashed in. It's like, oh it's got so much potential right. But I do think was has got a lot of potential right now.
Ronald Skelton 18:19
The equivalent of the blind date, but they've got a great personality.
Freddy Lansky 21:12
Yeah, yeah. The personality. Points Panda is still losing money, but it's got a great, well actually, it's not true. The, the last few months, it's been doing a grand or two profit, but it's going to take, it's gonna take years for me to pay back the money I lost in 2020. Because the rug got pulled so fast on the travel industry. I was spending about three, four grand a month on SEO and writers, video editors, graphic design, I had a whole operation going saying you know, and it was great because I was also spending a few grand making a few grand a month on the points consulting. But the point consulting out pulled under the rug. So now I'm just making a few $100 a month in advertising. And I said okay, well this is April 2020. I think by June 2020, we'll have this sorted out, right. Then it's like August 2020, not sorted out at all, no one's traveling international. And then I finally cut it down to basically four or five grand a month in expenses, about a grand a month in expense. But by then it was too late. I had already lost about 40 grand in the business on false expectations at the international travel would recover much more quickly than it did. That it basically broke even and 2021. Only lost a few grand which was I'm happy with because the traffic grew tremendously. And yeah, now I'm just focusing on this new business I bought. The sneaker reselling business that's been trailing 12 months revenue has about 100 grand. Just about 50 grand in profit. And really, I really don't care about the month to month profit. I'm really just trying to triple or quadruple the profit in 18 or 24 months in order to sell it for about a million dollars. Partially because I want the exit and more importantly to get to the next phase in my career, which is buying like a three to $5 million business with an SBA loan. Just having one successful seven figure business and then this other side business that was doing kind of good until COVID hit is not enough. I got to take this business that I just bought and get in quadruple the profit. And then I can show investors that hey, I'm the real deal. I wasn't a one hit wonder I've done this twice already. One time I've done it completely on my own without a partner, and then they're more eager to invest. And ironically, when it comes, I don't know that much about brick and mortar. But when it comes to internet businesses, actually the bigger they are up to an extent, the easier they are to run because you can have better managers, you can have more people in place more processes in place, you know, give them a couple of books to read on traction, EOS. Check in once a week how you guys doing? And basically check out. If you have a small business like one of these 100, 200 grand businesses like you can't hire like all these managers and writers and you have to like I do the SEO myself, I do the writing myself, I do the videos myself, I do a lot of the management myself, like you're gonna have to be doing it for a long time. Unless you either want no profit and also yeah, we're either, either gonna have, either gonna have no profit, or no time did you to pick one, right? But there's just, there's just not enough money to hire all the people in place that, that you can just do the SOPs and check out, right. So you kind of have to eat dirt for a little while until, until the business runs itself. But I've looked at these people that have these bigger Internet businesses. And it really does get easier. I think like brick and mortar. It's the opposite. It gets harder. I think it was maybe not I don't know, I know you're the brick and mortar guy. I don't know a lot about it. But,
Ronald Skelton 24:44
But I would say that for the brick and mortar if you're buying beans and under probably five, 5 million in revenue, uhm, you know, or anything smaller than that you're probably buying yourself another job. Just because there's not enough revenue. I mean, things aren't profitable, or they are. But if you look at what a decent general manager makes, in almost any market, you know, even in like Tulsa, Oklahoma, which is where I just moved from a, you know, you're probably talking about 80k a year. Well, it's really hard to pay that if you're only making 150, or something like that if you buy too small of a business. So that $5 million mark is kind of anything that are above. You typically have enough revenue to have your general manager in place. You have enough revenue to, they've been around usually long enough that they've bypassed a lot of the things that fell on the first so many years. So if my buying criteria is 5 million or more in revenue, and had been in business five years or more, because you've bypassed both the failure rate of being too small or too young. And usually they're starting to put systems processes in place, and there's somebody there that's been there long enough that they can step up and be the GM or you have enough revenue to hire one in. So it can't always the other side of it. If it's smaller than that, when you really start looking at these companies, the owner that's sitting there is wearing three or four hats. And you know, at least like a lot of people, like you just use a seller discretionary earnings. What he's paying himself to hire a new GM. Not necessarily true when he's carrying three hats. Nobody's gonna come in there and pull 60, 80 hour a weeks for what the guy's paying himself. Right. So same thing. I do like what you brought up, I want to circle back a little bit because you did something inside of that first conversation. And then you minimize minimalized that, I think there's another point of view inside of there. You were talking about the acquisitions of the blogs and stuff in tiny, tiny, tiny, and I would say their strategic. There's something to be said for buying your customer, instead of paying for ads all the time. So you bought those blogs, and you bought a cancer device, you know a generation tool a viable. So I'd like to look at when I'm looking at industries and stuff, is there any YouTube like I call, I call them face, faceless YouTube channels. So they're not a talking head, there's not like mine, it'd be hard to buy mine because everybody kind of expects the next video to have my face on it, right. But there's a lot of faceless YouTube channels out there that support an industry. And they're cheap, because you usually just about any other business. You buy things not on subscriber base, but on revenue base. A lot of these guys never learned how to monetize their shows. So you know,
Freddy Lansky 27:30
I bought a YouTube channel as well. Yeah, that's a great deal. I paid 1500 bucks for a YouTube channel that was doing, say, like, $150 a month in advertising, just from YouTube ads. YouTube, shut the ads down a year later, because I wasn't uploading another video. But the point is that yeah, that was great. The only issue with buying YouTube and social medias is first of all, technically, it's not allowed. But that's not really that big a deal. Because you know, when people buy businesses, that includes the social media all the time. The biggest issue with YouTube and specific is you can't 301 redirect YouTube videos, right. So if you're gonna buy 10 different YouTube channels, in the you know how to buy and sell, you know brick and mortar space, you're gonna have 10 different YouTube channels. It's gonna be very messy. But if you buy blogs, you're buying the website itself. You have full control on what you want to do. So you can either, you can either choose to keep it separate, and then buy a lot of these sites to just generate backlinks, etc. Or you can just roll the site up and just 301 redirect all the articles to see your current WordPress and import them, which takes a little bit of work. But that's a great way to juice up your initial website, right. And so if you buy 10 websites, you're more than free to redirect all of them and get all the backlinks and all the SEO juice and everything back to your website. Now it, for, is just a little more complicated than that. If you did all that at once, Google will be like, hey, what's going on with you. But if you do it the right way. Let's say there's a lot of different options you could take. You could keep some of them open just for the backlinks and things like that. You know, you can have all of the websites funnel into the same email provider, whatever the same email list. There's lots of things you could do. But yeah, this is, I think, a big opportunity because I think in most spaces, there's a lot of maybe not so much in the mergers and acquisitions space. I think most people are in it for the money on that one. But in lots of spaces. There's just a lot of people that are just fans and they just write or blog or do videos on certain topics with no real intention of monetizing it and they build up a little kind of like Mom and Pop blogs, right. Like in the travel space it's incredibly common to see people writing about, you know how they managed to score all these, you know like middle class people who could never afford, you know these five star hotels for these, you know, long distance first class tickets on their own. How they did it on points, how they managed to, you know, get the kids in business class as well, et cetera. And it paid practically nothing. They write about it. And they, you know, they just they, a lot of them end up abandoning it, but they ended up keeping some of the traffic like, you can reach out to those people and say, hey, you know, I, I mentioned and a lot of times, one time I ended up with a great Accu hire. I gave this guy a couple 1000 bucks, and well, he eventually quit. But he also wrote great articles for our website, as well. So you, you acquire the blog, they already like you, because you're also giving them a freelance job. And you get the best of both worlds, right, and you already, you already know, they're going to be a fantastic writer, because they already have tons of experience, writing on exactly the topic or doing videos on exactly the topic that you're looking on, which by the way is we could do a whole separate podcast on that. But one of the best places to finds employees, at least for Internet businesses for your space is your own email list and your own group of fans, right? Because if you go on Upwork, or any of these other sites, there's no substitute for people that are actually passionate about your niche. Right. So I think that's one place that people really overlook. And yeah, that was an interesting strategy.
It's not, it's not a game changer, but certainly, you know. Really, it'll happen by accident anyways, because if you're doing your own deal flow, and you're having a VA do like a spreadsheet with like, tons of different businesses, they're gonna range all the way from no revenue, or I don't know, 1000 a month all the way to $10 million, or 100 million, like, the biggest, the biggest players in the space. Your the VA is not gonna really know the difference. They're just going to be sitting there and just plugging away at every single website and their contact info. And so sometimes the smaller sites that aren't doing any revenue at all shouldn't be overlooked. Like, you're just you know, some of them have a big beat that the the real jackpots in the email list, right? If you find a website that's not doing any revenue, or they just happen to have a big email list, email converts so well, compared to every other medium. That's really, you know, that's really what you want to be looking for. And yeah, it's a good strike. There's so many different strategies to growth-hack your business. You know, another one is getting on a big YouTube channel or convincing a big influencer to work with you that has a lot of followers. And so then they can, you know, my chess business, we did exactly just that, right, there was already some people in the space with hundreds of 1000s of YouTube followers to promote us and do some kind of, we didn't even pay them. I forgot exactly what their compensation was. Basically, we promote it on our website, whatever. And it was a totally lopsided deal. They ended up with like, just from one YouTube video, I think we went from like 2000 subscribers to like 6000, or something like that from a much bigger channel. So when you're, when you're just starting off, it's really, really hard to get momentum on these social media channels and get those first 1000. You know, the first 1000 is the hardest. It's way easier, because I've done it all to go from 10,000, YouTube or Instagram followers to 100,000, than it is to go from zero to 3000. That's just the like the hard really hard grind. And so one way to hack that is to, you know, find some of these people that work with you.
Ronald Skelton 33:38
Awesome, that's great. So, I know we've got really tight on time today. And I want to cover one more topic. Before we go. That, the last acquisition that you had, we're not going to name it stuff, the sneaker business has an info product also.
Freddy Lansky 33:52
So they have three info products, like three ebooks. One of them, which is really popular, it's 400 pages. So it's not, it's not your typical ebook that you just charged $10. And it's just total garbage. But 80% of people don't ask for returns. It's so cheap. It's actually a good $50 ebook that like most people don't return, even though it's kind of high prices, it's really good. And then we have what's called a in the sneaker world, they call it a cook group, which is basically a discord group that's connected to all these different websites and has a manager as well, that's manually putting in all the deals, so they can get the sneakers before everybody else. And the idea is very simple. They're all mostly kids between the ages of 14, 15 and like 20 to 23 Looking for a side hustle, because they don't you know, want to work at McDonald's to make $1,000 a month. They, they'd much rather resell the sneakers, right. So they can go hang out and party. That's their mentality. And so they're looking to buy 10 of these sneakers for 100 bucks and then resell them on eBay for 220 bucks or whatever and do this each month to make a little bit of money on the side. And so there's a lot of businesses that cater to them and they get all their information from these groups. And so most of the revenue are a little more than half of the revenue is from this cook group as discord group that we charged 40 bucks a month for, and it's a good business very good model, very big industry. I only own one pair of sneakers. I don't know anything about this world, but I'm, I'm learning about it quickly.
Ronald Skelton 35:18
I have a real estate portfolio. And a lot of times we bought houses right out of foreclosure and people leave all kinds of stuff and on they would, you know, or get a rental back and it'd be full of stuff. And one of the guys that has cleanouts for me. He came up to me said, hey, there's a bunch of sneakers in the closet. Mind if I, my son wants them. Do they fit him? He's like, no, he's gonna clean them up and resell them. All right. And I don't care, you know, take them you know, it was gonna go in the dumpster anyway. So the kid sent me a little thank you note later. He had sold I think he's 11 or 12 pairs. I guess there's some Air Jordans and stuff. And there's some vintage, they were dusty, but like, you know, and worn but he cleaned them up. He actually put new laces in some of them and stuff. And he did you know, he flipped tennis shoes. And I don't remember what the number was. It was less than two grand, but it was close to two, I think they made like 1800 bucks.
Freddy Lansky 36:07
Yeah. You gotta remember these kids are all too grand for us as best as bookies, but for these, for a 16 year old kid two grand is like,
Ronald Skelton 36:14
I'm gonna say he loved it. I wasn't knocking the two grand at all. For him, he was like, "Dude, thank you! I got these shoes for free.", you know. And so I don't know what the kids doing now. But I always encourage entrepreneurialism, and you'd be surprised at what people leave in some of the properties we have. You know, as funny is, I think some of my kids bicycles and skateboards and other stuff are just that they just came from, you know. I found guns in houses before and had a call and turn them in just because I didn't know if they were used or anything. But uh, you know. So let's jump back real, go back to the sneaker resale business, you bought that business. It was, you did something in that that I do regularly. And before the show started, he said, yeah, we don't want ever do that again. You mind talking about that now? Or is that a little sensitive?
Freddy Lansky 37:00
Yeah, yeah sure. I gotta be careful not to, you know, defame this person or anything. So I won't mention the name of the business. The name of the person. But they had, they had wanted to stay on the business at 40%. And they were supposed to be the general manager. And the biggest mistake I made is not necessarily keeping the old owner with equity, that's fine. It was letting them work in the business, right? There was just so many problems right away. I'm never going to do that again. There just seemed to be a lot of like alliances with the business, a surprising amount of freelancers, you know. Mostly people in the Philippines, whatever. That you know, we're all buddy, buddy. And, you know, I had to let some of these people go and that upset the old owner. And they, really that the idea was, is a very small business, right? It's only trailing 50 grand profit in 12 months. I was like, it was never my idea to work on this full time. The idea was that, that person was supposed to, but after a few weeks, it was pretty clear that they just didn't want to do anything. And we're just hoping I'm going to 4x this business, so they can get a much bigger exit down the line. And I wasn't cool with that, you know. I'm like, well, you know, I'm gonna work 24/7 on this business, I'm not gonna give you, you know, 40% of it when time comes to sell. So things got a little bit ugly. I had to spend a few 1000 bucks on lawyers and to show all the ways that they were breaching the contract. I had originally tried to loosen up the contract a month, then, but then another month went by, and even the more loose contracts. They couldn't perform on that either. And then the end, he just accepted, you know, an extra payment for the rest of the business. And, and thankfully, things went smooth from there. And we're cool now, but I don't think there's you can necessarily, if someone else wants to keep a little bit of equity, whatever, just kind of crossing their fingers that, you know, maybe the business blows up. Especially if it's a much bigger business than the one I bought. There's no reason you know, it is part of the deal. Or now this is nothing wrong with that. But having the old owner have any say in the business whatsoever is just an act, this is going to be an absolute nightmare. I learned that the hard way. I was attracted to the deal because of the low multiple. But I really, you know, despite the fact that I ended up getting a fantastic deal on this business, I would have just prefer to pay more on a brokerage and not had, had to have had the two and a half months of things getting ugly and having to get lawyers involved, especially for such a small deal. And, and, you know, obviously my friendship with this person is toast. But, you know, I learned I learned a big lesson there. And I think the lesson is that most owners are going to feel that they're not selling for what they deserve. No matter how much they get. No matter how much it is, no matter what their goals is, and some of them will want to stay on and might promise you, oh yeah, I'm still gonna work on the business, etc. I would, I would really take that with a grain of salt. I think if people are ready to sell most of the time, it's not just about, oh, I just want to buy a house or I just had another kid. A lot of the time, most of the times, they're just checked out. They're just ready to move on, you know. People are, at the end of the day, we're still kids, right? We want a new toy. So you know, the old toys getting boring. So they don't want to work on the business anymore. If you see the business has been declining, and it hasn't been well run, and the person is just kind of checked out. Don't kid yourself, if they're offering you a good multiple to partner up with you that suddenly the day that you sign that contract, that they're suddenly going to be a different person, and then you're going to be stuck with a terrible partner. Because really, this, this whole deal could have ended up so much worse than it actually did. I was lucky that I managed to write up a very tight contract to keep the peace, to manage to get them out. But if they had decided to, I don't know if take control of the website or refused to leave like things could have gotten so much uglier than they did. And you know, this was not a major investment. It was the high five figure purchase price, right? It would have been the end of the world. But like imagine if it was like a real big deal with let's say a loan. Thankfully, with SBA loan, they don't allow the old partner to stay.
Ronald Skelton 37:00
That's probably why.
Freddy Lansky 37:00
Yeah, yeah. That's probably why. They've had too many bad experiences in it. But if you are looking made with investors, or signed by bigger business, like, I'd be okay with an earn out. If they're really insistent, maybe get leaves on a little bit of passive equity, I still would, I would say, the best thing you can do with the business is just get the old owner out have any ties whatsoever after maybe a few months, or now just for your own sanity, and peace. Because it just, is most of the time, it's not gonna work out. And people have warned me it wasn't going to work out. But in the end, it did work out in in its in its own way. I ended up getting a good deal. But you know, beyond money, you know, when these deals go south. It's, I lost tons of sleep, I couldn't sleep for a lot days. I take sleeping pill, I felt terrible. I didn't know what was coming next. And it was terrible. It was a terrible experience for that partner too. And it was really unfortunate. But yeah, and if you are considering it, have the contract as tight as a fiddle. But even then, I mean, if someone has a contract, and then they're not performing on it, well, at least you have the contract. But then you have to go through everything I went to. Spending 1000s of dollars on lawyers and to show them and it's just not, don't do it. Don't let a good multiple attract you to that. Just tell that purchase, offer them a little bit more money that you're way better off with that in the long run for your own peace and your own sanity. So that's what I learned. And I'm not gonna let that happen again, for future deals. And thankfully, it was a small deal anyway. So it all worked out.
Ronald Skelton 42:48
So the other way around it right is by, a big business big enough? That it's producing enough revenue that the company can pay for the attorneys to settle things out.
Freddy Lansky 43:00
Yeah, yeah, exactly. Right.
Ronald Skelton 43:02
Like, I agree, I think that if you if you have a previous owner around, you take most of the stay away from. You take 100% control, even if you only take 60% ownership, you take 100% control, and then you tie performance metrics to, you know, any other money that you can receive, right? They get to, you know, keep their 40% if they perform at a certain level over period of time. So I know we're short on time here, man. I want to, I want to respect your time. You have a heart commitment to get, to get to be somewhere else. So the one thing I like to end the show with every time is, what can myself and the audience do to help you, man?
Freddy Lansky 43:42
I don't know. Sign up for my concierge service at pointspanda.com. If you have over 700 credit score, and you live in the US and you're not optimizing for these things, you're literally leaving 1000s, if not 10s of 1000s of dollars worth of hotel and airline stays on the table here. I mean, you could just basically have your vacation for free every year and I teach people how to do that. You don't need to have an internet business, that's spending $20,000 a month even though that course that helps a lot. And you don't need to be a corporate frequent flyer, who just you know, jet setting every minute. All you need to do is have a decent credit score. And you know, just follow the formula. And that's what I help people do. And yep, I can, you can do that. And if you want to reach out to me, I'm on LinkedIn, the link is there or you can just reach out to me at Freddy with a Y. F-R-E-D-D-Y at pointspanda.com
Ronald Skelton 44:37
Awesome. Well, I appreciate having you on the show. I am with uh, end the show right now so you can get where you need to go. Thank you for being here today. And that's the show guys.
Freddy Lansky 44:47
All right, thanks so much.
Ronald Skelton 44:55
Hello, and welcome to the how to exit podcast where we introduce you to a world small to medium business acquisitions and mergers. We interview business owners, industry leaders, authors, mentors and other influencers with the sole intent to share with you what it looks like to buy or sell a business. Let's get rolling.
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