The Whole Pie or a Slice?

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The beginnings of my portfolio, The Wisdom Group was a simple 30% equity of a business that I was mentored back in 2019.

I loved the business, I loved the Entrepreneurs and we made the deal happen. That business will do about $3.5M this year.

When we started the business barely did $1M.

If you don’t remember, I’m Scott Oldford. I’m a mentor, advisor and investor for Online Businesses and own 40+ Online Businesses.

In working with this Entrepreneur I advise, mentor and help support on all areas of the business. At the beginning it was only me. Now it’s me and my team being able to help inside of that business.

To be clear— we don’t run the business. We support the Entrepreneur in building the business.

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Check out the latest stats from sold businesses and see how your online business stacks up:

- Flippa’s average annual profit multiple stands at 3.03x.

- It’s a good time to sell that content business you’re holding on to: Flippa sold a six-year-old content business for a peak annual profit multiple of 5.93x.

- Service business multiples have soared to a high of 5x the annual profit.

- For SaaS businesses valued at $250K+, the average annual profit multiple is currently 3.6x.

- The top Ecommerce profit multiple was 4.7x. This was a 19-year-old hair-loss prevention Ecom business.

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^ P.S. I’ve used Flippa multiple times and a big fan of their platform and found great gems like www.campnative.com and www.hardlyhustle.com on the platform.

Today, we have over 25 of these inside of our portfolio and have capacity for many more. We look for businesses that have $500K - $5M in revenue and want to go to the next level and need help with the pillars I talk about in my book, The Nuclear Effect.

At a certain point I started to acquire businesses where we owned the majority stake, generally over 70% and as time continued, I’ve been able to ask the question.

Do I want the whole pie or just a slice?

Obviously, when you have an entire pie it’s easy— you have the full control. You don’t have to think about business partnerships and all that go into that.

However, building acquired businesses at scale also has a lot of downsides and one key thing that is difficult? If a business that is under $10M/yr doesn’t have the founder or a true entrepreneur, it will never grow to the extent that it could.

Simply— if there isn’t someone waking up and the first thing on their mind is their business… and if it doesn’t work, they will personally lose the motivation is simply not there.

While you can incentivize operators of a business (and an operator is needed in every business) at the sub $10M/yr level the business can be maintained and grow, however, it likely won’t have hyper growth.

For this reason as we’ve continued forward we’ve changed our strategy.

I simply couldn’t get around this as our target companies are generally under $5M/year in revenue and in the past it was that the Entrepreneur wanted “out”. Further, in these cases the amount of resources to not just maintain the business and then grow it without having the entrepreneur inside of the business isn’t a bet that I wanted to keep betting on.

Thus, I changed my thesis based on noticing what has worked the best up to this point.

1. Businesses where we are less than 40% owner of the business with an Entrepreneur that I know, like and trust and generally have mentored and advised.

2. We help and support the business across all of the pillars, this goes far beyond when I work with someone 1-on-1. This also helps the business access all the support and resources alongside of the network of other businesses inside.

3. We acquire businesses that are “tuck-in’s” for these partner businesses where we can acquire a business that allows us to provide a specific service, product or audience to one or many of the businesses that we’ve partnered with.

This solves many issues with the acquisition model, motivation model and being able to scale and build. Further, it’s a model I’ve ran for a long time, simply in a pay-to-play model.

And the bonus? By having companies that are acquired where we are able to decrease the need for marketing, sales, operations and team. We are able to acquire assets, tuck them into existing businesses that we are partnered on and use that capital to fund the entire portfolio.

See… the downside of partnerships is that the first dollar of revenue is generally 18-24 months into the future.

The reason is simple: We want the businesses to grow, to be able to be sold and we don’t want a scenario where we are robbing from the business for its future growth potential.

I had to develop a way to get past this and while our revenue won’t be “pumped” until 2026 (maybe 2025), it will bring us enough revenue to be both very profitable, while building dozens of multi-million dollar businesses.

If you then add this on top of Wisdom Media (allowing our partners to get access to their ideal customers), the recurring revenue of our SaaS companies and our the cashflow from our wholly owned businesses that we’re keeping and while it’s similar to the original model.

It provides something that the original model couldn’t do.

It allows us to have Entrepreneurs running the businesses with their passion, grit, focus and ownership— while we’re able to support them.

In changing the model going forward, I reflected the reason I went to the acquisition model to start with…

And in truth, it was fueled with a lot of ego and the desire to go “faster”. I teach this every day, however, sometimes while you can tell someone else to do something and even know it yourself, it’s difficult to take your own medicine.

See… the downside of partnership deals is that they are long-term and acquiring businesses is more of a “here and now”…

You do your process, you buy the business and you’re able to add that revenue to your P&L. It’s a short-term win, you get more cashflow, however, the downsides (at scale) are immense.

While acquiring a business is a great idea, if your ego is involved, it’s not going to work the way you want it to work. Now, in truth, I’m good with learning this the way we did.

Whenever I do something… I’m all about learning the lessons and learning them as quickly as possible.

I hate wasting time learning a lesson. I would rather fail at something QUICKLY than wait 2 years knowing if something didn’t work.

When I set out to acquire businesses, I knew that majority of what we did wasn’t going to work. Why? I’m no expert and business is a game of the 10%.

90% of what you do won’t work. It’s the 10% that works really well that makes it all worth it.

I feel that we acquired 20% “duds”, about 40% “average” the other 40% I would expect are in the “epic” category.

I feel our strategy is based much more in the long-term and while our direct portfolio revenue will be smaller than expected in 2024 it will build for a much better future.

This also changed other elements of our strategy both with my personal brand and Wisdom Group.

As we continue forward, our team isn’t needed at the same degree, thus, we made changes and restructured the team. Those changes are now made and we’re confident with that going forward.

Each partner business has their own team, thus we are needed more for support versus actually doing everything.

On a personal brand perspective, I realized that if we went in this direction my personal brand would be far more important than it was in the past direction. There has for many years been a part of me that didn’t “like” the personal brand… that I wanted to be behind the scenes.

The truth is… I love the behind the scenes and being in the front. Our lead flow for partner businesses is also based on it. I never want to work with someone and own a percentage of a company with someone I don’t know— it doesn’t work out.

Through my paid mentorship and advisory, I get to see dozens of entrepreneurs a day and what they are doing. This allows me to get lead flow that is unprecedented with what we’re doing. There is no way to get lead flow in a better way in my opinion and it’s why so many of those who are building portfolios are so focused on personal brands.

In the end— I decided that I don’t need the whole pie but lots of slices of different pies.

- Scott