Importance of Partnerships in Dealmaking:

Partnerships are vital in the business of dealmaking. When it comes to dealmaking, it’s all about relationships—who you know, and having a wide network of people who know, like, and trust you. People prefer to do deals with those they consider friends. Partnerships are the lifeblood of long-term business. The goal is to connect with individuals who have access to what we need. In this case, we want to be referred to people who want to sell their businesses or seek capital/financing. To attract these individuals, we need to build relationships with business owners who work with our ideal targets. We should get to know them, understand their business and goals, and find synergistic ways of working together. By helping them benefit, we also achieve our objectives.

Steps to Develop Partnerships:

1) Define Your Objectives: Clearly define what you want to attract. Is it deal flow? Is it people seeking financing? Be intentional about the quality of people you want to work with.

2) Identify Potential Partners: Build relationships with people who have access to your ideal clients. This includes financial service business owners, marketing experts, B2B service providers, networking groups, masterminds, and business and mindset coaches.

3) Initiate the Process: Start conversations with the intention to add value and find mutually beneficial ways to work together.

Sample Messages to Initiate Partnerships:

"Hi [Name],

I see that you offer mentorship/consulting in marketing and content writing.

I work with clients who need help in these areas from time to time and was wondering if you might be interested in some co-consulting work (where we both provide services to a client and share fees) or doing a small online or in-person event together for our mutual clients (where you share your content/marketing strategies and I share my scale/growth strategies) and we share the fees generated from sales of our services at the event.

Is this something you might be interested in exploring?"

or

"Hey Madelyn,

I've sees your content, thank you for connecting. I'm always looking for partnerships and would be interested to see how we can work together and get more deals done.

Let me know a good time to meet."

Conclusion:

We hope this has been helpful. Partnerships are all about relationships and finding profitable ways to work together. There’s no secret method, only the importance of developing relationships and structuring deals that benefit both parties.

As everyone in our community is growing their holding companies, a foundational topic that keeps coming up is perfecting the system to create deal flow.

The two key ways to generate deal flow are through direct outreach and joint ventures or partnerships. Let's dive into each of these strategies to see how to maximize them.

For our personal deal flow, over 80% comes from partnerships, joint ventures, and my centers of influence. When I first started buying businesses, I relied solely on direct outreach for the first two years, and I believe that approach held me back from accessing 80% more deals.

Why do we say this?

Because with direct outreach, unless you have a team to help, it's just you doing the work. It’s very time-consuming, involves a lot of follow-up, and is often ineffective if your goal is to secure quality deals on autopilot.

On the other hand, direct outreach can be highly effective when you are very specific and targeted about what you want. For example, if you are looking for a laundromat in a specific part of town, direct outreach is your best friend. There may be only 5-10 quality businesses in that area, so it’s worth your time to cold call, email, and follow up to connect with these locations.

However, if you are not being specific, partnerships are the way to go.

In the beginning, we said, "We held ourselves back by focusing only on direct outreach." This is because when you rely solely on direct outreach, you only receive deals when you are actively reaching out. It’s only through partnerships and joint ventures that you can create a consistent system of deals that come to you, even when you are not working.

We spend 80% of our time on joint ventures and partnerships with B2B companies that work with business owners, leveraging their audience to create deal flow. Our partners refer us deals recurrently as they arise, and most of the time, these are high-quality off-market deals where the owner already trusts us because of the referral.

To summarize, use direct outreach 20% of the time, focusing on businesses you specifically want. By being a sniper, you can target businesses you are interested in and connect with those owners. For the rest of the time, focus on partnerships and joint ventures. This will give you the consistent and passive deal flow you need long-term.

Hi, this is __________ with ___________, and I’m calling about __________ (business) … is this the owner?

I'm doing a survey of all the (INDUSRTY) companies in the area and I was wondering … 

1. If you sold this business … what would you do next? (buy a boat) That’s exciting! 

2. How soon do you plan on selling so you can (buy a boat)? (twelve months) Fantastic! 

3. How would you rate your motivation to sell … on a scale of one to ten? (Five) Good for you! 

4. What methods do you plan on using for marketing your business for sale? (Hire a Broker) Interesting! 

5. Are you familiar with how businesses like yours are evaluated? (N0) That’s OK! 

6. How much time will you take… before you will consider… looking at offers from buyers interested in your business? ( ) Excellent! 

7. What has to happen before you decide to start the process of selling your business? 

8. I’m a motivated and qualified buyer looking for businesses just like yours… Most sellers I worked with in the past were not quite ready to sell… and that’s ok… Can I tell you a little more about the process I use to create an easy track for us to work off? 

9. My promise to you is simple… there’s no obligation to sell and all conversations are confidential… Best case scenario, I can give you an offer that makes sense for you and I… Worst case scenario, You’ll learn more about the process and be even better prepared in the future when you decide to sell… Does that make sense?  

NOW START YOUR PRE DUE-DILIGENCE QUESTIONS

1. Business Details:  - “What is the name, location, and nature/brief description of the business?”

Wait for a reply before providing any response and when you receive a reply proceed to the next question. 

2.    - “How long has the business been operational?”

Wait for a reply before providing any response and when you receive a reply proceed to the next question. 

3. Financial Information:  - “Can you provide the last three to five years of financial statements (income statement, balance sheet, cash flow statement)? If you have documents would you be able to send those over? If not, I will need at least sales revenues for the past 3 years and either profits for those periods or average profit margin for the business. The more data I have, the more accurately I can provide you with an estimate of valuation.”  

Wait for a reply before providing any response and when you receive a reply proceed to the next question. 

4.    - “Are there any projections or business plans available for future years? If so please would you be able to send those over? To best assist you in valuing the business, it is helpful to have projections or even your rough estimates as to future sales growth and future profit growth.”

In addition to any information provided by the user in response to this question consult your data set and conduct research on the Internet to determine industry projections for businesses in this industry. Wait for a reply before providing any response. When you receive a response from the user, provide them with information you have from your research, and then proceed to the next question. 

5. Revenue Streams:  - “What are the primary sources of revenue?”  

Wait for a reply before providing any response and when you receive a reply, consult your data set and conduct research on the Internet as to primary sources of revenue for similar businesses and suggest additional potential streams of revenue based on your research, then proceed to the next question. 

6.  - “Are there any recurring revenue streams? If so, please tell me what they are, how much recurring revenue exists, what the churn or retention rate is (specify which) and what the growth rate is for each over the past 3 years. The more information the better, but it’s okay if you don’t have all of this.” Wait for a reply before providing any response and when you receive a reply proceed to the next question. 

7. Cost Structure:  - “What are the major expenses in the business, e.g. labor, rent, advertising, cost of goods sold, etc. and ideally what percentage is each of these items with respect to total sales revenues?”

Wait for a reply before providing any response and when you receive a reply proceed to the next question. 

8.   - “Are there any unusual or one-time expenses in recent years? This is helpful in determining add-backs to get a more accurate valuation.”

Wait for a reply before providing any response and when you receive a reply proceed to the next question. 

9. Assets and Liabilities:  - “What are the significant assets and liabilities of the business?”

Wait for a reply before providing any response and when you receive a reply proceed to the next question. 

10.   - “Are there any outstanding debts or leases?”

Wait for a reply before providing any response and when you receive a reply proceed to the next question. 

11. Market and Industry:  - “What is the market size and growth rate?”

Wait for a reply before providing any response and when you receive a reply consult your data set and conduct research on the Internet to determine market size and growth rate for the industry and provide that information to the user, then proceed to the next question. 

12.   - “Who are the main competitors?”

Wait for a reply before providing any response and when you receive a reply consult your data set and conduct Internet research to determine who the main direct and indirect competitors are for this industry and provide that information to the user, then proceed to the next question. 

13. Management and Employees:  - “Who comprises the management team, and what is their experience?”

Wait for a reply before providing any response and when you receive a reply proceed to the next question. 

14.   - “What is the employee structure and turnover rate?”

Wait for a reply before providing any response and when you receive a reply consult your data set and conduct Internet research to determine average employee turnover rate for this industry and provide that information to the user, then proceed to the next question. 

15. Customer and Supplier Information:  - “Who are the key customers and suppliers?”

Wait for a reply before providing any response.

One of the AHC members recently scheduled a meeting with a potential seller in her network to discuss their interest in selling their business. When a business owner expresses interest in selling, the next step is usually to schedule a meeting to delve deeper into their business, your goals, and their aspirations.

The primary goal of this meeting is not to immediately buy the business but to learn as much as possible about it. By understanding the business and the owner's goals, you can identify opportunities to create a mutually beneficial deal.

Holistic Dealmaking

Holistic Dealmaking is a crucial concept in your dealmaking career. It involves understanding the business owner's goals, needs, and personal aspirations, which are as important as their willingness to sell.

Definition: Holistic Dealmaking is the art of analyzing a business's problems and strengths, understanding the seller's personal aspirations, and leveraging these factors to form relationships and structure win-win deals.

Key Areas to Focus On

When meeting with the owner, your first goal is to ask insightful questions to understand their business and personal goals. Here are some suggested questions:

Business Overview

- You mentioned the business/ website is XYZ. Can you tell me more about the business?

- Is the business focused on a specific geography or part of the state?

- How long have you owned the business?

Performance and Operations

- How is the business performing so far this year?

- How are you acquiring clients?

- Are they reaching out to you, or are you actively contacting them?

- What's the breakdown of your revenue types?

Services and Client Management

- How many types of services do you offer? Are there different levels of service?

- How long does it take to onboard a new client? Is there a waitlist, or can clients join immediately?

- Are there any specific education requirements for a new owner?

Financials and Legal

- What portion of your revenue is recurring?

- What profit margins are you seeing? Can you share gross profit and net profit percentages?

- Are there any ongoing lawsuits against the business?

Operations and Client Relations

- Do you take before-and-after photos of your work?

- How are payments received?

- Is the business reliant on any particular customer, supplier, or employee?

Client Retention and Specialization

- What percentage of your clients are repeat vs. one-off?

- For repeat clients, how long do they typically stay with you?

- You offer several services. Is there an average service most clients use, or do you specialize in a particular area?

Growth Potential

- What opportunities do you see for growth and expansion? Are there any untapped markets or services?

- What is your role in the business as the owner?

- Can you describe the roles of your staff?

- How many hours per week do you typically work?

Personal Questions to Consider

- What does an ideal exit look like for you?

- How much do you need to walk away with, or are you flexible?

- Do you want to continue being involved in the business in some way?

- What would you want to help with if you stayed on?

- Are you open to keeping equity when you sell?

Post-Meeting Considerations

After a successful meeting and engaging conversation with the seller, the next steps involve digesting the information and identifying opportunities. Establish clear next steps with the seller. For example:

"Thank you for your time today and for sharing the story of your business. I'm looking forward to working together. For the next steps, let's plan to reconnect next week over a call. In the meantime, I will reach out with any additional questions I have about the business."

Take your time to review all the information before making a decision. Key considerations include:

- Does the owner actually want to sell, or are they looking for a partner?

- Are they ready to sell?

- What are the 3-5 issues that might make the business unsellable at this time?

- Are the owner's price expectations reasonable or unrealistic?

- How much will this business require of me if I proceed?

- Does an equity consulting arrangement make more sense?

Objective Analysis

Your goal during this stage is to question the deal objectively. After the initial meeting:

1 ) Write out any additional questions or clarifications you need.

2) Evaluate the business, its problems, opportunities, and overall operations to decide if you want to pursue it further.

If the answer is yes, outline the best structure for the deal based on the seller's wants and the opportunities you see. This could be an acquisition or an equity consulting agreement. Approach this stage with objectivity, considering all options, both positive and negative, to make a confident decision.

Conclusion

As dealmakers, deal flow is essential. We don't want to waste time on deals that aren't viable. The more options we have, the less likely we are to be stuck on any single business. Always look at businesses objectively and determine the best course of action.

Preparing For Your Consult.

Position for equity from the start:

Invest in yourself:

"I only work with people willing to invest in themselves It's the best indicator of future success."

It's not about the money:

"I only do these with people I'd like to be in business with. This is how I vet opportunities"

10X Commitment:

"My commitment to you is to deliver 10X the value of your investment in the consult."

Plan:

"My evil plan is to razzle-dazzle frazzle you so much you decide you'd be crazy not to have me as a partner."

The 9 Equity Models: Get Paid + Get Equity

5 "Perform-Ask" Equity Models (Date Before Getting Married)

1. Free Discovery Day - Identifies opportunities and issues, suggests scope of future services, and lets you prove yourself and your value.

Initial Free Discovery Day -> Hourly or Flat Fee to implement plan - > Achieve Results +Ask/Offered Equity

2. Paid Discovery Day - Identifies opportunities and issues, suggests scope of future services, and lets you prove yourself and your value.

Initial Paid Discovery Day -> Hourly of flat fee to implement plan -> Achieve Results + Ask/Offered Equity

3. Paid 1/2 Day Consult - Solves known issue(s) and creates plan of action to achieve "magic wand" results

Paid Flat Fee for 4 Hr Consult -> 2 Hour Initial + 2 Hours Follow Up -> Ask for / Be offered Equity

4. Hours To Equity - Solves known issue(s) and create plan of action to achieve "magic wand" results.

Open-Ended $$ for Hours Consult -> Deliver Required # of Hours -> Ask / Offered Equity

5. Results Then Equity - Solves known issue(s) and creates plan of action to achieve "magic wand" results.

Open Ended $$ for Hours/Flat Fee Consult -> Achieve Major Desired Result -> Ask / Offered Equity

4 "Guaranteed" Equity Models

1. Earn-In To Equity - Provide services in exchange for equity that vests when you hit pre-agreed upon milestones or achieve agreed upon results.

Open-Ended Unpaid Consulting -> Achieve Major Desired Results -> Receive Agreed Upon Equity

2. Time-Based Equity - Provide services in exchange for hourly/flat fee payment(s) with a guaranteed pre-agreed upon equity grant after x-amount of time.

Open-Ended $$ for Hours Consult -> Agreed Upon Vesting Time Passes -> Receive Agreed Upon Equity

3. Triggered Pseudo-Equity - Provide services in exchange for stock options, phantom stock or a profits-only interest.

Free or Paid Hourly or Flat Fee Consult -> Time, Milestone or Hybrid Trigger Event -> Receive Options, Phantom Stock, or POI

4. Immediate Equity - Provide services in exchange for an immediate grant of equity in stock or other form of equity.

Hourly/Flat Fee Consult -> Pre-Agreed Upon Time or Result -> Receive Stock/Equity Immediately (Tax Consequences on money not received)

Pricing The Perfect Consult

10X Pricing: Promise to deliver 10X on their investment in you.

Flat Fee: For specific deliverable is best. E.g., time block (half-day) or outcome (solve issue)

Hourly: Best for undetermined time to achieve specific outcome (help improve profits)

Money value of your service to your client: $____________ / 10 = $______ Flat Fee (Minimum Fee Suggestion is $1,5000)

Your Target Monthly Income = $__________ / $___________ Fee = _____ Total clients needed to hit monthly income goal

The Paid Consult

Half-Day: Is plenty. Meet, deliver quick amazing value and then let them implement.

Magic Wand: Ensure customer satisfaction by having them describe their ideal outcome.

Stack The Deck: Pre-game transformational solutions BEFORE the meeting. Don't worry about looking at any of their documents beforehand. Tell them to get all their stuff together that you want me to look at during the consult and have it ready for the meeting. Otherwise they will end up sending you documents over 17 emails and can be a pain in the rear.

Send them the consulting agreement and follow up to confirm payment. Don't schedule the consult UNTIL AFTER you receive payment!

Follow Up: "Did you have any questions about the agreement or is there anything I can help with?"

Key Points to have in the agreement:

Define scope of consult
Define time limit

Exclude advice that creates liability

Exclude advice that requires a license

Limit liability to amount of fee

Exclude incidental damages

Optional: NDA (Only used when client asks for one)

Optional: Non-circumvention/poaching

Agreement Example:

Services: Client desires to retain Consultant to provide the consulting services of {Your Name} regarding Client’s business structure, new and existing ventures, partnerships, and strategic plans. Client and Consultant shall meet and discuss client’s business for a total of up to {four (4) hours in person in Rancho Santa Fe, California, or on a Zoom or phone call} on a mutually acceptable date or dates to be determined. Meetings may be for any time length of {30 minutes or more}. No other services shall be provided, and Client acknowledges that no legal, accounting, financial, investment or tax advice will be provided by Consultant or {Your Name}.  

Fee: The flat fee for the services described above is {Your Fee} to be wired to: {YOUR WIRING INSTRUCTIONS}. Please forward wire confirmation upon sending. No meetings, document reviews, or consultation will take place prior to Consultant’s receipt of the above payment in full.  

Entire Agreement + Amendment: This Agreement constitutes the complete and exclusive statement of its terms. No extrinsic evidence whatsoever may be introduced in any judicial or arbitration proceeding involving this Agreement. All prior and contemporaneous conversations, negotiations, possible and alleged agreements, representations, covenants, and warranties, express or implied, oral or written, with respect to the subject matter hereof, are waived, merged herin and superseded hereby. There are no other agreements, representations, covenants or warranties not set forth herein. No part of this Agreement may be amended or modified in any way unless such amendment or modification is expressed in a writing signed by all parties to this Agreement.  

Limitation of Liability: Any liability of Consultant and/or {Your Name} pursuant to this Agreement or the rendering of the services contracted for herein shall be strictly limited to the total amount paid to Consultant hereunder.  Governing Law: The parties and signatories to this Agreement agree that the laws of the State of {State Your Company Is Formed} shall apply to any question or issue raised by this Agreement, without regard to conflict of law principles.

The BIGGEST mistake is giving Solutions + Advice PRIOR to payment!

Get Ready for The Consult:

What's your end game?

If you could wave a magic wand...

Biggest challenges

Biggest roadblocks

Most desired connections

Paint It Done Pre-Planning:

Client's Challenge Ideal Outcome Possible Solutions

______________________________ ______________________________ ______________________________

______________________________ ______________________________ ______________________________

______________________________ ______________________________ ______________________________

Paid Consult Meeting Framework

:00 - :15 Meet + greet. Build rapport. Socialize

:15 - :30 Confirm PID/DSQ desired outcomes

:30 - 1:00 They list + explain their constraints

1:00 - 1:30 Gather/review data + docs

1:30 - 2:30 Socratic problem-solving process

2:30 - 3:30 Review + rank identified solutions

3:30 - 4:00 List action steps. Set next meeting

Opening Your 1/2 Day Consult

What We'll Leave With" Worksheet

Biggest Issues Ideal Outcomes When-Done Feeling

_________________________ _________________________ _________________________

_________________________ _________________________ _________________________

_________________________ _________________________ _________________________

_________________________ _________________________ _________________________

Reveal "The Plan" Your genius results-getting framework:

If you have a framework you already work with and are good at use it. If not, here are some sample frameworks you can use.

Marcus Lemonis's 3 P's Framework (People, Products, Process)

SWOT Analysis (Strengths, Weakness, Opportunities, Threats)

Ohmae's 3 Cs (Customer, Company, Competition)

Michael Porter's 5 Forces (New entrants, Suppliers, Substitutes, Rivalry, Customers)

More Advanced Frameworks

4 Ps Marketing Mix (Promotion, Product, Place, Price) or 7 Ps (advanced version of 4 Ps)

McKinsey 7S Framework (Strategy, Structure, Systems, Shared Value, Skills, Staff, Style)

Epics' Scalable Impact SPV Framework (Leveraged Sales, Bankable Profits, Transferable Value)

Review Documents + Data

Tell them to bring everything they think we will need to talk about during the meeting.

Run The Playbook:

See detailed Training, links below

The Wrap Up

Review what you covered, confirm challenges faced, outcomes and feelings achieved from "What we'll leave with" worksheet.

Discuss possibilities of moving forward on an equity basis.

"How would you see the best way forward would be?"

"Would you like some help with that?"

"Would you like someone who champions that cause and helps you through this?"

"What would you think about working together on an equity basis?"

Set time for next meeting.