The Best Agency Offer I've Ever Seen: Lead Gen for Private Equity Deal Sourcing

Jordan Ross (0:00)

Welcome to How to Build an 8 Figure Agency. My name is Jordan Ross, and I'm your host. And over the course of this journey, we're going to be interviewing 8 Figure Agency owners and going through the systems that I've seen work and we've implemented into our clients' businesses that have helped our clients add a half a billion dollars in annual recurring revenue over the last handful of years. I myself have already hit the 8 figures in annual recurring revenue, and when I got there, I wasn't happy. I was stressed, I was dissatisfied, and I didn't like the people I was working with. So I clicked the restart button and went from 12 million in annual portfolio revenue back down to the mid 7 figure level to a climb back again. And on this journey, I'm going to be documenting my process on how I'm getting back to 8 figures and bringing you expert industry leaders who will tell you everything they did to get there as well. Thanks for tuning in and enjoy the episode. It's a greater opportunity cost for my clients to churn than stay. So they'll literally never churn. This was the line that was told to me yesterday from one of my clients. He runs an agency that has 7 figures of subscriptions, and he works with PE firms. They pay him 2% commission. Like his commissions are usually 6-figure commissions when he staffs and source them a deal that closes. So he works for buy-side PE firms. They pay him a retainer, and they pay him a commission, and he makes a boatload of money, and arguably the best agency model. I wanted to break down what I learned yesterday talking to him, because this was fascinating, and actually how we're talking about implementing better operation systems and then AI into his operation, because really eye-opening for me for this conversation yesterday. So this guy's an investment banker. And one of the things they told me about working with PE firms is you need to look the part, right? So I do know a handful of agencies. I know three off the top of my head that had been successful and started working with PE firms. So it's not impossible to go from running an agency to start working with a PE firm. But these guys, when they engage with them, they have been bankers for their entire career. Investment bankers, they've been on buy side deals. And from what they told me, getting into a PE firm is pretty hard because they already have their network, and you need to really work on it, be presentable, things of that nature.

I love this model. I think it's one of the best models if you could crack into this industry because what they told me, their clients, they have, let's just call it 20 clients.

Their 20 clients have so much capital that they're never going to turn because the opportunity cost of missing a deal, missing a deal that could bring in 2, 5, 10, 20 million dollars in EBITDA to then roll up into their platform. And if you don't know what a platform means, basically, when you aggregate a bunch of similar types of businesses together, and then you get economies of scale because you have like 10 HVAC agencies that you're buying together. But they have such an opportunity cost where missing a 20 million dollar EBITDA or 2 million or 5 million dollar EBITDA business, whatever the number is, when they get that business, if they buy it for, let's just call it 5X EBITDA, so 2 times 2 million dollars in EBITDA multiplied by 5, 10 million, they might be able to flip it for 10 So right out of the gates, if they bought it for 10 and they can flip it for 20, they're gaining 10 million in enterprise value. They're like, paying these guys 5K a month, 60,000 a year is nothing for every deal that they bring in.

So something to consider if you're an agency owner, thinking about a longer arc, because if you're going to look into this space, if this is a space that's appealing, or if it's just interesting, these guys are playing the game for the next 20, 30 years, and they're going up against some firms that have been in this space for 30 years. So if you're going to go into this world, it's got to be, I want to do this, I want to do this for like 10, 20 years, because the economy is a scaler there. And here's what's the most compelling thing, arguably. I think they have one of the best Hermosy offers I've ever seen of an agency. So they represent buyers of companies. They're servicing 16 different verticals at the present moment. But when someone goes to sell their business, they offer free M&A advisory services.