e54 Marty M. Fahnke

54: Marty M. Fahncke’s Billion-Dollar Journey

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Summary:

In episode 54 of the First Customers podcast I spoke with Marty M. Fahncke, a seasoned Acquisitions Advisor for Westbound Road. With a remarkable track record of over a billion in revenue and 450 million in acquisitions, Marty shares his invaluable experiences and insights on acquiring first customers, pricing strategies, and scaling businesses through effective mergers and acquisitions.

Highlights:

  1. Marty’s Initial Journey: How he and his partners innovated a soccer training product and their grassroots marketing approach.
  2. Key Learning Experiences: Insights on pricing strategies and understanding customer behavior.
  3. Transition to Television Marketing: Marty’s shift from grassroots to TV marketing, including the challenges and successes encountered.
  4. The Power of Mergers and Acquisitions: Marty discusses his transition into the world of M&A, highlighting the importance of strategic partnerships and acquisitions.
  5. Lessons Learned from Business Sales: Insights on the value of equity over cash during business sales.

Key Quotes:

  • “It was a highly demonstrable product with an immediately understood benefit.”
  • “We learned that just because the market tells you your product should be priced at one point, the market can actually bear even more.”
  • “Instead of continuing to compete, let’s acquire them and work together.”

Links:

  • Marty M. Fahncke on LinkedIn
  • Westbound Road’s website
  • Marty’s recommended book: “Influence” by Dr. Robert Cialdini

Show Transcript

Paris Vega (00:00.682)
Welcome to the first customers podcast. Today we have Marty M. Fonke with us. He is the acquisitions advisor for Westbound Road. He’s done over a billion in revenue and over 450 million in acquisitions over his career. Marty, welcome to the show.

Marty M. Fahncke (00:18.97)
Thanks Paris, I’m honored to be here.

Paris Vega (00:21.75)
So let’s get right into it. How’d you get those first customers?

Marty M. Fahncke (00:26.886)
Well, that’s always the question, right? I love the theme of your podcast. When I first got invited to be on here, I listened to it and I thought it was really exciting and I appreciate the opportunity. I started thinking about how did I get my first customers for my current company? And even though my company’s four years old, as I really thought about this topic, which is so unique, I realized that my first customers really came over 20 years ago

Paris Vega (00:29.194)
Right. Oh, thank you.

Marty M. Fahncke (00:55.878)
Created what I have today and in the most grassroots manner and I’m wondering can I tell that story? All right, cool. So Go way back in the back in time about 1999 and Me and two guys had gotten together and somebody one of the guys had invented a sporting goods product It was a soccer training product and he had called a buddy of his and said hey, I’ve got this product I’ve invented it. I think it’s a great idea. I don’t know how to bring it to market I don’t know how to get it manufactured

Paris Vega (01:02.094)
Sure.

Marty M. Fahncke (01:25.994)
And this guy said, I can get it manufactured and I know the guy that can bring it to market. So the three of us formed a partnership and developed this soccer training product. And it was a device that had a waist belt and then it’s elastic strap and then the sleeve that went around the ball. And kids could kick the ball and practice speed drills or kicking accuracy drills and whatnot without having to kick a soccer ball off the garage door and break the garage or off a wall or whatever else. And…

Paris Vega (01:49.39)
Okay, yeah.

Marty M. Fahncke (01:52.894)
So we developed the first iteration of it. And when I say grassroots, I mean really grassroots. And here’s why. Across the street from my house was a big park that had about a dozen soccer fields. And every given hour of any given day on the weekend, those fields were full of kids playing soccer. So what we did is we created the first iteration of the product and we…

went across the street and I took my kids with me and they were about the right age of the same kids playing soccer there. And we set up a little table and my kids would get the product strapped on and they’d start kicking the ball and bouncing it back and forth and doing all these fun things with it. And kids would just flock. They wanted to see what is this thing? That’s cool, really, really awesome. And as the kids would come, they dragged their parents over and the parents would come and I’d talk to them and we started making sales. And…

When I say grassroots, obviously we were literally standing on the grass selling this product. And so we learned a whole lot of things in this process that led me to where I am today. And I wanted to talk about first customers. Well, I can literally remember, even though it’s been over 20 years, I can literally remember those first customers coming to me and they were the kids, right? Eight, nine, 10 year old little kids. And their eyes were just big because they saw something.

Paris Vega (02:52.296)
Yeah.

Marty M. Fahncke (03:16.374)
that completely blew them away. Why? Because it was a highly demonstrable product with an immediately understood benefit, right? From across the soccer field, they could see it and go, I understand that, I want it, and I want it today. And they would drag their parents over, and we began the process. Now, what else did we learn from those very first customers? Well, we learned that

We had done some kind of market research or some asking around and it wasn’t a super complex product and it wasn’t a super expensive product to make and people said, oh you should charge about 12 bucks for that, $12.95. Okay, so we started charging $12 and what we found out was it was a really pain to make change and 20 years ago most people had cash and everybody would hand us a $20 bill and so we said, well wonder what would happen?

to ourselves closing ratio if we charge $20 instead of $12 and didn’t even mess around with giving change. Well guess what happened to closing ratio? Nothing. Sold just as many for just as many people that walked up as we had before. So we learned that just because the market thinks, tells you your product should be priced at one point, the market can actually bear even more.

Paris Vega (04:16.427)
Hmm.

Paris Vega (04:21.183)
Interesting.

Right.

Paris Vega (04:28.386)
So that’s something that might be different now where, you know, we’re swiping a card that $12 versus $20 might make a bigger difference. But back then, if it’s mostly cash, there’s a convenience of just charging 20 instead of 12.

Marty M. Fahncke (04:39.482)
There was a convenience, I would submit that today it’d be even easier because there’s a visceral reaction to handing over a $20 bill that is much stronger than swiping, right? That’s part of why we could go into all sorts of things here about the current level of debt of Americans and things like that, because it’s so much easier to spend money on a card than it is cash, because you don’t see it going out. Today I’d probably charge 30 or $35 for that product and probably have zero impact on the sales.

Paris Vega (04:49.143)
Yeah.

share.

Oh yeah.

Paris Vega (05:02.481)
Yeah, super low friction.

Paris Vega (05:09.71)
So I’ve seen these products. Were you guys the first to make those? Really? Got one of those. Yeah, I got one of those for my kids when they were playing soccer. That’s crazy. I think we just bought one.

Marty M. Fahncke (05:13.518)
We were the very first patented product. Yeah, yeah, the very first ones.

Marty M. Fahncke (05:19.923)
Awesome. How many did you buy?

Marty M. Fahncke (05:25.278)
Okay, so here’s something else we learned is that if your product is good, sometimes you can have more than one sell. So we would find that we would have a parent come up and if they had one kid, we’d sell one unit. But we quickly learned that if they had more than one kid with them, they don’t want to share. They don’t want to have to fight over it. So we immediately started saying, we started bundling, say, hey, it’s one for 20 or two for 30, right? Great, started selling a lot more.

Paris Vega (05:30.955)
Mm-hmm.

Paris Vega (05:34.304)
Right.

Paris Vega (05:44.163)
Bye.

Paris Vega (05:52.706)
Yeah.

Marty M. Fahncke (05:54.722)
We very quickly had an average units per cell of 1.51 in every transaction. But here’s what we really learned. Kids drive demand and parents give in and buy one. They drag them over, mom, I gotta have this. Okay, well, how much is it? Okay, fine, here it is. But any kids that had grandparents there, they’d come over and the grandparents.

Those kids drive that demand, and the grandparents want to delight their grandkids, and so they’re much less reluctant. And what we found is that most grandparents have multiple grandkids, and so our average units per cell went up to three and a half whenever a grandparent would show up. So light bulb, what did we learn from those first sales? Potentially grandparents are more lucrative than parents. And this is something that we never could have really learned without that.

Paris Vega (06:36.311)
Mm, smart.

Marty M. Fahncke (06:47.17)
really on the ground, in your face, right there dealing with customers and seeing what’s really happening day in and day out. Because the original vision of this product, by the way, was always to put it on television. Because back then, I was a TV guy. I had been doing TV promotions and DRTV and infomercials and home shopping. And had I put it right on TV, I would have made some major mistakes. But getting that face-to-face grassroots helped with some learning. So I’m gonna talk about that in just a minute. So.

Paris Vega (06:54.412)
Yeah.

Paris Vega (07:06.888)
Oh wow.

Marty M. Fahncke (07:17.262)
The other thing that it allowed us to do is over a period of time, it allowed us to do product improvement. We would sell the units, the kids would take them home, and they’d come back the next Saturday, and they’d say, you know what? This didn’t quite work as well as I thought it would. And so we actually had three different product improvement phases over a pretty short period of time.

where we realized that the way the strap was manufactured wasn’t quite right, it needed to be different because the ball would pop out, we wanted to stop that from happening, so we put four straps instead of two. We realized that we had judged the size of the Velcro waist belt to be too big because most kids are only that big around, we made it a little too big. So we actually, when anybody would come up and say, hey, I bought this, but it’s not the greatest, I would take their name and number, and then when the new batch came in that had been revised, I’d just give them one for free. Thank you for your feedback. Here’s a new and improved version.

give us your feedback. So I was soliciting customer feedback continually and we kept our isolated audience of that kind of small town and we sold a couple thousand units. But because we kept our audience isolated, as we were iterating, we started with an MVP and then we iterated improvements from there, we also kept down any potential for negative feedback or negative comments or customer complaints to a scalable model. We took those customer.

We took that customer feedback and we iterated until we had something that was ready to go big and I see a lot of people who Kind of start day one and they blast it out and their product really wasn’t ready and it can kill a company from day one If you release a product of software something that really customers aren’t happy with Word-of-mouth spreads bad reviews spread and customer sentiment goes bad and you can you can really destroy a business without first isolating

Paris Vega (08:45.609)
Okay.

Marty M. Fahncke (09:06.462)
a nice subset of your audience and finding out what is it, is it really serving their needs, is the value proposition there, are the benefits really there, and are the features there. So that really allowed us to do that. Now.

Paris Vega (09:18.946)
Yeah. Yeah, that goes along with a common pattern we see all about getting connected to that target audience that you’re trying to serve and getting as much feedback and get joining the conversation as much as possible.

Marty M. Fahncke (09:30.702)
Conversation exactly and it wasn’t surveys it wasn’t it was literally face to face Hey, I bought this last week and it doesn’t fit my kid. How do we okay great and we fixed it You know the ball everything else and so we worked really quickly to Because we had it, you know, it was a short season right summertime We were really quickly to try and iterate and get this in place So that we could create the best product

Paris Vega (09:33.462)
That seems to be the winning recipe.

Paris Vega (09:53.386)
How long does it take to iterate a physical product? Like, cause you have to manufacture, I don’t know how big of a manufacturing it was, but that seems like there’s a lot involved.

Marty M. Fahncke (10:02.07)
Well, we started out manufacturing it basically, one of the founders was manufacturing in his garage. And so it wasn’t at scale, but it was able to turn around and say, oh, let’s try adding this strap here and let’s try doing that. And so we created a hundred units, went out and sold them, created another hundred units, and each hundred units was getting progressively better until we had what we knew to be the absolute best unit. Now.

Obviously that can’t scale very well. So what was the next phase? The next phase scale the marketing scale the manufacturing So we found a manufacturer who could then You know build the product at large scale, but that does take time We wound up having the product manufactured in mexico. Actually, we looked at china and the quality was just horrible We went to mexico and we actually found a really good Manufacturer in the maquiladora area who was able to manufacture that We took our learnings

Paris Vega (10:46.584)
Okay.

Paris Vega (10:49.987)
Really.

Marty M. Fahncke (10:59.074)
from those Saturday morning in the park interactions and used what we learned from there about who buys it, why they buy it, what gets them excited, what lights up the kids’ eyes, and what do the kids say to the parents to get them to actually pull out their credit card or pull out their cash, and we used that to create a script for a television commercial and put it on the air, and we very quickly sold $300,000 worth of product. Really nice. And the…

Paris Vega (11:26.818)
And that’s the early 2000s at that point, or is that still 99?

Marty M. Fahncke (11:29.353)
That would have been in the spring of 2000. Yep.

Paris Vega (11:32.556)
Okay.

Marty M. Fahncke (11:34.678)
And with those learnings, we obviously, from a standpoint of going on the, from being in the part to now going on TV and having orders come through telephone and online, there were other things to learn. And then once we kind of put together, we really knew now, okay, we know now exactly what the customer’s looking for, who they are, what they want to buy. Then we went to QVC. And as I mentioned before, we knew that parents are great, grandparents are better.

when we looked around and said, where do grandparents buy their product? At that time, QVC was a behemoth in the marketing space and it was doing billions of dollars in sales and it was primarily grandparents. So we took all of that learning that we had and all of the data and we presented it to QVC and said, we’ve got something big here, put us on the air. They did and we were right and we wound up selling another million dollars worth of product over the rest of that summer.

Paris Vega (12:30.83)
Wow. So pause right here because there might be some younger entrepreneurs listening and they’re like, what TV QVC? What are these things? And QVC was like where people would sell these. It was just a channel of commercials, basically selling products and people would be on there pitching things and you’ll still see these infomercials. And another question younger folks might be asking is, why didn’t you just put that video on Facebook or YouTube?

Well, in 2000, YouTube and Facebook didn’t exist yet. Like 2004 is when those both launched, I think. And so that was the way to get mass distribution was mostly like TV and radio. Uh, so that’s a really interesting little piece of business history here. It’s like, you were right before, you know, the online scalability happened.

Marty M. Fahncke (12:58.915)
Alright.

Marty M. Fahncke (13:02.562)
You’re absolutely right.

That’s right.

Marty M. Fahncke (13:11.267)
Yep, absolutely.

Marty M. Fahncke (13:18.994)
Absolutely. Well throw some other trivia. So first of all, yeah qvc was in the home shopping. So people some people have heard of home shopping network Qvc they were both shopping 24 hours seven day week live shopping channels They they continued this day to do about four to five billion dollars a year in sales they have global footprints and Again, the audience is definitely skews older

Paris Vega (13:37.321)
Wow.

Marty M. Fahncke (13:45.194)
So if you’re a younger entrepreneur, you’ve probably never even heard of it, but it’s on your channel. You can go through your channel guide right now and you’ll find QVC and HSN and you’ll be fascinated. And there’s a lot you can learn from those by the way. They have pioneered so many things that we take for granted today that they, because they have such a massive footprint, there’s a lot of things that electronic marketers and digital marketers have learned to take it from them.

Paris Vega (13:50.76)
Yeah.

Paris Vega (14:03.222)
Yeah.

Paris Vega (14:08.29)
for sure. But what was the cost for just to give some context? Because today you record a selfie on your phone, showing your product, put it on the internet. You can do that for free on your social accounts and get pretty good reach. So what did it cost to produce a commercial for your product back then?

Marty M. Fahncke (14:25.854)
We spent probably $20,000 to produce that commercial. And yeah, and buying time, you could buy spots for as little as $10 each on small local champ TV stations across the country. And sometimes there were more, sometimes, you know, a big one like in Los Angeles or New York might be $300. Smaller one, that was per airing, per airing, yeah. Yeah.

Paris Vega (14:39.undefined)
Really?

Paris Vega (14:47.362)
Is that like a day per showing of your, per airing? Okay, interesting.

Marty M. Fahncke (14:53.41)
So commercial runs you paid $10 for it. You sell one unit, you’ve made money, right? And the bigger ones, you know, obviously if you’re paying more, you’re gonna get more. So interesting though, the home shopping model is different where they actually, they sell it and then they pay you a revenue split basically.

Paris Vega (14:58.348)
Yeah.

Paris Vega (15:03.679)
Interesting.

Marty M. Fahncke (15:13.394)
So your profit margin is built in, you have no upfront costs other than providing inventory and they’ve got the distribution footprint and in any given moment you might have a couple hundred thousand people watching at any given moment.

Marty M. Fahncke (15:30.239)
So yeah, so that was one year of effort. So from standing in the park selling it at $20 a piece to doing a million dollars in sales on TV was one year. What happened next was really cool for three young entrepreneurs who just kind of had an idea and executed on it. Somebody came knocking on our door and said, we love what you’re doing, we love your product, and we would like to buy your company.

Paris Vega (15:49.037)
Yeah.

Marty M. Fahncke (15:56.954)
totally beyond anything that we had ever even comprehended or thought about. And we were like, okay, well, we’re open to that. What are you offering? And they said, we’ll give you a million and a half dollars and we’ll take over your company. That was all the money in the world at that time, right? So we took a million and a half dollars cash, sold the company and walked away. Now, here’s what brought me to where I am today, is that…

Paris Vega (16:12.332)
Right.

Marty M. Fahncke (16:25.562)
Later on, I found out that I shouldn’t have taken that cash. I didn’t need the cash. I was fine. Little cash would be nice, but I didn’t need that much money. You know, the company was profitable. Yeah, we were growing. We had just expanded out to be on QVC in Japan, and we were in Brazil, we were in the UK. We were growing really, really rapidly. What I didn’t know, because

Paris Vega (16:36.874)
company was profitable at that point. Yeah.

Paris Vega (16:49.012)
Yeah.

Marty M. Fahncke (16:52.61)
If the me now could have gone back in time to the me back then and said, don’t sell the company for cash, that million and a half dollars sounds like a wonderful deal. But what you should do is ask questions. The questions I should have asked are, who are you and why do you wanna buy my company? I didn’t ask those, I just said, is your check gonna clear, right? What I found out was that it was a private equity firm who was rolling up our business into

Paris Vega (17:05.954)
Mm.

Paris Vega (17:13.33)
Yeah, yeah.

Marty M. Fahncke (17:21.162)
uh, consolidation of other sporting goods related businesses. And eventually they rolled that up into several well-known public entities that you’ve brands that you’ve heard of and probably have in your house today. And, um, and went public with it in a big way. I went back and did an analysis and had I taken equity instead of cash, I would have, we would have made $24 million.

Paris Vega (17:25.489)
Mmm.

Paris Vega (17:37.227)
Whoa.

Marty M. Fahncke (17:52.818)
because there’s a huge arbitrage difference in valuation of a business that’s doing a million dollars a year versus a business that’s doing a billion dollars a year. And these private equity firms that are doing these roll-ups understand that, and I didn’t understand it at the time. So what I wish I would have done, and I wish somebody would have told me is, hey, take half the cash and put the other half in equity, which would have given me personally a quarter million dollars when we sold the business, which is plenty.

And it would have given me, you know, would have given us as a collective partnership, you know, about $12 million to split. So 4 million bucks each, 12 years down the road. Would I rather have had that? Heck yeah. So that kind of was the beginning of my journey into buying and selling companies and understanding the value there and then the creation and how all that works.

Paris Vega (18:29.727)
Yeah.

Marty M. Fahncke (18:48.918)
and what got me into doing mergers and acquisitions. Because I want to help other entrepreneurs who have businesses to be able to accomplish their dreams with their business, whether it’s selling all of it, whether it’s selling partial, retiring, or leveraging that business to create something new, buying businesses to scale their businesses, there’s so many things and it became a passion for me. But it was really those first customers, $20 apiece,

Paris Vega (19:07.457)
Yeah.

Marty M. Fahncke (19:17.298)
in a soccer field that led me to now doing 20 instead of $20 deals doing $20 million deals

Paris Vega (19:24.13)
That’s awesome. So I’ve got some questions to kind of balance out that part of the story about, or that piece of advice about, Hey, make sure you always take some equity. Um, in that case, it seems that once you’ve switched gears to saying, all right, I’m not just interested in selling for cash, I’m interested in getting some equity and whatever, whoever I sell to, then it becomes much more important who you sell to you, because if it’s just for cash, who cares who takes it over? As long as you don’t get defamed somehow, your reputation.

Marty M. Fahncke (19:46.999)
Mm-hmm, absolutely.

Paris Vega (19:53.73)
If you get the cash, you walk away with all the value that you were going to get at that moment. But if you’re getting equity, then it really matters who’s taking the reins and who’s going to be leading it because I’ve heard or been close to or kind of associated with projects where they get bought and they just fall apart because of mismanagement. That seems like something that’s common, depending on who it sells to. Yeah.

Marty M. Fahncke (19:57.06)
Right.

Marty M. Fahncke (20:09.921)
Mm-hmm.

Marty M. Fahncke (20:14.562)
It does, it can happen, yeah. Yeah, and that is, so that’s why it’s careful to understand, ask questions, and understand, you know, if you are selling your business, who’s buying it, and why? And what is their plan for it? Because that can impact, you know, 60% of entrepreneurial businesses, when they are sold, have some sort of earn-out factor, or seller financing factor. Those are critical. You’ve gotta understand who’s buying your business, and what are they gonna do with it, because you’re mitigating that risk as to whether you’re gonna get your future.

Revenues against it. So I’m not saying equity is always keep or retaining some equity is always the right thing to do without question It’s not always the right thing to do in my case. It was and I didn’t even know it was an option So what I’m saying is as entrepreneurs out there who are thinking about buying or selling a business

Paris Vega (20:53.611)
Yeah.

Marty M. Fahncke (21:04.746)
You need to be thinking about all of the ways that you can do the deal right to accomplish your goals And if you don’t know then find someone who does and bring them alongside to help you

Paris Vega (21:11.265)
Yeah.

Paris Vega (21:16.874)
So now let’s bridge that gap between, all right, you learned that lesson eventually looking back at that first project. How did you go from that cash out to starting and getting into the mergers and acquisitions?

Marty M. Fahncke (21:32.514)
Yeah, sure. So left that business once we sold it and then went to work with an infomercial company actually in California. Little trivia, 2001, I was the very first person to ever put a URL on an infomercial. So that seems so weird today to think about, but at the time, people were terrified. Infomercial companies who were doing 100 million, 200 million dollars a year by putting…

Paris Vega (21:48.226)
Oh wow. Yeah.

Paris Vega (21:53.526)
Yeah.

Marty M. Fahncke (21:58.862)
toll-free numbers on their things and controlling the customer conversation and controlling the upsell path. We’re terrified about, oh, I’m not going to put a website on there and then go off to the wild, wild west and we’ll never see them again and we can’t control it. It was a fascinating time and we kind of pioneered it. We put the very first URL out there and we figured out how to marry TV marketing with digital marketing. I started.

Paris Vega (22:15.137)
Yep.

Marty M. Fahncke (22:27.246)
A business that we were doing we were doing about a million and a half dollars a year in revenue and I had a competitor who was kind of Kept bumping into me all over the place and this was before Google the search engine of the time was Yahoo That was the big search engine back then they were kicking my button Yahoo This was shortly after Yahoo introduced paid keyword searches, which is again Ubiquitous today that was brand new back then and you could get five cent clicks back then that were really valuable

Paris Vega (22:55.222)
Mm.

Marty M. Fahncke (22:55.854)
But they were kind of out maneuvering me in some places and I was really frustrated and I went to my CEO and I said, look, these guys are doing this and they’re doing that and somehow they’re able to move faster than we are. I don’t know how, but our team’s good, but they seem a little bit better. And he said, well, if they’re that good, why don’t you go buy them? I don’t know, I never thought about that. And he goes, yeah, go see if they’ll sell to us. So I called him up and I said, are you interested in telling your business? And you know, when…

Paris Vega (23:15.127)
Hmm.

Marty M. Fahncke (23:25.118)
Most people get that call entrepreneurs, they get that call. They’re, you know, well, I don’t know, it depends on how much, right? So the guy said, yeah, I’d be open to it, you know, and we talked, we had some conversations, found out, they were doing about $2 million a year. I was doing about 1.5, so combined, we were doing about 3.5 million in sales. So we agreed to merge our businesses, we acquired them. By the way, they took a substantial amount of stock in that deal, some cash, a lot of stock. And…

Paris Vega (23:30.143)
Yeah.

Marty M. Fahncke (23:55.586)
Two years later, if my business was doing one and a half million and their business was doing two million, how much do you think we were doing two years later as a combined entity?

Paris Vega (24:07.454)
I guess five million. Whoo, look at that.

Marty M. Fahncke (24:09.146)
$30 million. We grew a $1.5 million business and a $2 million business. We put them together. We did $30 million the second year.

Paris Vega (24:19.426)
amazing.

Marty M. Fahncke (24:19.942)
just a great synergy between our, what we were able to offer with some major distribution points that they didn’t have, access to products that they didn’t have, at prices they couldn’t get. They had some really great marketing tactics that we weren’t able to really replicate, and just a really great team. And that was a case of one-in-one not making two, one-in-one made 11.

Paris Vega (24:40.918)
Yeah. So did you, were you able to merge the websites in such a way that you weren’t having to compete with each other in search, like pay-per-click-wide?

Marty M. Fahncke (24:48.702)
We actually kept them separate so that we would have more footprint in search. Didn’t make sense to merge them, made sense to keep them separate. And each website had its own kind of customer profile, little bit of a separate personality, but there were enough back office synergies and things like that. We supported each other instead of competing with each other.

Paris Vega (24:52.79)
got you. Yeah.

Did you put?

Okay.

Paris Vega (25:06.754)
So did you organically, I understand, keeping the footprint? Did you also bid against each other still?

Marty M. Fahncke (25:14.07)
No, we were coordinating our bids. So instead of bidding against each other for keywords, we were managing, we were artificially keeping our bids low. So we were lowering our marketing costs, increasing our margins and cross-selling our customers. So every customer from one would get, because we had some different product selections and things like that. So if we sold to one customer, that automatically would get added over to this list and we’d be cross-selling, cross-promoting back and forth.

Paris Vega (25:16.878)
Nice. Right. Yeah.

Paris Vega (25:23.138)
That’s awesome. Yeah.

Paris Vega (25:40.274)
Yeah, it seems like that simple little adjustment alone is worth the acquisition of totally changing your marketing costs because you could say, Oh wait, what are you guys bidding on? Okay. Well, we’ll bid on this. You bid on that. We can both attack what we’re most likely to rank for and just dominate. That’s awesome.

Marty M. Fahncke (25:55.95)
Yep, that’s exactly what we did.

Paris Vega (25:59.402)
Love that. Those early search engine days were incredible on the opportunity. Yeah.

Marty M. Fahncke (26:04.87)
Oh, it was the Wild West back then and it was fun. I also had an affiliate program with 27,000 affiliates. It was one of the earliest affiliate programs. That was growing like crazy. So back to where I am, why I do what I am today. So that was lesson number two. So lesson number one was somebody came along, bought my business for a million and a half dollars, thought it was all the money in the world, thought it was the coolest deal in the world, was really pretty small in the grand scheme of things. Lesson number two was,

Oh, I have a business. There’s a business like mine that’s competing with me. Instead of continuing to compete, let’s acquire them and work together. That worked really well. We did that business from a million and a half dollars to 30 million dollars. We eventually went public in the umbrella company. That was also private equity based or backed. So we had some capital to make those acquisitions, which was wonderful. And then I left that business, started a business that was in the education space.

Ran that for three years, three and a half years, and then I sold it. Another profitable exit, and so I’m like, well I’m kinda liking this buying and selling businesses thing. I continued to grow businesses organically through a combination of marketing, innovative and creative marketing strategies and some acquisitions. But it took me a really long time to just focus on acquisitions as the primary and marketing as the secondary, even though over that time I did do a billion dollars in sales.

But it wasn’t until about 2018 2019 that I bought and sold a couple of other businesses and been involved in some other Transactions and some mergers and everything else that I realized I really want to do this full-time This is what I want to do. I want to own a great portfolio of companies

who are synergistic, do business with each other, and really control kind of this empire that fits in my wheelhouse. So I started making a concerted effort to finding businesses to acquire. And I went right back to my grassroots, right? I went one-on-one cold call.

Paris Vega (27:57.524)
Yeah.

Marty M. Fahncke (28:09.034)
I didn’t go out to the brokerage sites or anything. Well, I did to kind of do some research, but I’d already been told that working with brokers was a huge pain in the ass, true. Those brokerage sites have a lot of garbage on them, true. And so I had been told by people in the know, the best way to find deals is literally cold call and find those deals that are off-market, private deals that you can deal with face-to-face without a bunch of people involved.

Paris Vega (28:09.125)
Bye.

Paris Vega (28:21.645)
Yeah.

Marty M. Fahncke (28:34.71)
So I said, okay. So I got back to dialing for dollars, and after doing a billion dollars in sales, I literally was cold calling on the phone, emailing in LinkedIn and saying, hello, are you interested in selling your business?

Paris Vega (28:46.146)
What businesses did you target? Like what type, is there a certain profile that you had? Was there a certain profile that you would come up with? Like this is the type of business.

Marty M. Fahncke (28:47.95)
So I was targeting at that time, pardon me.

Yeah, so I’ve had a lot of success in e-commerce. So I was focusing primarily on e-commerce businesses. So I’ve done hundreds of million dollars in sales in e-commerce. So I was looking at those types of businesses primarily. But I also was looking at businesses that were complimentary to that. So for example, one of the first acquisitions I made was a bookkeeping business. Why? Well, it was a bookkeeping business that I was already using. A couple of my businesses were already using them for bookkeeping. And I went and said, hey,

I’m about to do a bunch of acquisitions. I could probably bring you 10 new deals, 10 new clients. If I consolidate all my stuff with you guys, would you be willing to give me a percentage of your business? And they were like, yeah, absolutely. It was literally a 20 minute call. So I took a percentage of that company and still own it today, right? We acquired a company that was a gluten-free beer company. And part of that was a huge promotion to do swag, like,

koozies and sweatshirts and hats and all that kind of stuff. And so I realized that a lot of my companies needed that. I’d buy logo hats for my company and all this sort of stuff. It’s a big thing that we do. Well, who does that? So I found a company that does that. We acquired part of that company. So now we do business with ourselves. If we wanna buy a logo wear, we buy it from our own company. If we want bookkeeping, we buy it from our own company.

So we’re looking at businesses that are in our wheelhouse of e-commerce, but also who serves those e-commerce. So whether it’s 3PL, packaging, printing, you name it, if it’s in that supply chain, I wanna have an ownership piece of it. So I was cold calling and getting great response. People, yeah, sure, I’m interested in selling. I’d look at the business and if I wanted to acquire it, great, we’d acquire it, form some partners, put some money together to make that happen.

Marty M. Fahncke (30:44.494)
But more often than not, I didn’t want to acquire it. More often than not, there was something about the business that I didn’t particularly want it. So I’d say, hey, great. It was nice looking at your business. It was nice meeting you. I’m not interested in making you an offer, but have a nice day. And then they would come back and say, well, wait a minute, now you got me excited. You know, I wanna sell my business. You don’t want it, can you help me find somebody who does? And I said, well, it’s not really what I do, but maybe I can help you.

Paris Vega (31:04.184)
Thank you.

Paris Vega (31:08.363)
Hi.

Marty M. Fahncke (31:13.242)
And from that, Westbound Road was born in 2020, which was the perfect timing, because Mergers and Acquisitions has been going on fire since then. And we help those sellers find buyers, we help buyers find sellers, and we help people create strategy around growth through acquisition and marketing. But it all started literally with just, again, grassroots cold calling, picking it.

Paris Vega (31:36.162)
Okay.

Marty M. Fahncke (31:41.194)
And by the way, when I say cold calling, I know I’m old. I got a gray beard and I’m talking about stories from back 20 years ago, taking $20 bills. But I will tell you that if you can’t get through to somebody on LinkedIn and you can’t get them to respond to your emails, you’d be surprised how often they’ll pick up the phone and you can get ahold of people. So don’t forget that age-old contraption that sometimes you can actually reach people on.

Paris Vega (31:47.388)
as well.

Paris Vega (31:58.551)
Yeah.

Paris Vega (32:06.942)
Yeah. So was it a lot of creative deals, you’d say, or is it more just cash mergers when you started buying up companies like that one where you said, Hey, I’ll bring you deals. If you give me a percentage, like that’s beautiful. It’s an amazing move. Okay.

Marty M. Fahncke (32:20.93)
Yeah, a lot of creative deals. A lot of creative deals. It’s shocking how easy it is to do acquisition deals without having to take a ton of money out of your pocket.

Paris Vega (32:34.222)
Hmm. Man. I feel like we need a master class from you just to we need more than one podcast. This is this is so interesting. I want to be you when I grow up. This is incredible.

Marty M. Fahncke (32:40.277)
Hahaha

Marty M. Fahncke (32:47.406)
It’s fun being me, I had to admit.

Paris Vega (32:50.858)
No, that’s awesome. Can you talk about why do you think mergers and acquisitions exploded in 2020?

Marty M. Fahncke (32:59.287)
So opportunity combined with cheap money. So opportunity was, you know, 2020 with the global pandemic, a ton of businesses were either struggling, it really created a divide in businesses. Businesses were either really struggling or they got loaded with cash.

a lot of it, you know, government cash, EIDL, PPP cash. In my space, e-commerce, e-commerce had exploded because everybody had to buy stuff and have it shipped home, right? The stores were closed. So the e-commerce business went crazy. So there was a lot of cash flowing, there was zero interest rates, there were a lot of investments being made. And on the sell side, there were a lot of sellers going, I just made a gob of money, I’m out, and wanted to sell their businesses. And so it was just one of those perfect storms

Paris Vega (33:16.415)
Okay.

Paris Vega (33:26.506)
Right. Yep.

Marty M. Fahncke (33:45.472)
of everything coming together to create what in 2021 was the largest year for mergers and acquisitions in the world history. Trillions of dollars of acquisitions happened in 2021. Now, 22 things started slowing down because interest rates started going up, but it’s still, especially in kind of the

Paris Vega (33:55.608)
Really.

Paris Vega (34:05.198)
That’s it.

Marty M. Fahncke (34:10.986)
Small business sector the small to medium business sector sector. It is still Very hot if you want to sell your business There are a ton of buyers out there and if you want to buy a business There are a lot of great businesses out there in the you know under

couple million dollar range. There’s constantly people looking to retire. There’s constantly people looking to sell their business so they can start something else. There’s constantly buyers wanting to buy a lifestyle business so they can become digital nomads and quit their job and control their own destiny. People get divorced, people get sick. There are always businesses for sale and there’s always businesses to buy especially in the small business sector.

Paris Vega (34:53.666)
I guess that there’s been, I think, one experience where I got ownership of a business by saying, hey, I’ll, you know, apply my skills. I’ve got these skills. I’ll apply these skills and I’ll spend a little bit of money on advertising and let’s exchange ownership. Help.

Marty M. Fahncke (35:12.502)
Yep, that’s called an earn in and it’s a very common It’s a very common way of gaining and let’s be clear what you just said and what I’ve talked about the companies Acquisitions doesn’t always mean a hundred percent of a business. I don’t always want to own all of the business Sometimes I only want to own a percentage of it for various reasons risk management time things like that and so If you could own If you get on a hundred percent

Paris Vega (35:22.316)
Yeah.

Paris Vega (35:26.335)
Right.

Marty M. Fahncke (35:43.094)
of a million dollar business, or you could own 10% of 10 million dollar businesses, your equity is the same, but your opportunity skyrockets.

Paris Vega (35:55.202)
Gosh, and you’re not having to manage because you’re not the 100% responsible. So there’s other people. Yeah.

Marty M. Fahncke (35:58.326)
Right. It’s not right.

Right, so that’s an opportunity that, you know, you can build a portfolio of cash flowing, profitable businesses that are providing you consistent income as well as huge paychecks when they’re acquired and you don’t necessarily have to be trying to run all these businesses.

Paris Vega (36:16.695)
Right.

Paris Vega (36:21.13)
Yeah. Yeah, that’s what I’ve fallen into at different times is trying to start so many projects or have so many things that you’re trying to get off the ground that it just, you just get spread so thin that everything’s just growing really slow. And I think that’s a really cool approach where if you’re just, you know, partial ownership and things that are already, you know, they already have traction.

Marty M. Fahncke (36:43.606)
It’s much less risk to starting new stuff. I mean, starting anything new, nine out of 10 of them fail, right? But investing in existing things that are already proven, nine out of 10 of them succeed.

Paris Vega (36:46.512)
Yeah.

Paris Vega (36:56.674)
So are you still mostly in the e-commerce space?

Marty M. Fahncke (37:00.226)
We do primarily digital types of businesses, so e-commerce, SaaS, publishing, digital agencies.

All those sorts of things are bread and butter. We also do a lot of service-based businesses. So we’ll do like design businesses, air conditioning, plumbing, heating, things like that. What we don’t do is brick and mortar businesses. We’re not looking for restaurants and gas stations and dry cleaners and things like that. We’re looking for service-based businesses that are…

Paris Vega (37:28.398)
Okay.

Marty M. Fahncke (37:34.498)
relocatable preferably or delivered virtually. And actually about 60% of our clients are outside the United States. So we have a lot of clientele. We have a lot of European entrepreneurs who’ve built really great businesses. We have a ton of stuff in the.

Paris Vega (37:44.174)
Really?

Marty M. Fahncke (37:51.106)
the publishing space over there. And we wind up selling them to North American buyers. So whether in the US or Canada, it’s pretty common for us to find buyers in the US for European and Eastern European businesses because it’s really hard for them. Really smart people who, you know, great entrepreneurial spirit, build solid businesses, but there’s not really the acquisitions climate.

in some of those countries for, you know, you build it, who am I gonna sell it to? So we’ve really developed a great way to pair, you know, buyers with sellers that are, and borders really don’t matter, right? If the business, if it’s e-commerce, if it’s a SaaS, if it’s something like that, borders really have no bearing on it.

Paris Vega (38:14.152)
Okay.

Paris Vega (38:18.612)
Right.

Paris Vega (38:32.034)
Can you give an example, you don’t have to name a specific business, but of what a publishing business, like, is that just like content sites or can you give an example of that?

Marty M. Fahncke (38:39.762)
Yeah, it could be it could be content sites We have a lot of like Membership coaching, you know like coaching sites membership sites, you know Like marketing membership. We also have even some of them are truly publishing like we’ve sold several in the actual book publishing space Things like that so children’s education English is a second language reading

Paris Vega (38:55.778)
Hmm. Oh, wow.

Marty M. Fahncke (39:06.158)
programs, language training programs, things like that are all kind of considered in the publishing space. But the customers are paying a monthly fee and getting content for their kids or for themselves or whatever, but it’s really content that they’re buying.

Paris Vega (39:23.682)
Can you give like maybe a rough profile of like what do you consider like a healthy business or a business worth? getting involved with

Marty M. Fahncke (39:32.254)
Oh yeah, absolutely. So a healthy business is one that has a profit, that’s number one. Number two has processes and procedures that are well documented. That’s something that a lot of entrepreneurial businesses lack.

Paris Vega (39:38.158)
sure.

Marty M. Fahncke (39:49.566)
And by the way, if they would do this part, the profit part would come, but having standard operating procedures, having the ability for anybody who’s in the company to be able to do a process and have it understand what they’re doing is very critical. And what that leads to is important factor number three, which is a business that can operate successfully without the owner having to put in 60 hours a week.

So if the owner has to put in 60 hours a week, then who’s gonna buy it because they’re just buying themselves a job at 60 hours a week and nobody wants that. So you need to be able to have a business that your business can operate without you as the owner having to be there to run it. And if you have those three things, then you’ve got a business that has lots of people who will wanna buy it.

Paris Vega (40:38.082)
Wow. Okay. So profitable standard operating procedures and not having to be run directly by the owner.

Okay. Some good goals for people listening if they wanted to sell their business.

Marty M. Fahncke (40:54.402)
Well, and I’ll tell you something else. Even if you never want to sell your business, if you go through the steps of creating a business that’s sellable by cleaning up your financials, cleaning up your processes, putting systems in place and people in place so that you as an owner can step away from your business a little bit, even if you never sell it.

Paris Vega (40:59.988)
Yeah.

Marty M. Fahncke (41:16.194)
You’ve got a heck of a lot better business than you did before because a lot of business owners can’t do that. And so doing the steps to get your business ready for sale, oftentimes we’ll have a business owners who thinks they wanna sell it, and then they do everything we tell them to do, and then they look around and go, actually I really like this business, now I’m gonna hold on to it, why would I sell it? Great, that works for us too. But when they called us, they were working 60 hours a week and the business was killing them. And so just the act of getting your business

Paris Vega (41:34.648)
Right.

Marty M. Fahncke (41:45.854)
ready to sell even if you never sell it is going to benefit you.

Paris Vega (41:49.534)
Now, do you have any content online that helps people go through this process or is it they need to engage with you as a client of yours?

Marty M. Fahncke (41:56.706)
It’s interesting you say that we’re actually working on a course right now that will be released in well, I don’t know when this recording will come out, but we’re planning to release it right now on February 14th, which Valentine’s Day is a as an act of love to our customers. It’s a course on how to prepare your business for sale.

Paris Vega (42:08.193)
Okay.

Marty M. Fahncke (42:15.31)
But for the most part, this is something that we provide as a service and help. It’s usually pretty complex. There’s a lot of moving pieces. There’s a lot of things to, a lot of questions that need to be asked and a lot of different ways things need to be looked at. So it’s a service that we provide to help business owners get their business ready to sell so they can get the maximum value for it and accomplish their goals.

Paris Vega (42:36.946)
Okay. Yeah. I think the timing of this episode might be right before then, or right near that time. Um, a couple of weeks from this recording date, um, other than the course itself that you guys are going to offer, are there any books you might recommend to entrepreneurs who are kind of on this journey of trying to build a great business, sell a business or maybe even acquire a business?

Marty M. Fahncke (43:02.511)
Oh, that’s a good question. You know, it’s funny. I listened to some of your episodes and I knew you were gonna ask about books and I didn’t think about acquisition books. I thought about first customer type of things. So you threw me for a loop there, which is dumb. I should have thought of that. Because I like I said I listened to a couple episodes of your show. I really like it, by the way, I just love the concept behind it. It’s it’s taking that foundational thing and just scaling it.

Paris Vega (43:14.07)
That’s fine too, yeah. Anything.

Ha ha ha.

Paris Vega (43:24.939)
to hear that.

Paris Vega (43:29.484)
Yeah.

Marty M. Fahncke (43:30.75)
So I will I will I will say the one I was gonna say anyway, which is the influence by dr. Robert Chaldini You know from it whether it’s talking about first customers Or whether it’s talking about multimillion dollar acquisitions those Principles of influence, you know reciprocity and social proof and all the things that you learned in that book

Paris Vega (43:38.05)
Yeah

Marty M. Fahncke (43:55.478)
will help you no matter what. And it’s a highly recommended book. I’ve actually worked with Dr. Cialdini and we showed the stage together at some conferences and I just highly respect him. So I would recommend that book because understanding influence helps you create the messaging for your business, it’ll help you negotiate, it’ll help you understand what your customers are. And again, so whether it’s…

Paris Vega (44:01.57)
Really?

Marty M. Fahncke (44:19.778)
Whether it’s first customers or whether it’s big deals, I think that’s a really fantastic book to understand.

Paris Vega (44:25.894)
Awesome. Well, we’ll add a link to the show notes to that one for sure. Well, this has been an incredible episode. This is right in the alley of my personal goals in business is this kind of area of wanting to get into mergers and acquisitions and kind of going down that path. So this is super interesting. Definitely going to be following along.

Marty M. Fahncke (44:42.219)
Oh great.

Paris Vega (44:50.274)
with what you’re doing on social media, and we’ll put links to your LinkedIn and different things in the show. Okay.

Marty M. Fahncke (44:55.042)
Yeah, and I’m very active on LinkedIn and we do. I put a lot of content out there, so I mean, if you’re interested in this journey, I do a lot of podcasts, I do a lot of recordings, but we’re putting a lot of content out and just follow me on LinkedIn, you’ll get an education.

Paris Vega (45:11.698)
All right. Well, that’s another episode of the first customers podcast. Marty, thank you again. This has been a great episode.

Marty M. Fahncke (45:18.438)
Thanks, Paris. Appreciate being here.

Paris Vega (45:21.182)
See everybody next time.


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