AI transcript
0:00:05 Here’s how one side hustler strategically acquired 200 grand a year in we’ll call it
0:00:06 semi-passive income.
0:00:12 You know, why go through the trouble of building up your own cash flow when with a little determination,
0:00:17 a little hustle, you can insert yourself into some income streams that are already happening.
0:00:22 That’s what today’s guest has done not once, not twice, but five different times, stacking
0:00:30 up what would be considered small-ish business acquisitions into a healthy full-time income
0:00:32 in exchange for part-time work from linkmoser.com.
0:00:36 Linkmoser, welcome back to The Side Hustle Show.
0:00:37 Thanks, Nick.
0:00:38 Great to be back.
0:00:43 I always love getting your emails and kudos to all the great work that you do.
0:00:46 My kids are excited that you’re going to be on that show with Nick.
0:00:48 Yeah, I am, guys.
0:00:50 Thank you for all that you’re doing.
0:00:53 Happy to be here and, yeah, excited to share.
0:00:55 It comes full circle.
0:00:57 Glad I got some street cred with the kids.
0:00:58 Link, we last heard from you.
0:00:59 It was late 2022.
0:01:04 We covered one of your other income streams, which I thought was really creative at that
0:01:09 time as this real estate lead generation site that you’d have for years and years where
0:01:14 single referrals could be worth tens of thousands of dollars.
0:01:19 Maybe this is kind of a theme, looking for these really leveraged activities where it’s
0:01:23 going to take the same amount of work to do this path or this other path and the hourly
0:01:26 return on this other path seems to be a lot greater.
0:01:30 I think it’s an interesting angle and the one we’ll get into in this episode.
0:01:35 We’re going to talk about the specific types of businesses that Link found most attractive
0:01:41 to try and go out and buy, how he found and negotiated with the owners for sometimes pretty
0:01:46 low down payments, low risk upfront, and maybe more interesting, even though they weren’t
0:01:48 necessarily even for sale.
0:01:53 How do I go buy something that’s not for sale and the time and logistics that goes into
0:01:55 that portfolio today?
0:01:58 As we’ve alluded to, you’re a man of many side hustles.
0:02:02 What inspires you to go out and try and acquire some cash flow in this way?
0:02:05 It’s a really unique strategy that a lot of people probably don’t think about.
0:02:09 It was really like so many things in life, accidental.
0:02:14 It was around 2010, so I’m about 10 years into this business of building websites and
0:02:18 hosting them, which I started ironically around the same time.
0:02:24 I got into real estate about 20 years old in the mid-90s, fell into both of these paths.
0:02:27 The OG, early days of the internet.
0:02:28 Early, early days.
0:02:31 AOL was still a thing.
0:02:35 Like others, there were other people starting up in this space and I had a friendly competitor
0:02:40 that was in 30 minutes from me and it was a husband and wife team and they went a little
0:02:41 bigger than I did.
0:02:46 They went and got an office, they got employees, and I was still much just doing this stuff
0:02:52 solo and having some freelance help, but to me, they looked like they were bigger and
0:02:55 who knows what kind of money they were making, but lo and behold, one day, they closed their
0:02:58 doors and I heard about it through the grapevine.
0:03:02 I don’t remember how, but they had just either given their book a business or maybe sold
0:03:08 it short money to another firm 45 minutes away and because I was always bidding against
0:03:12 these guys and Herbert thinking, “Why didn’t I get a seat at the table?
0:03:14 Why didn’t they reach out to me?
0:03:15 Do they think I was too small?
0:03:18 Do they think I didn’t have the means to do this?”
0:03:24 Maybe they were right, but I still would have liked a chance to have that conversation.
0:03:26 That’s what prompted me to start sending letters out.
0:03:27 I thought, “You know what?
0:03:30 I’m not going to let this happen again in my own backyard.”
0:03:38 To pause, you’re already doing this web design hosting on a small-ish scale for local businesses,
0:03:44 local companies and the attractive piece of this is that recurring … Okay, great.
0:03:48 It’s great to get a website build project, but that’s one-time revenue, where the real
0:03:52 sweet spot is in this recurring hosting and maintenance type of fee.
0:03:53 Is that right?
0:03:54 That’s right.
0:03:57 I joked that I have made a ton of mistakes in my life, but the one that I think I got
0:04:01 right was from day one, “Hey, I just built you a website, Nick.
0:04:02 Where are you going to host it?”
0:04:03 Oh, I don’t know.
0:04:04 Well, hey, guess what?
0:04:07 I can host it for $30 a month or something, which doesn’t sound like a lot of money and
0:04:09 you’re going to say, “Sure, great.
0:04:10 I had a good experience.
0:04:11 You built my site.
0:04:12 Go ahead.
0:04:13 Host it.”
0:04:14 I started doing that.
0:04:16 You know, for a lot of these companies, it’s a no-brainer.
0:04:21 I want a single point of contact for … You’re going to be my outsourced IT department.
0:04:22 You deal with it.
0:04:23 Sure.
0:04:24 Yes, fine.
0:04:25 Let me sign.
0:04:26 Let me set up that recurring payment.
0:04:27 Yep.
0:04:28 I’ll get your email.
0:04:29 I’ll help you with your domain name.
0:04:33 In the early days, it was a little more tentacle, but nowadays, it’s really pretty straightforward
0:04:34 stuff.
0:04:37 A lot of designers were strictly, “Hey, I built you a site.
0:04:38 I don’t want to host it.
0:04:40 I don’t want to be on call.”
0:04:41 I get that.
0:04:42 No.
0:04:43 No, I don’t.
0:04:47 Yeah, because it doesn’t look like you have a server bank in a spare bedroom or anything.
0:04:48 It’s all reseller hosting, right?
0:04:51 I’ll just partner with some other hosting company.
0:04:52 It is reseller.
0:04:53 Yeah.
0:04:56 You partner with somebody, does a good job, and it’s got good support, and you’ve got
0:04:58 somebody watching your back.
0:05:03 It did lay that track early on for recurring revenue, which has really become a big part
0:05:08 of what I do, so I don’t know if I had that foresight then, but I’m glad I did.
0:05:09 Okay.
0:05:10 There’s a game plan.
0:05:14 There’s somebody else doing this locally, and they sell to somebody else, and you’re
0:05:15 like, “Whoa, whoa, whoa.
0:05:16 I would have taken it.
0:05:18 You would have happily taken that off your head.”
0:05:24 The game plan becomes, “Who are the other smallish operators like me or like them who
0:05:32 have this piece of their revenue pie is that attractive recurring low maintenance hosting
0:05:38 type of revenue and trying to proactively get on their radar?”
0:05:39 Exactly.
0:05:43 I use this little thing called Google, and I reached out and said, “Who else is doing
0:05:44 this around me?”
0:05:47 I wrote him a letter, a one-page letter, “Hey, my name is Link.
0:05:50 I’m in this same business as you are.
0:05:55 I’m reaching out to see or just make the connection if you are ever thinking of shifting gears.”
0:06:02 Now, granted, this is a 10, 15-year-old industry, so a lot of people weren’t at traditional retirement
0:06:06 age if they started when they were younger, but other things happened in life that caused
0:06:10 people to get out of this stuff and you can’t take your business with you to the grave.
0:06:13 I realized you’re not going to win the lottery if you don’t buy a ticket, so I sent these
0:06:17 letters and I’m like, “Hey, the timing may be way off, but just hang on to my info.
0:06:18 Keep it in mind.
0:06:20 If you want to chat now, great.
0:06:26 I’m a real person, but if and when that time comes, I would just welcome the conversation.
0:06:30 Maybe a good fit may not, but hey, I’m putting myself out there.”
0:06:31 Okay.
0:06:33 It’s kind of a soft intro.
0:06:39 If you ever considered selling, if you have, give me a call or … I imagine you’re going
0:06:44 through pages and you’re just looking up New Hampshire web design type of companies.
0:06:46 It’s hard to imagine.
0:06:51 People would call themselves differently, “I’m a creative agency,” or there’s different
0:06:53 ways people might brand that.
0:06:54 There are.
0:06:55 There are.
0:06:57 You had to pick through, “Is it web designer?
0:06:59 Is it marketing agency?”
0:07:04 If you really took your time, there weren’t very many of that local, so I could go look
0:07:08 at their website and see, “Okay, it looks like … Oh, no, you’re doing TV spots.”
0:07:09 Well, that’s not for me.
0:07:14 I mean, you kind of figure … You can look at their website and see if it’s a match and
0:07:15 we build websites.
0:07:16 We host websites.
0:07:17 Okay, great.
0:07:18 Okay.
0:07:21 If they didn’t have 30 people under the About page, then you can figure, “All right.
0:07:26 There’s a small operation here because I can’t take over some giant monster company.”
0:07:29 I didn’t have that kind of means.
0:07:34 I think the first one was around 2014 when somebody did respond and it was local and
0:07:37 it was small, like similar size to me.
0:07:39 It was a husband and wife team.
0:07:44 I think the husband took ill and passed away and he had all the technical knowledge.
0:07:47 The wife’s like, “I can’t run this.”
0:07:52 She’d gotten my letter a year or two later, hung on to it, and yeah, plant those seeds.
0:07:53 Yeah, planting those seeds.
0:07:57 It could be a really long lead to conversion cycle, as they say, yeah.
0:07:58 Correct.
0:08:02 You’ve got to think the long game here and most of these people don’t reach out to you
0:08:07 and, “Hey, I got your letter,” but many of them hang on to it and file it away and you’re
0:08:08 glad they did.
0:08:12 She reached out and she probably had 20, 30 customers.
0:08:17 I took those over with no money down and it was, “I’ll give you half of whatever I
0:08:21 collect for 12 months,” so 12 payments.
0:08:26 If $100 comes in in January, then I’ll give you a check for $50 on the 1st of February
0:08:28 and I’ll do that 12 months, whatever it is.
0:08:30 It’s based on retention.
0:08:34 The more we can hang on to, the more I get and in that case, that woman just wanted to
0:08:35 home for the customers.
0:08:38 At that small level, it’s not usually always monetary.
0:08:40 It’s, “Hey, I’m done doing this.
0:08:43 I need to find a good, trusted home for my customers.
0:08:44 I’ve talked to you.
0:08:47 You seem like we have similar values.
0:08:49 Let’s figure this out.”
0:08:53 You’d asked me why I started doing this and it was partly because I felt like I’d missed
0:08:58 an opportunity, but it was also getting harder and harder for me to grow organically because
0:09:04 by now, everybody was doing this stuff and that growth was not as strong.
0:09:10 This was another way to grow and sometimes a good conversation is a one to many where
0:09:15 you might invest in that relationship but it may yield 50 accounts.
0:09:17 How long would it take to get those organically?
0:09:18 Interesting.
0:09:26 A new website coming online has huge menu of choices between WordPress and Squarespace
0:09:28 and Webflow and every other thing.
0:09:30 Each of those are going to have their own hosting packages.
0:09:34 Instead, it’s like, “Well, how can I go for people who already have a website?
0:09:36 They’re already used to paying for hosting.
0:09:40 How can I get in front of them in this creative, unique way?”
0:09:44 It sounds like it may be really as a matter of right place, right time.
0:09:45 It is.
0:09:50 This existing owner-seller who is looking to get out, give me a sense of the volume
0:09:55 of letters that you sent out, the research that went into it, the response rate.
0:09:58 I imagine anything direct mail has got to be pretty low.
0:10:02 I would do this in spurts as I had time to.
0:10:04 Up until last year, I used to send these out manually.
0:10:07 I’d written a little form letter and word.
0:10:08 I’d print the letters out.
0:10:13 I’d hand sign all of them and then I’d print on the envelopes because my handwriting wouldn’t
0:10:15 get the letter there.
0:10:18 Then I’d beg my kids, “Hey, help me stuff these.”
0:10:24 I might do 100, 200 in a batch, but it might be taking hours and then pay for the stamps.
0:10:29 After I exhausted New Hampshire, I found a virtual assistant to help research the name.
0:10:35 I went on Upwork and found a fellow and I would just go state by state, “Okay, New Hampshire’s
0:10:36 done.
0:10:37 Give me Maine and Vermont.”
0:10:42 The bigger states would be longer to list, so it would take me a while to go through
0:10:44 500, 600 people.
0:10:47 I wanted to stay local because I felt that was a connection, “Hey, I’m right here in
0:10:51 New Hampshire or you’re right over Vermont or you’re in Massachusetts.
0:10:53 I’m here in New England just like you.
0:10:55 You’re trying to find a way to connect.”
0:10:59 At least it gives you a starting point versus some company in Montana or something.
0:11:00 Correct.
0:11:07 A lot of these people at a smaller size, their clients valued the perception of a local relationship.
0:11:13 These days, people are less worried about that, but back 15 years ago, it mattered and
0:11:16 it still does to some, all things being equal.
0:11:17 Sure.
0:11:22 Having this virtual assistant comb through the directories of web design, web hosting,
0:11:27 marketing agency, all these variations on certain keywords where somebody has hosting
0:11:30 as they’re under their menu of services.
0:11:31 Correct.
0:11:36 I would pay them about 25 cents a lead and I got this person dialed in to where it was
0:11:37 working well.
0:11:39 In the beginning, I would say, “Hey, send me 10 listings.
0:11:40 Let me take a look at them.
0:11:44 I’ll manually go look at the websites and I’ll say I’ll give them feedback.”
0:11:45 These two are on point.
0:11:46 This one is not.
0:11:47 Here’s why.
0:11:52 Once we had that dialed in because I needed to have the owner’s name first and last name
0:11:57 because I could want to personalize it and I needed a valid mailing address and I wanted
0:11:59 a website so I could go look at it.
0:12:00 I like that.
0:12:01 Send me 10 as a trial task.
0:12:03 We’ll see if we’re on the right path.
0:12:04 Yes.
0:12:05 Correct.
0:12:06 Send me 10.
0:12:07 Send me 20.
0:12:08 I would shift it over time.
0:12:10 I would say, “Hey, these are a little too big.
0:12:16 Look at the headcounts if they’re under five or I don’t want anything with the video work
0:12:19 on it because that wasn’t my cup of tea.”
0:12:23 We would refine that model and we’d go state by state and they’d send me the list and I
0:12:29 would just ask for it whenever I had the bandwidth and I would send out letters and inevitably,
0:12:33 and I would track it all in Excel, which I realize is very low-tech, but the response
0:12:37 rate would be 10 to 12 percent, which I think was pretty darn good.
0:12:39 That’s shockingly high for direct mail.
0:12:41 Normally, the rule of thumb is like 1 percent.
0:12:43 It’s like one to two, exactly.
0:12:47 I measured that by the response, so certainly not meaning, “Hey, we’re going to make a
0:12:48 deal.”
0:12:53 It was more, “Did I get a call or an email back from somebody?”
0:12:54 It’s like a funnel, right?
0:12:58 You talk to so many and then you get serious with a few more.
0:13:01 You ask for some financials and you kind of work through it.
0:13:05 There was, of course, the gazillion conversations that went nowhere, or at least nowhere at
0:13:06 the moment.
0:13:10 I had to have the bandwidth and the capacities who, “You send out letters, you better be
0:13:13 ready when the phone rings that you’re going to have some calls.”
0:13:14 Yeah.
0:13:18 Is that the main, “Put your phone number at the bottom, hey, call me if this is of interest.”
0:13:23 We could talk through what a deal might look like, next steps, get a sense, get to know
0:13:24 each other.
0:13:26 What’s the sign off here?
0:13:30 This is definitely, “Here’s my phone number, here’s my email address,” and then I think
0:13:35 it was important to put my LinkedIn URL because I wanted them to look me up.
0:13:37 Many people were like, “Is this real?”
0:13:41 I would use my company logo letterhead, put the LinkedIn, just go check me out.
0:13:42 I’m a real person.
0:13:47 There’s no scam here because many of these, especially the little guys, they never get
0:13:48 a letter like this.
0:13:50 They’re thinking, “What is the angle with this guy?”
0:13:51 No, yes.
0:13:53 It’s certainly a unique approach.
0:13:54 This is Windhill Design.
0:13:58 This would be like, “Hey, look, we’ve been doing this for years, we’re going to take
0:13:59 or carry your clients.
0:14:02 It’s not just some fly-by-night type of operation.”
0:14:03 Yes.
0:14:04 I’m like you.
0:14:07 We’re both similar here and I’m not making any assumptions.
0:14:09 Nobody tipped me off that you’re about ready to retire.
0:14:14 I’m a guy reaching out, making connection.
0:14:16 If and when this is something you want to chat about, I’m right here.
0:14:17 Yeah.
0:14:18 Bonus points.
0:14:23 If you’re Upwork VA, you could find the About page and it’s got a gray hair guy on it.
0:14:24 Yeah.
0:14:25 Yeah.
0:14:26 Oh, okay.
0:14:27 I’ll pay you 50 cents for that lead.
0:14:28 That’s right.
0:14:32 If you know something that’s going to happen in their lives and if people are listing there’s
0:14:36 a takeaway here, I learned as I had more and more of these conversations, some of them
0:14:40 felt like wild goose chases that if I could drill down, why are you reaching out to me
0:14:42 now, Nick?
0:14:45 What it is that about my letter prompted you to reach out?
0:14:46 I’m digging.
0:14:47 I’m probing a little here too.
0:14:51 Are you just thinking that maybe I’m some dumb guy with a bunch of money that’s going
0:14:55 over pay and you hadn’t thinking until you got this letter or is there something else
0:14:58 in your life that you want to pursue?
0:15:03 I hate to say a health factor, but sometimes that’s the case.
0:15:09 Some of the reason besides strictly financial of why we might be talking now.
0:15:10 Yeah.
0:15:11 That’s fair.
0:15:12 Yeah.
0:15:18 It’s like how Zillow used to have the Make Me Move price or something.
0:15:22 It’s like, yeah, it’s not for sale, but how much are we talking here?
0:15:23 Right.
0:15:24 Right.
0:15:26 We’re talking about people that I was not going to overpay.
0:15:27 I couldn’t be that person.
0:15:32 I didn’t just win the lottery here and I bored and sprinkling money around.
0:15:34 If they didn’t have a good reason, I didn’t really push to come.
0:15:39 I was sort of like, hey, you’re going to make more money hanging onto this because we both
0:15:44 know the recurring revenue and we both realize the comfort that comes from this.
0:15:50 So I’m not fooling anyone into thinking I can adjust their trajectory.
0:15:53 So I wanted a good reason that was there.
0:15:57 And then if that was there, like you said, the timing was right.
0:16:03 You could then take the conversation to a second date, so to speak.
0:16:04 Yeah.
0:16:07 If it’s a good book of business for you to buy, by definition, it’s a good business,
0:16:08 book of business for them to hold on to.
0:16:09 Correct.
0:16:13 It’s kind of like, why am I letting go of this recurring revenue cash cow?
0:16:14 Yeah.
0:16:15 Okay.
0:16:16 So the question, hey, why are you reaching out?
0:16:21 What prompted you to respond to this letter and trying to probe for some indication that
0:16:26 hey, I’m trying to take some chips off the table, I’m nearing retirement, I’m just trying
0:16:31 to explore more with Link in just a moment, including the due diligence phase, how he
0:16:35 might structure a deal and the all-important transition so you don’t lose a bunch of the
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0:18:46 Okay, what does the next step look like?
0:18:50 I’d like to have a smooth transition handoff for these clients that I’ve probably had for
0:18:53 5, 10, 15 years in some cases.
0:18:57 Talk to me about the next steps of due diligence and trying to get it.
0:18:58 It’s going to be sensitive.
0:19:03 Now, all of a sudden, they’re having to open up their books and financials and prove they
0:19:09 are making what they say they’re making and even that’s kind of like a personal question.
0:19:10 Why are you reaching out?
0:19:11 Yes.
0:19:16 Once you’re monthly recurring revenue here, it’s like, “Whoa, whoa, whoa.
0:19:17 We just met.”
0:19:18 Yeah, it is.
0:19:19 It’s like dating.
0:19:21 You’re not going to ask for marriage on that first date.
0:19:25 And so, I’m very mindful of respecting that and knowing everyone’s going to be a little
0:19:26 different.
0:19:32 Now, surprisingly, people are very open about things like financials and people sometimes
0:19:35 are very forthcoming because I will dance around.
0:19:39 People are more willing to share maybe top line revenue, what they brought in versus
0:19:40 what they kept.
0:19:44 So, you know, I have no clue how big they are, how many clients do you have?
0:19:47 That’s kind of a roundabout way to asking.
0:19:52 So if your intercall went well and you found some motivation that you’re comfortable with,
0:19:56 then the next step is to sort of size this thing up and see if it’s a fit because I don’t
0:20:00 want to promise that I can flip into your shoes and do what you do.
0:20:03 I want to know a little more.
0:20:06 In the beginning, it was me sending emails with questions and then eventually, I made
0:20:10 a list of questions that was about two pages and I said, “Hey, this all sounds good.
0:20:11 I’ve got some questions.
0:20:14 I’m going to send them to you.
0:20:18 Don’t feel you have to answer any or all of them because I don’t want you to feel uncomfortable.
0:20:21 But these are things that would help me size this up because, of course, they’re sitting
0:20:23 there wondering, “What are you going to pay me for this?”
0:20:26 And I said, “Well, I need to know more and I need to know sure it’s a fit.”
0:20:28 And I’m also going to send over an NDA.
0:20:32 So I get ahead of that before they even ask for one, whether they know what that means
0:20:33 even.
0:20:37 I’m going to send that over with my signature on it because you should have this.
0:20:42 This is this good, proper protocol so that you know that our conversation is confidential.
0:20:46 And it goes without saying, I said, “But let’s have a piece of paper to make sure that that’s
0:20:47 there.”
0:20:48 So I’m proactive with that.
0:20:52 This is a non-disclosure agreement for those unfamiliar with the acronym.
0:20:53 Yep.
0:20:58 It means what we talk about stays confidential because you’re trying to build trust.
0:21:02 And I want this person, especially if I get the sense they have something I want, I really
0:21:04 want them to like and trust me.
0:21:11 So I need to establish that early on, genuinely, let’s assume definitely genuinely, I’m trying
0:21:13 to fleece anyone.
0:21:19 So I’m trying to also make this as easy and smooth for them recognizing the sensitivity
0:21:23 that they’re parting with a part of them for whatever reason.
0:21:24 Yeah.
0:21:29 And the alternative is them selling it through a brokerage and now you’ve got a competing
0:21:30 bid situation.
0:21:33 You’re trying to want to eliminate all of that by being proactive and being the only
0:21:37 person who is even having this conversation with them.
0:21:38 Correct.
0:21:40 So asking the kind of things, “Well, how many clients do you have?”
0:21:46 I imagine it would be, “What percentage of this is like the one-off design work?”
0:21:49 You’re like, “Well, I don’t know if I need to buy myself another job and I don’t know
0:21:52 how much of that is really going to be, how much of that could I really count on if they
0:21:56 have a personal relationship with you or your design team?”
0:21:59 And it’s like, “Well, I don’t know.”
0:22:03 It’s a little bit harder to put a value on versus the recurring revenue side.
0:22:10 Okay, expect, I don’t know, what is a reasonable number, like 75% to 80% retention rate.
0:22:17 Yeah, just keep it on the same server, let’s keep it going and then I can throw out a valuation
0:22:18 or a multiple based on that.
0:22:22 It is all over the map and those are the questions that are part of that, that early
0:22:28 due diligence before you can put a value on it and I’ll tell people that because I will
0:22:31 value the, you’ve got recurring revenue and then kind of everything else, what I will
0:22:37 call project-based or one-time revenue and it’s a much lower value because exactly to
0:22:41 your point, you don’t know how much of that will stick and carry forward.
0:22:47 So it’s not that it isn’t got some value, but it’s certainly not predictable and it
0:22:51 speaks to kind of the terms by which I structure a deal.
0:22:53 So first you’ve got to know if you want it and then if you knew on it, you got to think
0:22:58 about how will I value this and be ready to present that to that owner.
0:23:06 Is there a rule of thumb for, okay, I’m going to put the one-time revenue at 1x earnings
0:23:11 because I don’t know if that’s going to materialize or even less than that versus, okay, the recurring
0:23:14 revenue and more comfortable paying a higher multiple, like are there any rules of thumb
0:23:17 or is it just like, hey, we got to start the negotiation somewhere, it’s all over to put
0:23:20 it at two and a half times or like something like that?
0:23:22 There isn’t a rule of thumb.
0:23:27 Years and years ago, I knew a fellow that did mergers and acquisitions in this space,
0:23:33 way bigger deals and I would pick his brain a little and this was probably 15 years ago.
0:23:37 His rule of thumb was for this small stuff was that it was around one to one and a half
0:23:44 times gross on the hosting and then 0.5, 0.75 on the product base.
0:23:47 Now I think this day and age, that’s probably a little low.
0:23:49 It also depends on the size.
0:23:56 If you’re talking about 50K in revenue versus 500K, the bigger fish is going to get a higher
0:23:59 multiple even on the blend.
0:24:05 But if this little stuff, if you’re talking, let’s say around that 50K or under or above,
0:24:13 0 to 100, I’m trying to be probably a starting point one and a half on the hosting and maybe
0:24:16 close to the 0.8 or one on the project base.
0:24:19 I’ve got a little Excel tool I made where I plug all this stuff in and then I spend
0:24:24 a little time looking at it because you got to look and say, “Is this fair?”
0:24:30 Even if somebody is really motivated to sell, you still have to be fair and you can’t, I’ll
0:24:31 just take it.
0:24:35 Some people will approach and say, “I won’t put anything down, I’ll just pay you an earn
0:24:36 out.”
0:24:42 Unless we’re talking like 10 to 15 clients, then I should put some skin in the game for
0:24:43 somebody.
0:24:45 I think that’s the right thing to do.
0:24:51 If you’re talking $50,000 a year in hosting revenue, that’s good value and then it’s pretty
0:24:53 sticky.
0:24:58 If that’s a C-Panel and it moves right over into your universe, that’s pretty much almost
0:25:02 all profit if you’ve got your hosting capacity in place.
0:25:08 That would be the equivalent of probably pretty close to a median income over your own 50 grand
0:25:14 a year to just have that cash flow show up all of a sudden in your bank account.
0:25:19 Instead, for a fair price for that might be $75,000, but you’ve structured it in a way
0:25:25 where you’re not necessarily stroking a check for $75,000 upfront, it’s this combination
0:25:29 of, “Hey, I’ll make you a down payment and then we’ll do some performance-based earn
0:25:30 out.”
0:25:32 Maybe we can use your first couple of deals as an example.
0:25:37 You mentioned the first one was no money down, but maybe the second or third, let’s talk
0:25:38 through some of those examples.
0:25:42 2017, I came back and picked up another one.
0:25:44 I got a little more purposeful.
0:25:51 I had my focus shifted to the other side hustle, the real estate world from about 2014 to 2017.
0:25:56 I was not as focused on growing this at that time because my focus was on the real estate
0:25:57 business.
0:26:02 So, when I shifted my focus back to this, I dusted my old inkjet and started sending
0:26:03 letters out.
0:26:08 And to be clear, hundreds and hundreds of letters, a volume game, I’m trying to cast
0:26:12 a wide net, I’m trying to make sure every hosting reseller in New England has heard
0:26:13 my name.
0:26:14 Yes, hundreds of letters.
0:26:19 I mean, by now, there’s probably been 7,000-8,000 letters that have gone out over the last
0:26:20 10 years.
0:26:21 Okay, that’s great.
0:26:22 Yeah, it’s a lot.
0:26:25 Now, do you start back at the top of the list and like, “Oh, it’s been 10 years.
0:26:27 Might as well hit these people up again.”
0:26:28 I should.
0:26:32 I also got emails, so then I started doing email file like, “Hey, did you get my letter?”
0:26:33 Or, “Hey, it’s been a few years.
0:26:34 Let me check in with you.”
0:26:37 And some people were like, “Hey, I sold it two years ago.
0:26:38 Oh, dang.
0:26:39 I didn’t check in enough.”
0:26:40 That’s right.
0:26:42 Yeah, it’s like trying to keep the multiple touch points.
0:26:43 You do.
0:26:45 You got to find that balance of not being a pest.
0:26:51 But in 2017, the first one in the most recent batch, I would say, was a fellow here in New
0:26:52 Hampshire.
0:26:53 It was a second career for him.
0:26:57 He had about 35 customers, mix of hosting and project-based work.
0:27:01 And his wife was getting ready to retire, so they were going to travel some, and he was
0:27:04 ready to just have this office plate.
0:27:09 He had already tried to find a home for it with another company locally and did not have
0:27:12 a good experience with them, and then, “Okay, you guys aren’t a match.”
0:27:15 So he was primed and ready.
0:27:16 And when we met, we hit it off.
0:27:18 He’s like, “Yeah, great.
0:27:19 You seem like a good fit.
0:27:20 Let’s do this.”
0:27:23 So I offered him three deal scenarios, and I forgot the other two.
0:27:29 But the one he picked was $4,000 down and 18 months of earn-out payments.
0:27:34 So I think that was 50% on the recurring or the hosting revenue.
0:27:38 This is based on the gross, which is easier to track and more transparent.
0:27:42 And I think 35% on the one time.
0:27:47 So just, if you all clarify what that looks like, it’s January right now.
0:27:52 So if $100 in hosting revenue comes in in January and $100 in project-based, February,
0:27:58 I will make a check for $50 on the hosting and $35 on the project-based.
0:28:04 So $85 check in February 1st, and we’d follow that model for 18 payments.
0:28:05 Okay.
0:28:08 You’re keeping more margin on the hosting because there’s more margin there.
0:28:12 You’re paying less margin to the seller on the project-based because that is requiring
0:28:14 some labor on your front.
0:28:16 It is acquiring some labor, and it’s also not as sticky.
0:28:18 So it’s not as worth as much.
0:28:21 So the hosting revenue is worth more and had better margin.
0:28:23 So I put more value on that.
0:28:24 Yep.
0:28:25 Okay.
0:28:30 So this, I think, was worth around $32,000 in gross revenue.
0:28:34 And that feels like a, you know, we talk about mergers and acquisitions and like, you know,
0:28:35 millions of dollars changing hands.
0:28:40 It’s like, you know, there are these little mini businesses, still great cash flow, especially
0:28:41 as a side hustle.
0:28:47 Like, oh, I could add $30,000 to my income next year with $4,000 down and a few hours
0:28:48 of work every week.
0:28:50 Like, that’s a pretty good trade.
0:28:51 It is.
0:28:54 And I think, I think for someone listening and thinking about this, what had helped me
0:28:56 was that I was already in the space.
0:29:01 So, you know, you, it may be a little harder to buy the first one on terms like this because
0:29:04 somebody’s going to say, I don’t know if you could do this, right?
0:29:08 I’m depending on you to perform in order for me to get paid out.
0:29:11 So this would not be deal terms out of the gate.
0:29:16 Either you start it and you get in it, you can still do it on the side, but you need
0:29:20 to have the experience or you, you might need to pay more traditional, I’m going to make
0:29:21 fixed payments.
0:29:26 And I think a seller would still carry payment, but you might not be able to do the earn out
0:29:31 if you were completely new to this, especially if they knew you were working a full-time
0:29:32 job.
0:29:33 Got it, got it.
0:29:35 Think about it from their perspective, right?
0:29:39 Well, I’m just about to turn around and like start looking for people in the Seattle area
0:29:43 trying to sell their businesses, but you’re right, it’s kind of the credibility.
0:29:49 Well, you got to establish some credibility and authority before you can structure something
0:29:50 completely like this.
0:29:56 And even if it’s just setting up your own home base and, you know, even gathering just
0:29:59 a handful of clients to get some practice out of your belt.
0:30:00 Correct.
0:30:03 Because otherwise you’re like, now it’s trial by fire and this person has entrusted me with
0:30:06 their longtime clients and I got to figure this out.
0:30:08 And you got to take that seriously.
0:30:12 And I will say, you know, writing those checks, I never missed one, but I’ve written some
0:30:16 big checks to people and then that, you know, it hurts a little, but you know when that
0:30:18 period is over, you’ll be able to keep all that.
0:30:24 So your hope is that you can hang on to these clients and attrition is a horrible word, but
0:30:29 it happens and you do lose clients with the transition sometimes and you’re like, oh man,
0:30:34 I just bought this guy and he’s going out the door on month two, you know, and is that
0:30:35 my fault?
0:30:36 Is he just not like me?
0:30:38 Was he already on his way out?
0:30:39 I mean, you…
0:30:45 Yeah, especially if there’s only, you know, 10 or 20 clients, losing a couple is a big
0:30:46 percentage wise.
0:30:48 You’re like, oh shoot, I was banking on that revenue.
0:30:50 I just paid for, you know, a multiple of that revenue.
0:30:51 Yep.
0:30:56 There was a deal in 2020 that was a company in Denver that did social media marketing
0:31:03 and I, they had a monthly recurring revenue of about $20,000 when I took it over, only
0:31:04 about 12 clients.
0:31:06 So this was not hosting.
0:31:09 This was a more retainer based work.
0:31:14 And I took that over with nothing down, but that and it had employees and we kept that
0:31:21 brand separate, but by May, about into January one, by May, it was, the doors were shut.
0:31:26 So that had shed enough clients where I couldn’t make the payroll and I wasn’t going to ride
0:31:31 this thing down into the bottom and, you know, we had to say, okay, that’s that.
0:31:35 And had I not structured it that way, I would have really financially found myself in a
0:31:36 pickle.
0:31:38 So it does happen.
0:31:42 And that’s sort of what brings us back to, I like the hosting side because that is more
0:31:44 like the power company, right?
0:31:47 You know, it was the last time you called the power company, probably when the power
0:31:48 went out, right?
0:31:50 Otherwise we don’t bug them.
0:31:51 The lights are on.
0:31:52 I’m happy.
0:31:53 Yeah.
0:31:57 It’s a utility and it’s priced as, hopefully it’s priced as such where it’s just kind
0:32:00 of this low monthly recurring thing.
0:32:03 If I want my website to exist, I just got to keep the pay on us.
0:32:04 That’s right.
0:32:07 And if you don’t give them a reason to go anywhere, they’re not going to.
0:32:14 Keep the price fair, keep the lights on and you don’t need to pay for staff or your time
0:32:15 to manage that.
0:32:18 So it’s, it brought me back to that service being a good fit.
0:32:24 Is there anything specific that you do during that transition time to introduce yourself?
0:32:30 Hey, I’m, Link, I’m taking over, you know, so-and-so is handing over the reins.
0:32:31 Don’t worry.
0:32:32 You’re a good hand.
0:32:33 I’ve been doing this forever.
0:32:35 It’s going to be a seamless transition for you.
0:32:39 Like, what does, what does a handoff look like to minimize that fall off?
0:32:44 It’s different every time, but I think some common traits are that you, you’re going to
0:32:50 lean on that seller in those first 30, 45, 60 days to follow their lead.
0:32:51 They know those relationships.
0:32:56 So they’re going to know, you know, who might be a little more sensitive, who might need
0:32:57 a little more handholding.
0:33:00 You certainly want that seller to stay visible.
0:33:06 Ideally, they are reaching out by phone and email to these folks, not just boom, hey,
0:33:12 I’m out the door, you know, so how they leave that relationship sort of sets you up for
0:33:14 you taking it over.
0:33:17 And if it’s, if it’s straight hosting, then it’s not really a big deal.
0:33:22 But if they are used to more points of contact, because you’re doing some print design, you’re
0:33:27 doing some web maintenance, things that have more interaction, then, then you need to be
0:33:32 able to slip into that cadence and maybe you sit on a call or zoom with them and there’s
0:33:36 a, there’s a handoff, somebody, as they’re phasing out, you’re phasing up.
0:33:38 It’s not necessarily, boom, here are the keys link.
0:33:39 Good luck.
0:33:40 Yeah.
0:33:43 In most cases, they’ve got that 12 to 18 month earn out.
0:33:49 So there’s some incentive for them to make it a smooth transition so they can maximize
0:33:52 their ultimate payout at the end.
0:33:53 Yes.
0:33:54 Correct.
0:33:55 That is a huge part of that.
0:33:56 It aligns our goals.
0:34:03 I want to retain, they want to maximize, we both want to keep these clients in the fold
0:34:04 and happy.
0:34:07 So do you typically do it as a, I guess a percentage of what you collect rather than
0:34:12 like, I’m going to pay you the $75,000 purchase price and we’re just going to stretch it out
0:34:15 or it’s like, I’m going to pay you this much upfront and then we’re going to see what comes
0:34:18 in and I’m just going to give you a fixed percentage of that.
0:34:22 If it, if it grows great, if it, you know, if it goes down, that’s, that’s what happens.
0:34:23 Yeah.
0:34:28 It has always been variable because otherwise they’re just making me alone and I need their
0:34:32 incentive to help with the retain because if they’re going to get their 75 grand, no
0:34:35 matter what, they just have to wait for it.
0:34:37 That puts more risk on my side.
0:34:42 I want them to know, you know, if Bob or Sue leaves, they’re walking out the door with
0:34:46 revenue that affects both of us, not just me.
0:34:51 And that does, that does require you building a lot of trust because they’re thinking, Link,
0:34:52 are you going to take this seriously?
0:34:55 Are you going to screw off or you’re going to jack the prices?
0:34:58 I mean, so I, I will even write in the agreement.
0:35:00 I’m not raising prices during the earn out.
0:35:06 I’m, you know, I will, I’m willing to agree to certain non boat rocking.
0:35:12 If they’ve got a ploy or I can’t promise I’ll keep employees, but freelancers, if they’re
0:35:16 client facing and they, it’s a good fit, I’ll, I’ll try to hang onto that and just kind of
0:35:20 keep things as same as it can, you know, the money goes somewhere different.
0:35:22 It’s so different, Mr. Client.
0:35:26 More with Link in just a moment, including handling those project based requests, a day
0:35:32 in the life of running this business and his plans for the future right after this.
0:35:36 Years ago, I was sitting in a conference in Santa Barbara and the presenter asked this
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0:35:47 I saw myself as a full-time entrepreneur, but it was this moment of clarity that, no,
0:35:50 I’m still very much working in the business.
0:35:53 So when I got back home, that’s when I made my first full-time hire.
0:35:58 It was the first in a long series of steps of learning to truly take control by being
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0:37:56 Yeah, that brings up the next point of when the project-based stuff comes in.
0:37:57 That’s great.
0:38:01 If they had somebody on their team who was already doing that, it’s like, “Sure.
0:38:07 Let me pass along that same project over to you,” would be the manager, reviewer, overseer
0:38:14 versus, “Well, now somebody’s asking for this redesign and either I got to figure that out
0:38:16 or I got to go find somebody who’s qualified to do it.”
0:38:22 I’ve had pretty good luck maintaining a good long-term relationship with various contractors
0:38:27 and freelancers over the years, so some of them which have teams behind them so they can
0:38:28 scale.
0:38:32 Certainly, if you’re going through one of these, I’m going to tell the people that I’m
0:38:33 working, “Hey, do you have more capacity?
0:38:35 Do you want more work?
0:38:37 If not, I’m going to need to tee up that.”
0:38:44 When the last ones I did in 2023 came with a whole bunch of print design work, so I needed
0:38:50 to find a print designer to help with this because the previous owners was a husband
0:38:55 and wife team and the husband was doing the creative design, so I don’t know how to use
0:38:56 Adobe InDesign.
0:39:01 I don’t want to use Adobe InDesign, so I needed to find someone to help with that.
0:39:07 Again, it takes a little due diligence and just like you’re finding an employee, but
0:39:12 I’ve got a good person now that works stateside and at the same time zone and takes the design
0:39:15 projects and it’s been working well.
0:39:16 You have enough runway.
0:39:22 In that case, those owners still did contract work for me for a good six to 12 months of
0:39:27 a 24-month earn-out, so that was a very gradual timeline.
0:39:29 They wanted to keep the revenue.
0:39:31 They wanted to let the dust settle.
0:39:35 They were not web people, so the web stuff I took over right away, but they hung on to
0:39:40 some of the print work and they stayed more client-facing and we gradually moved those
0:39:44 relationships over on their timeline and that’s worked out well.
0:39:45 Yeah.
0:39:46 This is a big question mark.
0:39:51 I think for a lot of business owners is what is the exit strategy and if there’s a way
0:39:57 to draw down and slowly reduce your hours while still getting some income, that probably
0:40:01 makes a lot of sense because that’s not something you think about day to day.
0:40:05 It’s like, “No, I’m just doing my thing,” and then it’s a question of like, “How long
0:40:06 do we keep doing this?”
0:40:11 If somebody like Link comes along and says, “Hey, I’m offering you an exit plan,” and
0:40:14 it’s like, “Oh, I never thought about that.”
0:40:17 Like, “Oh, okay,” so it could be pretty attractive.
0:40:23 I did want to ask if this is purely like a war of attrition where it’s like, “Okay,
0:40:26 I bought 30 clients at the end of two years.
0:40:28 I hope to have 20 of them.
0:40:29 Does it grow?”
0:40:33 Are new people signing up or it’s like, “We had a guy from Philip Morris come and talk
0:40:38 to our group in college,” and we’re like, “Are new people starting smoking anymore?”
0:40:39 He’s like, “No.
0:40:44 This business has been around for 100 years, but it declines 3% a year.”
0:40:45 3% a year.
0:40:46 And it’s like, “Okay.”
0:40:49 So, it’s like slowly dying and they’re trying to diversify.
0:40:55 But it was just a weird … Yeah, we openly admit that it may not be around forever, but
0:40:58 it’s still a huge business and it just is slowly declining.
0:41:03 Is it similar here where it’s just trying to do the best to keep what you have?
0:41:09 At the small end where I have played for the most part, I’d say yes.
0:41:14 You’re buying a client list, so there’s not usually a brand.
0:41:20 Just because they had a logo and a trade name doesn’t mean it was a recognizable brand.
0:41:22 The owners were the brand.
0:41:24 They were the business development people.
0:41:26 They were the lead generation team.
0:41:32 So when that is gone, especially if it’s not local, you might get some referrals possibly,
0:41:38 not necessarily in the hosting piece, but on design work if someone is happy and you’re …
0:41:42 They’re not going to refer you until they get to know you, but if it’s going well by
0:41:49 month six to nine, they might be a referral, but I have found that the attrition of acquired
0:41:53 client badges is higher than what I’ve organically got.
0:41:58 And so it is … Race to the bottom isn’t the right term, because some of these hosting
0:42:01 clients I’ve had for 10 plus years.
0:42:04 Yeah, it can be super sticky.
0:42:08 Other things happen, they go out of business or they … I have lost people because they’re
0:42:12 someone more local or they’re … Hey, these people do email marketing and they want to
0:42:15 take over our hosting as well.
0:42:19 It goes both ways, no matter even if you’re doing a good job.
0:42:24 Now I would say a bigger company in this space, the bigger they get, the more there may be
0:42:31 a brand, the last one I did was the biggest I’ve done that has generated some new business
0:42:32 that have come through referrals.
0:42:33 Okay.
0:42:36 Even after it’s transitioned because of the reputation that they had built, people were
0:42:40 still reaching out to them for new websites, new hostings.
0:42:46 I think the better play here is to arrange terms with that seller of, “Hey, if you get
0:42:53 a lead,” so when I purchased it, we list out the clients one by one, and this is all you’re
0:42:55 getting paid on.
0:42:59 If you have a website, if something new comes from that, that’s mine.
0:43:05 But if you get a lead personally, if someone reaches out to you from your sphere of influence,
0:43:09 that has value and I’ll pay a commission, I’d like to take 20%.
0:43:14 If that’s a $10,000 website project, that’s too grand, I’ll pay you.
0:43:19 It’s business I wouldn’t have had and I want you to know that that has value.
0:43:25 Sometimes that is a way to help close a valuation gap to tell a seller, “Okay, maybe this isn’t
0:43:30 quite as much as you want, but if you want to stay in the fold and sell a little, maybe
0:43:34 you don’t want to manage and design, then we can create revenue there.”
0:43:38 Or if you think, “Hey, Link, I haven’t raised prices in 15 years.
0:43:42 These guys are all paying $10 a month for hosting.
0:43:46 Maybe it should be 25,” because I’ve seen that and I’m like, “Look, man, you’re charging
0:43:50 way too less here a little, but I can’t raise that on the day one because that’s not going
0:43:52 to look good for me.
0:43:55 So you need to think about doing that before.”
0:43:59 Yeah, like the new apartment owner comes in and raises everybody’s rent.
0:44:02 But you also know that if you’re looking at the long term, you’re like, “All right, in
0:44:08 a few years, I can slowly bump these guys up once they’re feeling comfortable with me
0:44:09 and established.
0:44:11 So it is future revenue for sure.
0:44:13 Will they leave you over an extra $10 a month?
0:44:16 Yeah, a couple of might, but most won’t.”
0:44:19 I don’t know if we talked about this recently on the show, but I was telling somebody about
0:44:26 this where the podcast editing service, Podcast FastTrack, they said, “Hey, this was a couple
0:44:27 of years ago.”
0:44:29 They’re like, “Nick, we appreciate your business.
0:44:30 You’ve been a client forever.
0:44:31 Thank you.
0:44:36 But new clients, and we haven’t raised your rate since 2016, new clients come in.
0:44:40 We’re paying up here, and so we need to get you a little bit closer to that.
0:44:46 But what we’re going to do, because it was probably a double or 50%, it was a big jump.
0:44:52 And had they immediately gone to that, probably been like, “Let me go look for some alternatives.”
0:44:54 They said, “Here’s what we’re going to do.
0:44:58 Every quarter, for the next 15 months, we’re going to stair-step you up there.
0:45:02 So eventually you got to get to whatever our new rate is.”
0:45:05 And it was so incremental, you didn’t even notice.
0:45:11 It was like a frog in the boiling water where I had one of these other software that I used,
0:45:12 same story.
0:45:15 “Hey, you’ve been grandfathered at this rate for 10 years, but now we’re going to push
0:45:16 you up here.”
0:45:17 And it was like double.
0:45:21 It made me so angry, it was like, “Had you just done it incrementally, probably would
0:45:25 have never noticed, probably would have yelled at the screen, but instead wasted a whole
0:45:30 day trying to find alternatives and just like, fine.”
0:45:33 It’s like they get the stranglehold on you, and you’re like, “The switching costs are
0:45:34 too high.”
0:45:37 It makes you so mad, but there’s something to that.
0:45:42 Stare-step, that may help the upside valuation is like, “Okay, I’m buying this current level
0:45:49 of recurring revenue, but in today’s fair market value, if I’m able to increase those
0:45:55 rates 50%, 100% over the course of time, all of a sudden it could be worth a little bit
0:45:57 more or I can pay it back sooner.”
0:45:58 Definitely.
0:46:02 I mean, that timeline, you might agree not to do it while you’re making payments for
0:46:03 them.
0:46:06 That seems fair, but the longer term, you may step it.
0:46:12 I mean, I took over accounts that were at $10 a month and I was charging $25, $30, and
0:46:18 I remember people like $30, I mean, that’s 300 times, yeah, but it’s still only $20 a
0:46:19 month.
0:46:23 And there’s one or two people that will just rip your head apart, and then you realize maybe
0:46:28 that’s not a customer I need to hang on to over $20, but we all have the habit of underselling
0:46:32 ourselves and you start to realize, “All right, I’m providing value here.”
0:46:39 And I’m not competing with the discount dollar hosting because I’m value adding this by being
0:46:46 accessible and knowing them when they call my name and not just a number.
0:46:49 That is worth something and will everyone pay for that?
0:46:53 No, but there’s enough people that certainly want that personal touch, so you learn to
0:46:55 lean into that a bit.
0:47:03 So, day-to-day, it’s responding to customer inquiries, it is putting out any technical
0:47:08 fires that might come up, imagine it’s relatively low maintenance and then it’s trying to either
0:47:13 fulfill the design work or the project work that comes through, or kind of oversee, you
0:47:15 know, find somebody to do that.
0:47:21 Do you have a sense of the hours per day, hours per week that goes into it at this point?
0:47:27 I think, genuinely, you know, on a good day where there’s nothing unique going on, I think
0:47:34 it could be a couple hours a day of mostly, like you said, just moving emails, intersecting
0:47:38 between a client and the developer on projects.
0:47:43 You know, if there’s not an outage or something, I mean, that stuff does happen or, you know,
0:47:47 where humans and technology mix or something updates, somebody’s website’s broken, “Oh,
0:47:51 I forgot my email password,” I mean, so there’s a little bit of that stuff.
0:47:57 But it’s very, it’s not brain surgery, it’s not rocket science, you know, not everybody
0:48:01 has to be responded to in five minutes or less.
0:48:05 So you do learn to triage, “Oh, my site’s down, okay, well that’s important, I better
0:48:06 take a look.”
0:48:07 Yeah.
0:48:10 Or, “Can you add these pictures to this page when you get a chance?”
0:48:16 Sure, we’ll get that done in the next day or two, and I’ve got a great, I use something
0:48:20 called a Zoho Desk, so it’s a web-based ticketing tool.
0:48:25 So you try to train your customers to send an email into this, it creates a ticket, I’ve
0:48:29 got my team that can just get a sign of that, and I started allowing team members years ago
0:48:34 to be client-facing so they could reply to the client, “Hey, we got those pictures added.”
0:48:39 And just taking myself out of some of that communication on a day-to-day basis has certainly
0:48:44 freed up my time, because if you’re focused on acquisitions, you do need to have some time
0:48:49 to be able to take those calls, and then you certainly need to have time when you’re integrating.
0:48:54 You get the time to go on vacation when you just added 30 or 40 clients to your fold.
0:48:59 You’ve got to be on call and ready just to make sure, especially if you are migrating
0:49:04 servers from where they’re at to you, there’s plenty of things to go wrong there, and you
0:49:09 don’t want that first impression to be, “Oh, my site’s down now with this new guy.”
0:49:14 Yeah, yeah, yeah, there’s a whole technical side that I probably don’t want to get too
0:49:16 deep into the weeds on that, but something to be aware of.
0:49:17 Yeah, I’ve been there.
0:49:21 I’ve been in those moments where something didn’t go right, and you’ve got an egg on
0:49:26 your face, and you just want to crawl under a rock those days, but those are not the
0:49:27 norm.
0:49:33 Yeah, so it sounds like the work is front-loaded, and all the technical stuff is figure-outable
0:49:35 and the support.
0:49:37 It is, and you learn, you learn.
0:49:42 I definitely know better, and the more I do, times a bat and anything, you’re learning
0:49:45 better to, “Okay, this is what happened last time.
0:49:48 We’re going to do it this way this time,” and to mitigate that, for sure.
0:49:53 That’s sort of what helps with the retention is that relationship that you wouldn’t have
0:49:54 with HostGator.
0:49:59 I don’t mean to pick on HostGator, but if I’m just hosting with them, it’s strictly
0:50:01 I need the service as a utility.
0:50:07 But if you have a relationship with your web person, it’s a little more full service
0:50:12 versus the HostGators are more what I would think the DIY.
0:50:13 You have a little more technical knowledge.
0:50:16 You can just buy in space to host your website.
0:50:21 Yeah, it’s that in-between sweet spot between that DIY person and then that other somebody
0:50:24 who maybe has somebody in-house doing their web.
0:50:31 So it’s like that middle of the market, and they’re used to paying $30 to, I imagine,
0:50:33 maybe $100, $200 a month.
0:50:37 It’s just their website budget to keep it online.
0:50:38 Exactly.
0:50:45 If you have a web guy or gal, and they take comfort in knowing that they get those domain
0:50:48 name things in the mail, is this real?
0:50:49 Nope.
0:50:50 They get spam.
0:50:51 Should I click on?
0:50:52 Nope.
0:50:53 Yeah, that’s the only direct mail that I get.
0:50:55 It’s like domain registration scale, that stuff.
0:50:56 Yeah.
0:50:57 Your thing is going to expire.
0:50:59 You’re like, “Well, yeah, but it’s set to auto-renew.”
0:51:00 Like, “What is this garbage?”
0:51:01 Yeah.
0:51:03 So that is part of the value.
0:51:06 You’re there to, I didn’t think I should click on this.
0:51:07 Nope.
0:51:08 Don’t click on that.
0:51:11 You’re just there to kind of help them with those questions that come up.
0:51:16 If your email can be part of hosting, an email is a little more certainly high-maintenance,
0:51:18 it’s certainly a critical service.
0:51:22 People will lose less sleep over their website being down for an hour or so, but if email’s
0:51:24 down, it’s a bigger deal.
0:51:25 But it’s also sticky.
0:51:30 If you’re good at keeping the lights on, there’s value in those services.
0:51:35 The one that I had briefly thought about trying to acquire was this virtual assistant service
0:51:42 in the Philippines, because I had this virtual assistant site at the time, and I want to
0:51:44 say it was the Empire Flippers.
0:51:49 It was like their in-house agency that they were trying to spin off, and I forget what
0:51:50 they were.
0:51:56 It would have been a relatively low acquisition cost or asking price for it, but they may
0:51:59 have only had two clients or three clients.
0:52:02 It was like, “Okay, if this one guy leaves, that’s like half of the business.”
0:52:03 Yeah.
0:52:10 It didn’t feel super diversified, and it’s like there’s a lot of labor and management,
0:52:17 like lower margins, still had recurring revenue, but it was more of that service-based business.
0:52:19 But that was one that I had briefly considered.
0:52:24 I mean, I’ve learned a lot by going through these and talking to so many companies, even
0:52:29 the ones you don’t end up doing anything with, I’ve seen lots of profit, lots of statements.
0:52:35 I can’t think of another industry that is so diverse as this one in terms of how people
0:52:37 set stuff up.
0:52:41 The margins are all over the place, because if you’ve got a brick-and-mortar office and
0:52:48 you’re paying W-2 employees, your labor could be 70% of your revenue.
0:52:49 Yeah.
0:52:53 I’m not saying one’s better or worse than the other, but there’s just a lot of places
0:52:59 for, I think, creativity and also thinking about it from a different angle, lawn care
0:53:01 probably is much more similar.
0:53:03 Lawn care is lawn care, right?
0:53:07 Looking at different lawn care companies, but in this space, you’ve got remote hybrid
0:53:08 in office.
0:53:14 You’ve got a whole wide range of services and pricing, and so it’s not really the Wild
0:53:17 West still, but it’s still quite a range.
0:53:20 So I think that’s where you can find some opportunity.
0:53:21 I like it.
0:53:22 This is cool.
0:53:23 What’s next for you?
0:53:24 What do you want to take this thing?
0:53:25 What are you excited about these days?
0:53:26 It’s a great question.
0:53:31 It’s a hard one to answer, because I do find myself at that, as many of us do, I guess,
0:53:40 the crossroads of having been doing this 25 years and getting to that age or an age where
0:53:41 you think, “Is this what I’m going to be doing forever?”
0:53:43 And then that could be okay with that, but…
0:53:46 Somebody’s going to send you a letter after this, so it’s going to be great.
0:53:52 They might, but other things I want to do, and I think what I’d like to do is diversify
0:53:58 what I do, continue to do this, but maybe pursue acquisitions a little bit bigger.
0:54:03 I’d like to acquire some accompanies in some different industries, as well as some brick
0:54:04 and mortar.
0:54:08 I mean, for me, there’s a valuable and something tangible that you can do with your hands.
0:54:09 And I fix this.
0:54:10 I built that.
0:54:16 I like that aspect, and also, I think, like you said at the beginning of the show, my
0:54:22 interest in real estate, diversifying one’s income stream, I’d rather have 10 side hustles
0:54:25 all making 10 grand a month than to have one making it all.
0:54:26 I just…
0:54:30 I guess I sleep better at night with diversification.
0:54:31 I find it interesting.
0:54:33 It keeps me engaged.
0:54:38 So I do think looking at some other opportunities, whether it’s some consulting work, other ways
0:54:43 to stay sort of in the lane, but layer that and use the marketing in other places.
0:54:47 So that’s a long-winded answer, I’m not quite sure.
0:54:52 But us entrepreneurs get a little stir crazy if we can’t mix it up a little, right?
0:54:56 Having $10,000 worth of income streams sounds pretty awesome.
0:54:57 I mean, I don’t know.
0:54:58 I just threw that number out.
0:54:59 It could be $1,000, right?
0:55:04 But I guess diversification, and maybe that’d be a crazy problem, you’d go nuts managing
0:55:05 it all.
0:55:12 But I’m a big believer in finding good people to work with that you are not having to tell
0:55:16 them what to do, and they can manage and lead and do things on their own, so that independence.
0:55:20 So I truly believe that you can find a way, you can create anything you want.
0:55:22 You just got to make the past.
0:55:23 Yeah.
0:55:27 Again, super interesting, super creative way to go about it and to build this multi-six
0:55:33 figure income for just on an ongoing level just a couple of hours a day.
0:55:37 I think a lot of people excited, like I said, maybe somebody will send you a letter, but
0:55:41 imagine some letters are going to start flying after this episode.
0:55:46 Windhill.com, that’s where you can find Link’s design agency, linkmoser.com is the home base.
0:55:49 We’ll also link up his LinkedIn as well.
0:55:55 Let’s wrap this thing up with your number one tip for side hustle nation 2025 edition.
0:55:58 Number one tip, hands down, just get out there and do it.
0:56:00 All this stuff is a contact sport.
0:56:05 I’m sure it’s been said many times before, but you’re not going to get a side hustle,
0:56:10 a business, a job, a boyfriend, a girlfriend by sitting on the sidelines.
0:56:14 You just got to get out there, accept some risk, know that it’s going to be uncomfortable
0:56:17 and scary and you’re going to make some mistakes, but you’ll learn and you’ll pivot.
0:56:20 So we’re still January, it’s still the beginning of the year.
0:56:25 So I say, make your goals, share them with someone else, make it known and then just
0:56:26 start hitting it.
0:56:27 Make it real.
0:56:31 Give us some accountability out there, but get out there and do it, right?
0:56:33 You can’t play the game from the sidelines.
0:56:39 This is similar to the 2022 tip, which was don’t look a failure as a bad word as long
0:56:42 as you’re failing forward, you’re learning something from those mistakes.
0:56:47 It’s all adds up to that cumulative experience and hopefully some forward progress there.
0:56:51 A couple takeaways from me before we wrap, number one, this is kind of a game of right
0:56:52 place, right time.
0:56:58 So it’s this volume game of sending out a lot of outreach and the more you can personalize
0:56:59 it, the better.
0:57:04 But trying to do that at scale and hopefully get a few bites, like Link said, 10, 12% response
0:57:09 rate, really, really strong for that personalized outreach because it cuts through the clutter.
0:57:13 Then it comes kind of this diligence phase, looking at the revenue pie and really valuing
0:57:16 that recurring revenue a little bit higher.
0:57:21 And then this trying to build those relationships quickly and concisely and build up rapport
0:57:25 both with the existing owner because they have something set up to do that handoff, right?
0:57:30 And then with the existing client base for continuity for that recurring revenue.
0:57:34 If you liked this episode, I think you’ll get a kick out of Ryan Golgowski in episode
0:57:35 five, 50.
0:57:40 We talked about his web design agency wasn’t growing through acquisition per se, but had
0:57:42 set it up for recurring revenue.
0:57:49 I think maybe $200 a month was his average price for web design and ongoing maintenance
0:57:53 for targeting almost exclusively pressure washing companies.
0:57:55 It was like, man, it was a super inspiring episode.
0:57:59 I think he was doing crazy, like $90, $100,000 a month recurring revenue, building websites
0:58:01 for pressure washing companies.
0:58:05 And then a brick and mortar example of this inserting yourself into a cash flow that’s
0:58:12 already happening was Hannah Ingram in episode 571, where she went out and found this semi-delapidated
0:58:19 brick and mortar car wash in town, no money down deal, owner financing, bought herself
0:58:20 this cash flow.
0:58:21 And she was doing really well.
0:58:26 It was kind of an interesting, inspiring angle to go look at.
0:58:30 She was maybe doing a half hour a day worth of work there in exchange for that income
0:58:31 stream.
0:58:34 But big thanks to Link for sharing his insight.
0:58:37 Once again, you can also check out Link’s previous episode on The Side Hustle Show.
0:58:38 We can link that up.
0:58:42 Big thanks to our sponsors for helping make this content free for everyone.
0:58:48 As always, you can hit up sidehustlenation.com/deals for all the latest offers from our sponsors
0:58:49 in one place.
0:58:52 Thank you for supporting the advertisers that support the show.
0:58:53 That’s it for me.
0:58:54 Thank you so much for tuning in.
0:58:58 If you find a value in the show, the greatest compliment is to share it with a friend.
0:59:02 So fire up that text message to that friend of yours who’s always looking for those little
0:59:05 life hacks, those creative ways to build extra income.
0:59:06 I think they’ll like this episode.
0:59:10 Until next time, let’s go out there and make something happen, and I’ll catch you in the
0:59:11 next edition of The Side Hustle Show.
0:00:06 semi-passive income.
0:00:12 You know, why go through the trouble of building up your own cash flow when with a little determination,
0:00:17 a little hustle, you can insert yourself into some income streams that are already happening.
0:00:22 That’s what today’s guest has done not once, not twice, but five different times, stacking
0:00:30 up what would be considered small-ish business acquisitions into a healthy full-time income
0:00:32 in exchange for part-time work from linkmoser.com.
0:00:36 Linkmoser, welcome back to The Side Hustle Show.
0:00:37 Thanks, Nick.
0:00:38 Great to be back.
0:00:43 I always love getting your emails and kudos to all the great work that you do.
0:00:46 My kids are excited that you’re going to be on that show with Nick.
0:00:48 Yeah, I am, guys.
0:00:50 Thank you for all that you’re doing.
0:00:53 Happy to be here and, yeah, excited to share.
0:00:55 It comes full circle.
0:00:57 Glad I got some street cred with the kids.
0:00:58 Link, we last heard from you.
0:00:59 It was late 2022.
0:01:04 We covered one of your other income streams, which I thought was really creative at that
0:01:09 time as this real estate lead generation site that you’d have for years and years where
0:01:14 single referrals could be worth tens of thousands of dollars.
0:01:19 Maybe this is kind of a theme, looking for these really leveraged activities where it’s
0:01:23 going to take the same amount of work to do this path or this other path and the hourly
0:01:26 return on this other path seems to be a lot greater.
0:01:30 I think it’s an interesting angle and the one we’ll get into in this episode.
0:01:35 We’re going to talk about the specific types of businesses that Link found most attractive
0:01:41 to try and go out and buy, how he found and negotiated with the owners for sometimes pretty
0:01:46 low down payments, low risk upfront, and maybe more interesting, even though they weren’t
0:01:48 necessarily even for sale.
0:01:53 How do I go buy something that’s not for sale and the time and logistics that goes into
0:01:55 that portfolio today?
0:01:58 As we’ve alluded to, you’re a man of many side hustles.
0:02:02 What inspires you to go out and try and acquire some cash flow in this way?
0:02:05 It’s a really unique strategy that a lot of people probably don’t think about.
0:02:09 It was really like so many things in life, accidental.
0:02:14 It was around 2010, so I’m about 10 years into this business of building websites and
0:02:18 hosting them, which I started ironically around the same time.
0:02:24 I got into real estate about 20 years old in the mid-90s, fell into both of these paths.
0:02:27 The OG, early days of the internet.
0:02:28 Early, early days.
0:02:31 AOL was still a thing.
0:02:35 Like others, there were other people starting up in this space and I had a friendly competitor
0:02:40 that was in 30 minutes from me and it was a husband and wife team and they went a little
0:02:41 bigger than I did.
0:02:46 They went and got an office, they got employees, and I was still much just doing this stuff
0:02:52 solo and having some freelance help, but to me, they looked like they were bigger and
0:02:55 who knows what kind of money they were making, but lo and behold, one day, they closed their
0:02:58 doors and I heard about it through the grapevine.
0:03:02 I don’t remember how, but they had just either given their book a business or maybe sold
0:03:08 it short money to another firm 45 minutes away and because I was always bidding against
0:03:12 these guys and Herbert thinking, “Why didn’t I get a seat at the table?
0:03:14 Why didn’t they reach out to me?
0:03:15 Do they think I was too small?
0:03:18 Do they think I didn’t have the means to do this?”
0:03:24 Maybe they were right, but I still would have liked a chance to have that conversation.
0:03:26 That’s what prompted me to start sending letters out.
0:03:27 I thought, “You know what?
0:03:30 I’m not going to let this happen again in my own backyard.”
0:03:38 To pause, you’re already doing this web design hosting on a small-ish scale for local businesses,
0:03:44 local companies and the attractive piece of this is that recurring … Okay, great.
0:03:48 It’s great to get a website build project, but that’s one-time revenue, where the real
0:03:52 sweet spot is in this recurring hosting and maintenance type of fee.
0:03:53 Is that right?
0:03:54 That’s right.
0:03:57 I joked that I have made a ton of mistakes in my life, but the one that I think I got
0:04:01 right was from day one, “Hey, I just built you a website, Nick.
0:04:02 Where are you going to host it?”
0:04:03 Oh, I don’t know.
0:04:04 Well, hey, guess what?
0:04:07 I can host it for $30 a month or something, which doesn’t sound like a lot of money and
0:04:09 you’re going to say, “Sure, great.
0:04:10 I had a good experience.
0:04:11 You built my site.
0:04:12 Go ahead.
0:04:13 Host it.”
0:04:14 I started doing that.
0:04:16 You know, for a lot of these companies, it’s a no-brainer.
0:04:21 I want a single point of contact for … You’re going to be my outsourced IT department.
0:04:22 You deal with it.
0:04:23 Sure.
0:04:24 Yes, fine.
0:04:25 Let me sign.
0:04:26 Let me set up that recurring payment.
0:04:27 Yep.
0:04:28 I’ll get your email.
0:04:29 I’ll help you with your domain name.
0:04:33 In the early days, it was a little more tentacle, but nowadays, it’s really pretty straightforward
0:04:34 stuff.
0:04:37 A lot of designers were strictly, “Hey, I built you a site.
0:04:38 I don’t want to host it.
0:04:40 I don’t want to be on call.”
0:04:41 I get that.
0:04:42 No.
0:04:43 No, I don’t.
0:04:47 Yeah, because it doesn’t look like you have a server bank in a spare bedroom or anything.
0:04:48 It’s all reseller hosting, right?
0:04:51 I’ll just partner with some other hosting company.
0:04:52 It is reseller.
0:04:53 Yeah.
0:04:56 You partner with somebody, does a good job, and it’s got good support, and you’ve got
0:04:58 somebody watching your back.
0:05:03 It did lay that track early on for recurring revenue, which has really become a big part
0:05:08 of what I do, so I don’t know if I had that foresight then, but I’m glad I did.
0:05:09 Okay.
0:05:10 There’s a game plan.
0:05:14 There’s somebody else doing this locally, and they sell to somebody else, and you’re
0:05:15 like, “Whoa, whoa, whoa.
0:05:16 I would have taken it.
0:05:18 You would have happily taken that off your head.”
0:05:24 The game plan becomes, “Who are the other smallish operators like me or like them who
0:05:32 have this piece of their revenue pie is that attractive recurring low maintenance hosting
0:05:38 type of revenue and trying to proactively get on their radar?”
0:05:39 Exactly.
0:05:43 I use this little thing called Google, and I reached out and said, “Who else is doing
0:05:44 this around me?”
0:05:47 I wrote him a letter, a one-page letter, “Hey, my name is Link.
0:05:50 I’m in this same business as you are.
0:05:55 I’m reaching out to see or just make the connection if you are ever thinking of shifting gears.”
0:06:02 Now, granted, this is a 10, 15-year-old industry, so a lot of people weren’t at traditional retirement
0:06:06 age if they started when they were younger, but other things happened in life that caused
0:06:10 people to get out of this stuff and you can’t take your business with you to the grave.
0:06:13 I realized you’re not going to win the lottery if you don’t buy a ticket, so I sent these
0:06:17 letters and I’m like, “Hey, the timing may be way off, but just hang on to my info.
0:06:18 Keep it in mind.
0:06:20 If you want to chat now, great.
0:06:26 I’m a real person, but if and when that time comes, I would just welcome the conversation.
0:06:30 Maybe a good fit may not, but hey, I’m putting myself out there.”
0:06:31 Okay.
0:06:33 It’s kind of a soft intro.
0:06:39 If you ever considered selling, if you have, give me a call or … I imagine you’re going
0:06:44 through pages and you’re just looking up New Hampshire web design type of companies.
0:06:46 It’s hard to imagine.
0:06:51 People would call themselves differently, “I’m a creative agency,” or there’s different
0:06:53 ways people might brand that.
0:06:54 There are.
0:06:55 There are.
0:06:57 You had to pick through, “Is it web designer?
0:06:59 Is it marketing agency?”
0:07:04 If you really took your time, there weren’t very many of that local, so I could go look
0:07:08 at their website and see, “Okay, it looks like … Oh, no, you’re doing TV spots.”
0:07:09 Well, that’s not for me.
0:07:14 I mean, you kind of figure … You can look at their website and see if it’s a match and
0:07:15 we build websites.
0:07:16 We host websites.
0:07:17 Okay, great.
0:07:18 Okay.
0:07:21 If they didn’t have 30 people under the About page, then you can figure, “All right.
0:07:26 There’s a small operation here because I can’t take over some giant monster company.”
0:07:29 I didn’t have that kind of means.
0:07:34 I think the first one was around 2014 when somebody did respond and it was local and
0:07:37 it was small, like similar size to me.
0:07:39 It was a husband and wife team.
0:07:44 I think the husband took ill and passed away and he had all the technical knowledge.
0:07:47 The wife’s like, “I can’t run this.”
0:07:52 She’d gotten my letter a year or two later, hung on to it, and yeah, plant those seeds.
0:07:53 Yeah, planting those seeds.
0:07:57 It could be a really long lead to conversion cycle, as they say, yeah.
0:07:58 Correct.
0:08:02 You’ve got to think the long game here and most of these people don’t reach out to you
0:08:07 and, “Hey, I got your letter,” but many of them hang on to it and file it away and you’re
0:08:08 glad they did.
0:08:12 She reached out and she probably had 20, 30 customers.
0:08:17 I took those over with no money down and it was, “I’ll give you half of whatever I
0:08:21 collect for 12 months,” so 12 payments.
0:08:26 If $100 comes in in January, then I’ll give you a check for $50 on the 1st of February
0:08:28 and I’ll do that 12 months, whatever it is.
0:08:30 It’s based on retention.
0:08:34 The more we can hang on to, the more I get and in that case, that woman just wanted to
0:08:35 home for the customers.
0:08:38 At that small level, it’s not usually always monetary.
0:08:40 It’s, “Hey, I’m done doing this.
0:08:43 I need to find a good, trusted home for my customers.
0:08:44 I’ve talked to you.
0:08:47 You seem like we have similar values.
0:08:49 Let’s figure this out.”
0:08:53 You’d asked me why I started doing this and it was partly because I felt like I’d missed
0:08:58 an opportunity, but it was also getting harder and harder for me to grow organically because
0:09:04 by now, everybody was doing this stuff and that growth was not as strong.
0:09:10 This was another way to grow and sometimes a good conversation is a one to many where
0:09:15 you might invest in that relationship but it may yield 50 accounts.
0:09:17 How long would it take to get those organically?
0:09:18 Interesting.
0:09:26 A new website coming online has huge menu of choices between WordPress and Squarespace
0:09:28 and Webflow and every other thing.
0:09:30 Each of those are going to have their own hosting packages.
0:09:34 Instead, it’s like, “Well, how can I go for people who already have a website?
0:09:36 They’re already used to paying for hosting.
0:09:40 How can I get in front of them in this creative, unique way?”
0:09:44 It sounds like it may be really as a matter of right place, right time.
0:09:45 It is.
0:09:50 This existing owner-seller who is looking to get out, give me a sense of the volume
0:09:55 of letters that you sent out, the research that went into it, the response rate.
0:09:58 I imagine anything direct mail has got to be pretty low.
0:10:02 I would do this in spurts as I had time to.
0:10:04 Up until last year, I used to send these out manually.
0:10:07 I’d written a little form letter and word.
0:10:08 I’d print the letters out.
0:10:13 I’d hand sign all of them and then I’d print on the envelopes because my handwriting wouldn’t
0:10:15 get the letter there.
0:10:18 Then I’d beg my kids, “Hey, help me stuff these.”
0:10:24 I might do 100, 200 in a batch, but it might be taking hours and then pay for the stamps.
0:10:29 After I exhausted New Hampshire, I found a virtual assistant to help research the name.
0:10:35 I went on Upwork and found a fellow and I would just go state by state, “Okay, New Hampshire’s
0:10:36 done.
0:10:37 Give me Maine and Vermont.”
0:10:42 The bigger states would be longer to list, so it would take me a while to go through
0:10:44 500, 600 people.
0:10:47 I wanted to stay local because I felt that was a connection, “Hey, I’m right here in
0:10:51 New Hampshire or you’re right over Vermont or you’re in Massachusetts.
0:10:53 I’m here in New England just like you.
0:10:55 You’re trying to find a way to connect.”
0:10:59 At least it gives you a starting point versus some company in Montana or something.
0:11:00 Correct.
0:11:07 A lot of these people at a smaller size, their clients valued the perception of a local relationship.
0:11:13 These days, people are less worried about that, but back 15 years ago, it mattered and
0:11:16 it still does to some, all things being equal.
0:11:17 Sure.
0:11:22 Having this virtual assistant comb through the directories of web design, web hosting,
0:11:27 marketing agency, all these variations on certain keywords where somebody has hosting
0:11:30 as they’re under their menu of services.
0:11:31 Correct.
0:11:36 I would pay them about 25 cents a lead and I got this person dialed in to where it was
0:11:37 working well.
0:11:39 In the beginning, I would say, “Hey, send me 10 listings.
0:11:40 Let me take a look at them.
0:11:44 I’ll manually go look at the websites and I’ll say I’ll give them feedback.”
0:11:45 These two are on point.
0:11:46 This one is not.
0:11:47 Here’s why.
0:11:52 Once we had that dialed in because I needed to have the owner’s name first and last name
0:11:57 because I could want to personalize it and I needed a valid mailing address and I wanted
0:11:59 a website so I could go look at it.
0:12:00 I like that.
0:12:01 Send me 10 as a trial task.
0:12:03 We’ll see if we’re on the right path.
0:12:04 Yes.
0:12:05 Correct.
0:12:06 Send me 10.
0:12:07 Send me 20.
0:12:08 I would shift it over time.
0:12:10 I would say, “Hey, these are a little too big.
0:12:16 Look at the headcounts if they’re under five or I don’t want anything with the video work
0:12:19 on it because that wasn’t my cup of tea.”
0:12:23 We would refine that model and we’d go state by state and they’d send me the list and I
0:12:29 would just ask for it whenever I had the bandwidth and I would send out letters and inevitably,
0:12:33 and I would track it all in Excel, which I realize is very low-tech, but the response
0:12:37 rate would be 10 to 12 percent, which I think was pretty darn good.
0:12:39 That’s shockingly high for direct mail.
0:12:41 Normally, the rule of thumb is like 1 percent.
0:12:43 It’s like one to two, exactly.
0:12:47 I measured that by the response, so certainly not meaning, “Hey, we’re going to make a
0:12:48 deal.”
0:12:53 It was more, “Did I get a call or an email back from somebody?”
0:12:54 It’s like a funnel, right?
0:12:58 You talk to so many and then you get serious with a few more.
0:13:01 You ask for some financials and you kind of work through it.
0:13:05 There was, of course, the gazillion conversations that went nowhere, or at least nowhere at
0:13:06 the moment.
0:13:10 I had to have the bandwidth and the capacities who, “You send out letters, you better be
0:13:13 ready when the phone rings that you’re going to have some calls.”
0:13:14 Yeah.
0:13:18 Is that the main, “Put your phone number at the bottom, hey, call me if this is of interest.”
0:13:23 We could talk through what a deal might look like, next steps, get a sense, get to know
0:13:24 each other.
0:13:26 What’s the sign off here?
0:13:30 This is definitely, “Here’s my phone number, here’s my email address,” and then I think
0:13:35 it was important to put my LinkedIn URL because I wanted them to look me up.
0:13:37 Many people were like, “Is this real?”
0:13:41 I would use my company logo letterhead, put the LinkedIn, just go check me out.
0:13:42 I’m a real person.
0:13:47 There’s no scam here because many of these, especially the little guys, they never get
0:13:48 a letter like this.
0:13:50 They’re thinking, “What is the angle with this guy?”
0:13:51 No, yes.
0:13:53 It’s certainly a unique approach.
0:13:54 This is Windhill Design.
0:13:58 This would be like, “Hey, look, we’ve been doing this for years, we’re going to take
0:13:59 or carry your clients.
0:14:02 It’s not just some fly-by-night type of operation.”
0:14:03 Yes.
0:14:04 I’m like you.
0:14:07 We’re both similar here and I’m not making any assumptions.
0:14:09 Nobody tipped me off that you’re about ready to retire.
0:14:14 I’m a guy reaching out, making connection.
0:14:16 If and when this is something you want to chat about, I’m right here.
0:14:17 Yeah.
0:14:18 Bonus points.
0:14:23 If you’re Upwork VA, you could find the About page and it’s got a gray hair guy on it.
0:14:24 Yeah.
0:14:25 Yeah.
0:14:26 Oh, okay.
0:14:27 I’ll pay you 50 cents for that lead.
0:14:28 That’s right.
0:14:32 If you know something that’s going to happen in their lives and if people are listing there’s
0:14:36 a takeaway here, I learned as I had more and more of these conversations, some of them
0:14:40 felt like wild goose chases that if I could drill down, why are you reaching out to me
0:14:42 now, Nick?
0:14:45 What it is that about my letter prompted you to reach out?
0:14:46 I’m digging.
0:14:47 I’m probing a little here too.
0:14:51 Are you just thinking that maybe I’m some dumb guy with a bunch of money that’s going
0:14:55 over pay and you hadn’t thinking until you got this letter or is there something else
0:14:58 in your life that you want to pursue?
0:15:03 I hate to say a health factor, but sometimes that’s the case.
0:15:09 Some of the reason besides strictly financial of why we might be talking now.
0:15:10 Yeah.
0:15:11 That’s fair.
0:15:12 Yeah.
0:15:18 It’s like how Zillow used to have the Make Me Move price or something.
0:15:22 It’s like, yeah, it’s not for sale, but how much are we talking here?
0:15:23 Right.
0:15:24 Right.
0:15:26 We’re talking about people that I was not going to overpay.
0:15:27 I couldn’t be that person.
0:15:32 I didn’t just win the lottery here and I bored and sprinkling money around.
0:15:34 If they didn’t have a good reason, I didn’t really push to come.
0:15:39 I was sort of like, hey, you’re going to make more money hanging onto this because we both
0:15:44 know the recurring revenue and we both realize the comfort that comes from this.
0:15:50 So I’m not fooling anyone into thinking I can adjust their trajectory.
0:15:53 So I wanted a good reason that was there.
0:15:57 And then if that was there, like you said, the timing was right.
0:16:03 You could then take the conversation to a second date, so to speak.
0:16:04 Yeah.
0:16:07 If it’s a good book of business for you to buy, by definition, it’s a good business,
0:16:08 book of business for them to hold on to.
0:16:09 Correct.
0:16:13 It’s kind of like, why am I letting go of this recurring revenue cash cow?
0:16:14 Yeah.
0:16:15 Okay.
0:16:16 So the question, hey, why are you reaching out?
0:16:21 What prompted you to respond to this letter and trying to probe for some indication that
0:16:26 hey, I’m trying to take some chips off the table, I’m nearing retirement, I’m just trying
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0:18:46 Okay, what does the next step look like?
0:18:50 I’d like to have a smooth transition handoff for these clients that I’ve probably had for
0:18:53 5, 10, 15 years in some cases.
0:18:57 Talk to me about the next steps of due diligence and trying to get it.
0:18:58 It’s going to be sensitive.
0:19:03 Now, all of a sudden, they’re having to open up their books and financials and prove they
0:19:09 are making what they say they’re making and even that’s kind of like a personal question.
0:19:10 Why are you reaching out?
0:19:11 Yes.
0:19:16 Once you’re monthly recurring revenue here, it’s like, “Whoa, whoa, whoa.
0:19:17 We just met.”
0:19:18 Yeah, it is.
0:19:19 It’s like dating.
0:19:21 You’re not going to ask for marriage on that first date.
0:19:25 And so, I’m very mindful of respecting that and knowing everyone’s going to be a little
0:19:26 different.
0:19:32 Now, surprisingly, people are very open about things like financials and people sometimes
0:19:35 are very forthcoming because I will dance around.
0:19:39 People are more willing to share maybe top line revenue, what they brought in versus
0:19:40 what they kept.
0:19:44 So, you know, I have no clue how big they are, how many clients do you have?
0:19:47 That’s kind of a roundabout way to asking.
0:19:52 So if your intercall went well and you found some motivation that you’re comfortable with,
0:19:56 then the next step is to sort of size this thing up and see if it’s a fit because I don’t
0:20:00 want to promise that I can flip into your shoes and do what you do.
0:20:03 I want to know a little more.
0:20:06 In the beginning, it was me sending emails with questions and then eventually, I made
0:20:10 a list of questions that was about two pages and I said, “Hey, this all sounds good.
0:20:11 I’ve got some questions.
0:20:14 I’m going to send them to you.
0:20:18 Don’t feel you have to answer any or all of them because I don’t want you to feel uncomfortable.
0:20:21 But these are things that would help me size this up because, of course, they’re sitting
0:20:23 there wondering, “What are you going to pay me for this?”
0:20:26 And I said, “Well, I need to know more and I need to know sure it’s a fit.”
0:20:28 And I’m also going to send over an NDA.
0:20:32 So I get ahead of that before they even ask for one, whether they know what that means
0:20:33 even.
0:20:37 I’m going to send that over with my signature on it because you should have this.
0:20:42 This is this good, proper protocol so that you know that our conversation is confidential.
0:20:46 And it goes without saying, I said, “But let’s have a piece of paper to make sure that that’s
0:20:47 there.”
0:20:48 So I’m proactive with that.
0:20:52 This is a non-disclosure agreement for those unfamiliar with the acronym.
0:20:53 Yep.
0:20:58 It means what we talk about stays confidential because you’re trying to build trust.
0:21:02 And I want this person, especially if I get the sense they have something I want, I really
0:21:04 want them to like and trust me.
0:21:11 So I need to establish that early on, genuinely, let’s assume definitely genuinely, I’m trying
0:21:13 to fleece anyone.
0:21:19 So I’m trying to also make this as easy and smooth for them recognizing the sensitivity
0:21:23 that they’re parting with a part of them for whatever reason.
0:21:24 Yeah.
0:21:29 And the alternative is them selling it through a brokerage and now you’ve got a competing
0:21:30 bid situation.
0:21:33 You’re trying to want to eliminate all of that by being proactive and being the only
0:21:37 person who is even having this conversation with them.
0:21:38 Correct.
0:21:40 So asking the kind of things, “Well, how many clients do you have?”
0:21:46 I imagine it would be, “What percentage of this is like the one-off design work?”
0:21:49 You’re like, “Well, I don’t know if I need to buy myself another job and I don’t know
0:21:52 how much of that is really going to be, how much of that could I really count on if they
0:21:56 have a personal relationship with you or your design team?”
0:21:59 And it’s like, “Well, I don’t know.”
0:22:03 It’s a little bit harder to put a value on versus the recurring revenue side.
0:22:10 Okay, expect, I don’t know, what is a reasonable number, like 75% to 80% retention rate.
0:22:17 Yeah, just keep it on the same server, let’s keep it going and then I can throw out a valuation
0:22:18 or a multiple based on that.
0:22:22 It is all over the map and those are the questions that are part of that, that early
0:22:28 due diligence before you can put a value on it and I’ll tell people that because I will
0:22:31 value the, you’ve got recurring revenue and then kind of everything else, what I will
0:22:37 call project-based or one-time revenue and it’s a much lower value because exactly to
0:22:41 your point, you don’t know how much of that will stick and carry forward.
0:22:47 So it’s not that it isn’t got some value, but it’s certainly not predictable and it
0:22:51 speaks to kind of the terms by which I structure a deal.
0:22:53 So first you’ve got to know if you want it and then if you knew on it, you got to think
0:22:58 about how will I value this and be ready to present that to that owner.
0:23:06 Is there a rule of thumb for, okay, I’m going to put the one-time revenue at 1x earnings
0:23:11 because I don’t know if that’s going to materialize or even less than that versus, okay, the recurring
0:23:14 revenue and more comfortable paying a higher multiple, like are there any rules of thumb
0:23:17 or is it just like, hey, we got to start the negotiation somewhere, it’s all over to put
0:23:20 it at two and a half times or like something like that?
0:23:22 There isn’t a rule of thumb.
0:23:27 Years and years ago, I knew a fellow that did mergers and acquisitions in this space,
0:23:33 way bigger deals and I would pick his brain a little and this was probably 15 years ago.
0:23:37 His rule of thumb was for this small stuff was that it was around one to one and a half
0:23:44 times gross on the hosting and then 0.5, 0.75 on the product base.
0:23:47 Now I think this day and age, that’s probably a little low.
0:23:49 It also depends on the size.
0:23:56 If you’re talking about 50K in revenue versus 500K, the bigger fish is going to get a higher
0:23:59 multiple even on the blend.
0:24:05 But if this little stuff, if you’re talking, let’s say around that 50K or under or above,
0:24:13 0 to 100, I’m trying to be probably a starting point one and a half on the hosting and maybe
0:24:16 close to the 0.8 or one on the project base.
0:24:19 I’ve got a little Excel tool I made where I plug all this stuff in and then I spend
0:24:24 a little time looking at it because you got to look and say, “Is this fair?”
0:24:30 Even if somebody is really motivated to sell, you still have to be fair and you can’t, I’ll
0:24:31 just take it.
0:24:35 Some people will approach and say, “I won’t put anything down, I’ll just pay you an earn
0:24:36 out.”
0:24:42 Unless we’re talking like 10 to 15 clients, then I should put some skin in the game for
0:24:43 somebody.
0:24:45 I think that’s the right thing to do.
0:24:51 If you’re talking $50,000 a year in hosting revenue, that’s good value and then it’s pretty
0:24:53 sticky.
0:24:58 If that’s a C-Panel and it moves right over into your universe, that’s pretty much almost
0:25:02 all profit if you’ve got your hosting capacity in place.
0:25:08 That would be the equivalent of probably pretty close to a median income over your own 50 grand
0:25:14 a year to just have that cash flow show up all of a sudden in your bank account.
0:25:19 Instead, for a fair price for that might be $75,000, but you’ve structured it in a way
0:25:25 where you’re not necessarily stroking a check for $75,000 upfront, it’s this combination
0:25:29 of, “Hey, I’ll make you a down payment and then we’ll do some performance-based earn
0:25:30 out.”
0:25:32 Maybe we can use your first couple of deals as an example.
0:25:37 You mentioned the first one was no money down, but maybe the second or third, let’s talk
0:25:38 through some of those examples.
0:25:42 2017, I came back and picked up another one.
0:25:44 I got a little more purposeful.
0:25:51 I had my focus shifted to the other side hustle, the real estate world from about 2014 to 2017.
0:25:56 I was not as focused on growing this at that time because my focus was on the real estate
0:25:57 business.
0:26:02 So, when I shifted my focus back to this, I dusted my old inkjet and started sending
0:26:03 letters out.
0:26:08 And to be clear, hundreds and hundreds of letters, a volume game, I’m trying to cast
0:26:12 a wide net, I’m trying to make sure every hosting reseller in New England has heard
0:26:13 my name.
0:26:14 Yes, hundreds of letters.
0:26:19 I mean, by now, there’s probably been 7,000-8,000 letters that have gone out over the last
0:26:20 10 years.
0:26:21 Okay, that’s great.
0:26:22 Yeah, it’s a lot.
0:26:25 Now, do you start back at the top of the list and like, “Oh, it’s been 10 years.
0:26:27 Might as well hit these people up again.”
0:26:28 I should.
0:26:32 I also got emails, so then I started doing email file like, “Hey, did you get my letter?”
0:26:33 Or, “Hey, it’s been a few years.
0:26:34 Let me check in with you.”
0:26:37 And some people were like, “Hey, I sold it two years ago.
0:26:38 Oh, dang.
0:26:39 I didn’t check in enough.”
0:26:40 That’s right.
0:26:42 Yeah, it’s like trying to keep the multiple touch points.
0:26:43 You do.
0:26:45 You got to find that balance of not being a pest.
0:26:51 But in 2017, the first one in the most recent batch, I would say, was a fellow here in New
0:26:52 Hampshire.
0:26:53 It was a second career for him.
0:26:57 He had about 35 customers, mix of hosting and project-based work.
0:27:01 And his wife was getting ready to retire, so they were going to travel some, and he was
0:27:04 ready to just have this office plate.
0:27:09 He had already tried to find a home for it with another company locally and did not have
0:27:12 a good experience with them, and then, “Okay, you guys aren’t a match.”
0:27:15 So he was primed and ready.
0:27:16 And when we met, we hit it off.
0:27:18 He’s like, “Yeah, great.
0:27:19 You seem like a good fit.
0:27:20 Let’s do this.”
0:27:23 So I offered him three deal scenarios, and I forgot the other two.
0:27:29 But the one he picked was $4,000 down and 18 months of earn-out payments.
0:27:34 So I think that was 50% on the recurring or the hosting revenue.
0:27:38 This is based on the gross, which is easier to track and more transparent.
0:27:42 And I think 35% on the one time.
0:27:47 So just, if you all clarify what that looks like, it’s January right now.
0:27:52 So if $100 in hosting revenue comes in in January and $100 in project-based, February,
0:27:58 I will make a check for $50 on the hosting and $35 on the project-based.
0:28:04 So $85 check in February 1st, and we’d follow that model for 18 payments.
0:28:05 Okay.
0:28:08 You’re keeping more margin on the hosting because there’s more margin there.
0:28:12 You’re paying less margin to the seller on the project-based because that is requiring
0:28:14 some labor on your front.
0:28:16 It is acquiring some labor, and it’s also not as sticky.
0:28:18 So it’s not as worth as much.
0:28:21 So the hosting revenue is worth more and had better margin.
0:28:23 So I put more value on that.
0:28:24 Yep.
0:28:25 Okay.
0:28:30 So this, I think, was worth around $32,000 in gross revenue.
0:28:34 And that feels like a, you know, we talk about mergers and acquisitions and like, you know,
0:28:35 millions of dollars changing hands.
0:28:40 It’s like, you know, there are these little mini businesses, still great cash flow, especially
0:28:41 as a side hustle.
0:28:47 Like, oh, I could add $30,000 to my income next year with $4,000 down and a few hours
0:28:48 of work every week.
0:28:50 Like, that’s a pretty good trade.
0:28:51 It is.
0:28:54 And I think, I think for someone listening and thinking about this, what had helped me
0:28:56 was that I was already in the space.
0:29:01 So, you know, you, it may be a little harder to buy the first one on terms like this because
0:29:04 somebody’s going to say, I don’t know if you could do this, right?
0:29:08 I’m depending on you to perform in order for me to get paid out.
0:29:11 So this would not be deal terms out of the gate.
0:29:16 Either you start it and you get in it, you can still do it on the side, but you need
0:29:20 to have the experience or you, you might need to pay more traditional, I’m going to make
0:29:21 fixed payments.
0:29:26 And I think a seller would still carry payment, but you might not be able to do the earn out
0:29:31 if you were completely new to this, especially if they knew you were working a full-time
0:29:32 job.
0:29:33 Got it, got it.
0:29:35 Think about it from their perspective, right?
0:29:39 Well, I’m just about to turn around and like start looking for people in the Seattle area
0:29:43 trying to sell their businesses, but you’re right, it’s kind of the credibility.
0:29:49 Well, you got to establish some credibility and authority before you can structure something
0:29:50 completely like this.
0:29:56 And even if it’s just setting up your own home base and, you know, even gathering just
0:29:59 a handful of clients to get some practice out of your belt.
0:30:00 Correct.
0:30:03 Because otherwise you’re like, now it’s trial by fire and this person has entrusted me with
0:30:06 their longtime clients and I got to figure this out.
0:30:08 And you got to take that seriously.
0:30:12 And I will say, you know, writing those checks, I never missed one, but I’ve written some
0:30:16 big checks to people and then that, you know, it hurts a little, but you know when that
0:30:18 period is over, you’ll be able to keep all that.
0:30:24 So your hope is that you can hang on to these clients and attrition is a horrible word, but
0:30:29 it happens and you do lose clients with the transition sometimes and you’re like, oh man,
0:30:34 I just bought this guy and he’s going out the door on month two, you know, and is that
0:30:35 my fault?
0:30:36 Is he just not like me?
0:30:38 Was he already on his way out?
0:30:39 I mean, you…
0:30:45 Yeah, especially if there’s only, you know, 10 or 20 clients, losing a couple is a big
0:30:46 percentage wise.
0:30:48 You’re like, oh shoot, I was banking on that revenue.
0:30:50 I just paid for, you know, a multiple of that revenue.
0:30:51 Yep.
0:30:56 There was a deal in 2020 that was a company in Denver that did social media marketing
0:31:03 and I, they had a monthly recurring revenue of about $20,000 when I took it over, only
0:31:04 about 12 clients.
0:31:06 So this was not hosting.
0:31:09 This was a more retainer based work.
0:31:14 And I took that over with nothing down, but that and it had employees and we kept that
0:31:21 brand separate, but by May, about into January one, by May, it was, the doors were shut.
0:31:26 So that had shed enough clients where I couldn’t make the payroll and I wasn’t going to ride
0:31:31 this thing down into the bottom and, you know, we had to say, okay, that’s that.
0:31:35 And had I not structured it that way, I would have really financially found myself in a
0:31:36 pickle.
0:31:38 So it does happen.
0:31:42 And that’s sort of what brings us back to, I like the hosting side because that is more
0:31:44 like the power company, right?
0:31:47 You know, it was the last time you called the power company, probably when the power
0:31:48 went out, right?
0:31:50 Otherwise we don’t bug them.
0:31:51 The lights are on.
0:31:52 I’m happy.
0:31:53 Yeah.
0:31:57 It’s a utility and it’s priced as, hopefully it’s priced as such where it’s just kind
0:32:00 of this low monthly recurring thing.
0:32:03 If I want my website to exist, I just got to keep the pay on us.
0:32:04 That’s right.
0:32:07 And if you don’t give them a reason to go anywhere, they’re not going to.
0:32:14 Keep the price fair, keep the lights on and you don’t need to pay for staff or your time
0:32:15 to manage that.
0:32:18 So it’s, it brought me back to that service being a good fit.
0:32:24 Is there anything specific that you do during that transition time to introduce yourself?
0:32:30 Hey, I’m, Link, I’m taking over, you know, so-and-so is handing over the reins.
0:32:31 Don’t worry.
0:32:32 You’re a good hand.
0:32:33 I’ve been doing this forever.
0:32:35 It’s going to be a seamless transition for you.
0:32:39 Like, what does, what does a handoff look like to minimize that fall off?
0:32:44 It’s different every time, but I think some common traits are that you, you’re going to
0:32:50 lean on that seller in those first 30, 45, 60 days to follow their lead.
0:32:51 They know those relationships.
0:32:56 So they’re going to know, you know, who might be a little more sensitive, who might need
0:32:57 a little more handholding.
0:33:00 You certainly want that seller to stay visible.
0:33:06 Ideally, they are reaching out by phone and email to these folks, not just boom, hey,
0:33:12 I’m out the door, you know, so how they leave that relationship sort of sets you up for
0:33:14 you taking it over.
0:33:17 And if it’s, if it’s straight hosting, then it’s not really a big deal.
0:33:22 But if they are used to more points of contact, because you’re doing some print design, you’re
0:33:27 doing some web maintenance, things that have more interaction, then, then you need to be
0:33:32 able to slip into that cadence and maybe you sit on a call or zoom with them and there’s
0:33:36 a, there’s a handoff, somebody, as they’re phasing out, you’re phasing up.
0:33:38 It’s not necessarily, boom, here are the keys link.
0:33:39 Good luck.
0:33:40 Yeah.
0:33:43 In most cases, they’ve got that 12 to 18 month earn out.
0:33:49 So there’s some incentive for them to make it a smooth transition so they can maximize
0:33:52 their ultimate payout at the end.
0:33:53 Yes.
0:33:54 Correct.
0:33:55 That is a huge part of that.
0:33:56 It aligns our goals.
0:34:03 I want to retain, they want to maximize, we both want to keep these clients in the fold
0:34:04 and happy.
0:34:07 So do you typically do it as a, I guess a percentage of what you collect rather than
0:34:12 like, I’m going to pay you the $75,000 purchase price and we’re just going to stretch it out
0:34:15 or it’s like, I’m going to pay you this much upfront and then we’re going to see what comes
0:34:18 in and I’m just going to give you a fixed percentage of that.
0:34:22 If it, if it grows great, if it, you know, if it goes down, that’s, that’s what happens.
0:34:23 Yeah.
0:34:28 It has always been variable because otherwise they’re just making me alone and I need their
0:34:32 incentive to help with the retain because if they’re going to get their 75 grand, no
0:34:35 matter what, they just have to wait for it.
0:34:37 That puts more risk on my side.
0:34:42 I want them to know, you know, if Bob or Sue leaves, they’re walking out the door with
0:34:46 revenue that affects both of us, not just me.
0:34:51 And that does, that does require you building a lot of trust because they’re thinking, Link,
0:34:52 are you going to take this seriously?
0:34:55 Are you going to screw off or you’re going to jack the prices?
0:34:58 I mean, so I, I will even write in the agreement.
0:35:00 I’m not raising prices during the earn out.
0:35:06 I’m, you know, I will, I’m willing to agree to certain non boat rocking.
0:35:12 If they’ve got a ploy or I can’t promise I’ll keep employees, but freelancers, if they’re
0:35:16 client facing and they, it’s a good fit, I’ll, I’ll try to hang onto that and just kind of
0:35:20 keep things as same as it can, you know, the money goes somewhere different.
0:35:22 It’s so different, Mr. Client.
0:35:26 More with Link in just a moment, including handling those project based requests, a day
0:35:32 in the life of running this business and his plans for the future right after this.
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0:37:56 Yeah, that brings up the next point of when the project-based stuff comes in.
0:37:57 That’s great.
0:38:01 If they had somebody on their team who was already doing that, it’s like, “Sure.
0:38:07 Let me pass along that same project over to you,” would be the manager, reviewer, overseer
0:38:14 versus, “Well, now somebody’s asking for this redesign and either I got to figure that out
0:38:16 or I got to go find somebody who’s qualified to do it.”
0:38:22 I’ve had pretty good luck maintaining a good long-term relationship with various contractors
0:38:27 and freelancers over the years, so some of them which have teams behind them so they can
0:38:28 scale.
0:38:32 Certainly, if you’re going through one of these, I’m going to tell the people that I’m
0:38:33 working, “Hey, do you have more capacity?
0:38:35 Do you want more work?
0:38:37 If not, I’m going to need to tee up that.”
0:38:44 When the last ones I did in 2023 came with a whole bunch of print design work, so I needed
0:38:50 to find a print designer to help with this because the previous owners was a husband
0:38:55 and wife team and the husband was doing the creative design, so I don’t know how to use
0:38:56 Adobe InDesign.
0:39:01 I don’t want to use Adobe InDesign, so I needed to find someone to help with that.
0:39:07 Again, it takes a little due diligence and just like you’re finding an employee, but
0:39:12 I’ve got a good person now that works stateside and at the same time zone and takes the design
0:39:15 projects and it’s been working well.
0:39:16 You have enough runway.
0:39:22 In that case, those owners still did contract work for me for a good six to 12 months of
0:39:27 a 24-month earn-out, so that was a very gradual timeline.
0:39:29 They wanted to keep the revenue.
0:39:31 They wanted to let the dust settle.
0:39:35 They were not web people, so the web stuff I took over right away, but they hung on to
0:39:40 some of the print work and they stayed more client-facing and we gradually moved those
0:39:44 relationships over on their timeline and that’s worked out well.
0:39:45 Yeah.
0:39:46 This is a big question mark.
0:39:51 I think for a lot of business owners is what is the exit strategy and if there’s a way
0:39:57 to draw down and slowly reduce your hours while still getting some income, that probably
0:40:01 makes a lot of sense because that’s not something you think about day to day.
0:40:05 It’s like, “No, I’m just doing my thing,” and then it’s a question of like, “How long
0:40:06 do we keep doing this?”
0:40:11 If somebody like Link comes along and says, “Hey, I’m offering you an exit plan,” and
0:40:14 it’s like, “Oh, I never thought about that.”
0:40:17 Like, “Oh, okay,” so it could be pretty attractive.
0:40:23 I did want to ask if this is purely like a war of attrition where it’s like, “Okay,
0:40:26 I bought 30 clients at the end of two years.
0:40:28 I hope to have 20 of them.
0:40:29 Does it grow?”
0:40:33 Are new people signing up or it’s like, “We had a guy from Philip Morris come and talk
0:40:38 to our group in college,” and we’re like, “Are new people starting smoking anymore?”
0:40:39 He’s like, “No.
0:40:44 This business has been around for 100 years, but it declines 3% a year.”
0:40:45 3% a year.
0:40:46 And it’s like, “Okay.”
0:40:49 So, it’s like slowly dying and they’re trying to diversify.
0:40:55 But it was just a weird … Yeah, we openly admit that it may not be around forever, but
0:40:58 it’s still a huge business and it just is slowly declining.
0:41:03 Is it similar here where it’s just trying to do the best to keep what you have?
0:41:09 At the small end where I have played for the most part, I’d say yes.
0:41:14 You’re buying a client list, so there’s not usually a brand.
0:41:20 Just because they had a logo and a trade name doesn’t mean it was a recognizable brand.
0:41:22 The owners were the brand.
0:41:24 They were the business development people.
0:41:26 They were the lead generation team.
0:41:32 So when that is gone, especially if it’s not local, you might get some referrals possibly,
0:41:38 not necessarily in the hosting piece, but on design work if someone is happy and you’re …
0:41:42 They’re not going to refer you until they get to know you, but if it’s going well by
0:41:49 month six to nine, they might be a referral, but I have found that the attrition of acquired
0:41:53 client badges is higher than what I’ve organically got.
0:41:58 And so it is … Race to the bottom isn’t the right term, because some of these hosting
0:42:01 clients I’ve had for 10 plus years.
0:42:04 Yeah, it can be super sticky.
0:42:08 Other things happen, they go out of business or they … I have lost people because they’re
0:42:12 someone more local or they’re … Hey, these people do email marketing and they want to
0:42:15 take over our hosting as well.
0:42:19 It goes both ways, no matter even if you’re doing a good job.
0:42:24 Now I would say a bigger company in this space, the bigger they get, the more there may be
0:42:31 a brand, the last one I did was the biggest I’ve done that has generated some new business
0:42:32 that have come through referrals.
0:42:33 Okay.
0:42:36 Even after it’s transitioned because of the reputation that they had built, people were
0:42:40 still reaching out to them for new websites, new hostings.
0:42:46 I think the better play here is to arrange terms with that seller of, “Hey, if you get
0:42:53 a lead,” so when I purchased it, we list out the clients one by one, and this is all you’re
0:42:55 getting paid on.
0:42:59 If you have a website, if something new comes from that, that’s mine.
0:43:05 But if you get a lead personally, if someone reaches out to you from your sphere of influence,
0:43:09 that has value and I’ll pay a commission, I’d like to take 20%.
0:43:14 If that’s a $10,000 website project, that’s too grand, I’ll pay you.
0:43:19 It’s business I wouldn’t have had and I want you to know that that has value.
0:43:25 Sometimes that is a way to help close a valuation gap to tell a seller, “Okay, maybe this isn’t
0:43:30 quite as much as you want, but if you want to stay in the fold and sell a little, maybe
0:43:34 you don’t want to manage and design, then we can create revenue there.”
0:43:38 Or if you think, “Hey, Link, I haven’t raised prices in 15 years.
0:43:42 These guys are all paying $10 a month for hosting.
0:43:46 Maybe it should be 25,” because I’ve seen that and I’m like, “Look, man, you’re charging
0:43:50 way too less here a little, but I can’t raise that on the day one because that’s not going
0:43:52 to look good for me.
0:43:55 So you need to think about doing that before.”
0:43:59 Yeah, like the new apartment owner comes in and raises everybody’s rent.
0:44:02 But you also know that if you’re looking at the long term, you’re like, “All right, in
0:44:08 a few years, I can slowly bump these guys up once they’re feeling comfortable with me
0:44:09 and established.
0:44:11 So it is future revenue for sure.
0:44:13 Will they leave you over an extra $10 a month?
0:44:16 Yeah, a couple of might, but most won’t.”
0:44:19 I don’t know if we talked about this recently on the show, but I was telling somebody about
0:44:26 this where the podcast editing service, Podcast FastTrack, they said, “Hey, this was a couple
0:44:27 of years ago.”
0:44:29 They’re like, “Nick, we appreciate your business.
0:44:30 You’ve been a client forever.
0:44:31 Thank you.
0:44:36 But new clients, and we haven’t raised your rate since 2016, new clients come in.
0:44:40 We’re paying up here, and so we need to get you a little bit closer to that.
0:44:46 But what we’re going to do, because it was probably a double or 50%, it was a big jump.
0:44:52 And had they immediately gone to that, probably been like, “Let me go look for some alternatives.”
0:44:54 They said, “Here’s what we’re going to do.
0:44:58 Every quarter, for the next 15 months, we’re going to stair-step you up there.
0:45:02 So eventually you got to get to whatever our new rate is.”
0:45:05 And it was so incremental, you didn’t even notice.
0:45:11 It was like a frog in the boiling water where I had one of these other software that I used,
0:45:12 same story.
0:45:15 “Hey, you’ve been grandfathered at this rate for 10 years, but now we’re going to push
0:45:16 you up here.”
0:45:17 And it was like double.
0:45:21 It made me so angry, it was like, “Had you just done it incrementally, probably would
0:45:25 have never noticed, probably would have yelled at the screen, but instead wasted a whole
0:45:30 day trying to find alternatives and just like, fine.”
0:45:33 It’s like they get the stranglehold on you, and you’re like, “The switching costs are
0:45:34 too high.”
0:45:37 It makes you so mad, but there’s something to that.
0:45:42 Stare-step, that may help the upside valuation is like, “Okay, I’m buying this current level
0:45:49 of recurring revenue, but in today’s fair market value, if I’m able to increase those
0:45:55 rates 50%, 100% over the course of time, all of a sudden it could be worth a little bit
0:45:57 more or I can pay it back sooner.”
0:45:58 Definitely.
0:46:02 I mean, that timeline, you might agree not to do it while you’re making payments for
0:46:03 them.
0:46:06 That seems fair, but the longer term, you may step it.
0:46:12 I mean, I took over accounts that were at $10 a month and I was charging $25, $30, and
0:46:18 I remember people like $30, I mean, that’s 300 times, yeah, but it’s still only $20 a
0:46:19 month.
0:46:23 And there’s one or two people that will just rip your head apart, and then you realize maybe
0:46:28 that’s not a customer I need to hang on to over $20, but we all have the habit of underselling
0:46:32 ourselves and you start to realize, “All right, I’m providing value here.”
0:46:39 And I’m not competing with the discount dollar hosting because I’m value adding this by being
0:46:46 accessible and knowing them when they call my name and not just a number.
0:46:49 That is worth something and will everyone pay for that?
0:46:53 No, but there’s enough people that certainly want that personal touch, so you learn to
0:46:55 lean into that a bit.
0:47:03 So, day-to-day, it’s responding to customer inquiries, it is putting out any technical
0:47:08 fires that might come up, imagine it’s relatively low maintenance and then it’s trying to either
0:47:13 fulfill the design work or the project work that comes through, or kind of oversee, you
0:47:15 know, find somebody to do that.
0:47:21 Do you have a sense of the hours per day, hours per week that goes into it at this point?
0:47:27 I think, genuinely, you know, on a good day where there’s nothing unique going on, I think
0:47:34 it could be a couple hours a day of mostly, like you said, just moving emails, intersecting
0:47:38 between a client and the developer on projects.
0:47:43 You know, if there’s not an outage or something, I mean, that stuff does happen or, you know,
0:47:47 where humans and technology mix or something updates, somebody’s website’s broken, “Oh,
0:47:51 I forgot my email password,” I mean, so there’s a little bit of that stuff.
0:47:57 But it’s very, it’s not brain surgery, it’s not rocket science, you know, not everybody
0:48:01 has to be responded to in five minutes or less.
0:48:05 So you do learn to triage, “Oh, my site’s down, okay, well that’s important, I better
0:48:06 take a look.”
0:48:07 Yeah.
0:48:10 Or, “Can you add these pictures to this page when you get a chance?”
0:48:16 Sure, we’ll get that done in the next day or two, and I’ve got a great, I use something
0:48:20 called a Zoho Desk, so it’s a web-based ticketing tool.
0:48:25 So you try to train your customers to send an email into this, it creates a ticket, I’ve
0:48:29 got my team that can just get a sign of that, and I started allowing team members years ago
0:48:34 to be client-facing so they could reply to the client, “Hey, we got those pictures added.”
0:48:39 And just taking myself out of some of that communication on a day-to-day basis has certainly
0:48:44 freed up my time, because if you’re focused on acquisitions, you do need to have some time
0:48:49 to be able to take those calls, and then you certainly need to have time when you’re integrating.
0:48:54 You get the time to go on vacation when you just added 30 or 40 clients to your fold.
0:48:59 You’ve got to be on call and ready just to make sure, especially if you are migrating
0:49:04 servers from where they’re at to you, there’s plenty of things to go wrong there, and you
0:49:09 don’t want that first impression to be, “Oh, my site’s down now with this new guy.”
0:49:14 Yeah, yeah, yeah, there’s a whole technical side that I probably don’t want to get too
0:49:16 deep into the weeds on that, but something to be aware of.
0:49:17 Yeah, I’ve been there.
0:49:21 I’ve been in those moments where something didn’t go right, and you’ve got an egg on
0:49:26 your face, and you just want to crawl under a rock those days, but those are not the
0:49:27 norm.
0:49:33 Yeah, so it sounds like the work is front-loaded, and all the technical stuff is figure-outable
0:49:35 and the support.
0:49:37 It is, and you learn, you learn.
0:49:42 I definitely know better, and the more I do, times a bat and anything, you’re learning
0:49:45 better to, “Okay, this is what happened last time.
0:49:48 We’re going to do it this way this time,” and to mitigate that, for sure.
0:49:53 That’s sort of what helps with the retention is that relationship that you wouldn’t have
0:49:54 with HostGator.
0:49:59 I don’t mean to pick on HostGator, but if I’m just hosting with them, it’s strictly
0:50:01 I need the service as a utility.
0:50:07 But if you have a relationship with your web person, it’s a little more full service
0:50:12 versus the HostGators are more what I would think the DIY.
0:50:13 You have a little more technical knowledge.
0:50:16 You can just buy in space to host your website.
0:50:21 Yeah, it’s that in-between sweet spot between that DIY person and then that other somebody
0:50:24 who maybe has somebody in-house doing their web.
0:50:31 So it’s like that middle of the market, and they’re used to paying $30 to, I imagine,
0:50:33 maybe $100, $200 a month.
0:50:37 It’s just their website budget to keep it online.
0:50:38 Exactly.
0:50:45 If you have a web guy or gal, and they take comfort in knowing that they get those domain
0:50:48 name things in the mail, is this real?
0:50:49 Nope.
0:50:50 They get spam.
0:50:51 Should I click on?
0:50:52 Nope.
0:50:53 Yeah, that’s the only direct mail that I get.
0:50:55 It’s like domain registration scale, that stuff.
0:50:56 Yeah.
0:50:57 Your thing is going to expire.
0:50:59 You’re like, “Well, yeah, but it’s set to auto-renew.”
0:51:00 Like, “What is this garbage?”
0:51:01 Yeah.
0:51:03 So that is part of the value.
0:51:06 You’re there to, I didn’t think I should click on this.
0:51:07 Nope.
0:51:08 Don’t click on that.
0:51:11 You’re just there to kind of help them with those questions that come up.
0:51:16 If your email can be part of hosting, an email is a little more certainly high-maintenance,
0:51:18 it’s certainly a critical service.
0:51:22 People will lose less sleep over their website being down for an hour or so, but if email’s
0:51:24 down, it’s a bigger deal.
0:51:25 But it’s also sticky.
0:51:30 If you’re good at keeping the lights on, there’s value in those services.
0:51:35 The one that I had briefly thought about trying to acquire was this virtual assistant service
0:51:42 in the Philippines, because I had this virtual assistant site at the time, and I want to
0:51:44 say it was the Empire Flippers.
0:51:49 It was like their in-house agency that they were trying to spin off, and I forget what
0:51:50 they were.
0:51:56 It would have been a relatively low acquisition cost or asking price for it, but they may
0:51:59 have only had two clients or three clients.
0:52:02 It was like, “Okay, if this one guy leaves, that’s like half of the business.”
0:52:03 Yeah.
0:52:10 It didn’t feel super diversified, and it’s like there’s a lot of labor and management,
0:52:17 like lower margins, still had recurring revenue, but it was more of that service-based business.
0:52:19 But that was one that I had briefly considered.
0:52:24 I mean, I’ve learned a lot by going through these and talking to so many companies, even
0:52:29 the ones you don’t end up doing anything with, I’ve seen lots of profit, lots of statements.
0:52:35 I can’t think of another industry that is so diverse as this one in terms of how people
0:52:37 set stuff up.
0:52:41 The margins are all over the place, because if you’ve got a brick-and-mortar office and
0:52:48 you’re paying W-2 employees, your labor could be 70% of your revenue.
0:52:49 Yeah.
0:52:53 I’m not saying one’s better or worse than the other, but there’s just a lot of places
0:52:59 for, I think, creativity and also thinking about it from a different angle, lawn care
0:53:01 probably is much more similar.
0:53:03 Lawn care is lawn care, right?
0:53:07 Looking at different lawn care companies, but in this space, you’ve got remote hybrid
0:53:08 in office.
0:53:14 You’ve got a whole wide range of services and pricing, and so it’s not really the Wild
0:53:17 West still, but it’s still quite a range.
0:53:20 So I think that’s where you can find some opportunity.
0:53:21 I like it.
0:53:22 This is cool.
0:53:23 What’s next for you?
0:53:24 What do you want to take this thing?
0:53:25 What are you excited about these days?
0:53:26 It’s a great question.
0:53:31 It’s a hard one to answer, because I do find myself at that, as many of us do, I guess,
0:53:40 the crossroads of having been doing this 25 years and getting to that age or an age where
0:53:41 you think, “Is this what I’m going to be doing forever?”
0:53:43 And then that could be okay with that, but…
0:53:46 Somebody’s going to send you a letter after this, so it’s going to be great.
0:53:52 They might, but other things I want to do, and I think what I’d like to do is diversify
0:53:58 what I do, continue to do this, but maybe pursue acquisitions a little bit bigger.
0:54:03 I’d like to acquire some accompanies in some different industries, as well as some brick
0:54:04 and mortar.
0:54:08 I mean, for me, there’s a valuable and something tangible that you can do with your hands.
0:54:09 And I fix this.
0:54:10 I built that.
0:54:16 I like that aspect, and also, I think, like you said at the beginning of the show, my
0:54:22 interest in real estate, diversifying one’s income stream, I’d rather have 10 side hustles
0:54:25 all making 10 grand a month than to have one making it all.
0:54:26 I just…
0:54:30 I guess I sleep better at night with diversification.
0:54:31 I find it interesting.
0:54:33 It keeps me engaged.
0:54:38 So I do think looking at some other opportunities, whether it’s some consulting work, other ways
0:54:43 to stay sort of in the lane, but layer that and use the marketing in other places.
0:54:47 So that’s a long-winded answer, I’m not quite sure.
0:54:52 But us entrepreneurs get a little stir crazy if we can’t mix it up a little, right?
0:54:56 Having $10,000 worth of income streams sounds pretty awesome.
0:54:57 I mean, I don’t know.
0:54:58 I just threw that number out.
0:54:59 It could be $1,000, right?
0:55:04 But I guess diversification, and maybe that’d be a crazy problem, you’d go nuts managing
0:55:05 it all.
0:55:12 But I’m a big believer in finding good people to work with that you are not having to tell
0:55:16 them what to do, and they can manage and lead and do things on their own, so that independence.
0:55:20 So I truly believe that you can find a way, you can create anything you want.
0:55:22 You just got to make the past.
0:55:23 Yeah.
0:55:27 Again, super interesting, super creative way to go about it and to build this multi-six
0:55:33 figure income for just on an ongoing level just a couple of hours a day.
0:55:37 I think a lot of people excited, like I said, maybe somebody will send you a letter, but
0:55:41 imagine some letters are going to start flying after this episode.
0:55:46 Windhill.com, that’s where you can find Link’s design agency, linkmoser.com is the home base.
0:55:49 We’ll also link up his LinkedIn as well.
0:55:55 Let’s wrap this thing up with your number one tip for side hustle nation 2025 edition.
0:55:58 Number one tip, hands down, just get out there and do it.
0:56:00 All this stuff is a contact sport.
0:56:05 I’m sure it’s been said many times before, but you’re not going to get a side hustle,
0:56:10 a business, a job, a boyfriend, a girlfriend by sitting on the sidelines.
0:56:14 You just got to get out there, accept some risk, know that it’s going to be uncomfortable
0:56:17 and scary and you’re going to make some mistakes, but you’ll learn and you’ll pivot.
0:56:20 So we’re still January, it’s still the beginning of the year.
0:56:25 So I say, make your goals, share them with someone else, make it known and then just
0:56:26 start hitting it.
0:56:27 Make it real.
0:56:31 Give us some accountability out there, but get out there and do it, right?
0:56:33 You can’t play the game from the sidelines.
0:56:39 This is similar to the 2022 tip, which was don’t look a failure as a bad word as long
0:56:42 as you’re failing forward, you’re learning something from those mistakes.
0:56:47 It’s all adds up to that cumulative experience and hopefully some forward progress there.
0:56:51 A couple takeaways from me before we wrap, number one, this is kind of a game of right
0:56:52 place, right time.
0:56:58 So it’s this volume game of sending out a lot of outreach and the more you can personalize
0:56:59 it, the better.
0:57:04 But trying to do that at scale and hopefully get a few bites, like Link said, 10, 12% response
0:57:09 rate, really, really strong for that personalized outreach because it cuts through the clutter.
0:57:13 Then it comes kind of this diligence phase, looking at the revenue pie and really valuing
0:57:16 that recurring revenue a little bit higher.
0:57:21 And then this trying to build those relationships quickly and concisely and build up rapport
0:57:25 both with the existing owner because they have something set up to do that handoff, right?
0:57:30 And then with the existing client base for continuity for that recurring revenue.
0:57:34 If you liked this episode, I think you’ll get a kick out of Ryan Golgowski in episode
0:57:35 five, 50.
0:57:40 We talked about his web design agency wasn’t growing through acquisition per se, but had
0:57:42 set it up for recurring revenue.
0:57:49 I think maybe $200 a month was his average price for web design and ongoing maintenance
0:57:53 for targeting almost exclusively pressure washing companies.
0:57:55 It was like, man, it was a super inspiring episode.
0:57:59 I think he was doing crazy, like $90, $100,000 a month recurring revenue, building websites
0:58:01 for pressure washing companies.
0:58:05 And then a brick and mortar example of this inserting yourself into a cash flow that’s
0:58:12 already happening was Hannah Ingram in episode 571, where she went out and found this semi-delapidated
0:58:19 brick and mortar car wash in town, no money down deal, owner financing, bought herself
0:58:20 this cash flow.
0:58:21 And she was doing really well.
0:58:26 It was kind of an interesting, inspiring angle to go look at.
0:58:30 She was maybe doing a half hour a day worth of work there in exchange for that income
0:58:31 stream.
0:58:34 But big thanks to Link for sharing his insight.
0:58:37 Once again, you can also check out Link’s previous episode on The Side Hustle Show.
0:58:38 We can link that up.
0:58:42 Big thanks to our sponsors for helping make this content free for everyone.
0:58:48 As always, you can hit up sidehustlenation.com/deals for all the latest offers from our sponsors
0:58:49 in one place.
0:58:52 Thank you for supporting the advertisers that support the show.
0:58:53 That’s it for me.
0:58:54 Thank you so much for tuning in.
0:58:58 If you find a value in the show, the greatest compliment is to share it with a friend.
0:59:02 So fire up that text message to that friend of yours who’s always looking for those little
0:59:05 life hacks, those creative ways to build extra income.
0:59:06 I think they’ll like this episode.
0:59:10 Until next time, let’s go out there and make something happen, and I’ll catch you in the
0:59:11 next edition of The Side Hustle Show.
Why go through the trouble of building your own cash flow when, with a little determination and a little hustle, you can insert yourself into some income streams that are already happening?
That’s what Link Moser from linkmoser.com and his web design agency windhill.com have done, not once, not twice, but 5 different times, generating $200k a year in semi-passive income.
He was on the show in 2022, where he explained how he makes money with a real estate lead generation site, NHFineHomes.com, where a single referral can be worth tens of thousands of dollars.
But today, we’re diving into a different strategy: business acquisitions.
Tune in to Episode 655 of the Side Hustle Show:
- specific types of businesses to acquire
- how to negotiate with owners
- time and logistics involved in managing his expanding portfolio
Full Show Notes: How to Earn $200k/Year in Semi-Passive Income Through Small Business Acquisitions
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