365 Michael Frew

Jeffrey Feldberg: [00:00:00] Michael Frew owns and operates several seven figure companies specializing in digital business acquisitions and operations. Over the past decade, his expertise in guiding software developers and engineers through the intricacies of online acquisitions has been featured in numerous media outlets, including FE International, IndieHackers, and Empire Flippers.

Formerly a top performing software architect and cybersecurity consultant, Michael managed multi million dollar consulting engagements for major corporations such as IBM. Microsoft, Amazon, Salesforce, and Mandiant. He holds a B. S. and an M. B. A. in Business and Economics from the Universities of China, Hong Kong, and the Netherlands, and has earned several post graduate information security certifications. 

As an author, speaker, and consultant, Michael is dedicated to helping engineers escape the disillusionment of traditional employment by educating them on how digital acquisitions can serve as the [00:01:00] next step in their career evolution.

And before we start the episode, a quick word from our sponsor, Deep Wealth and the Deep Wealth Mastery Program. Here's Bill, a graduate, who says, the Deep Wealth Mastery Program has transformed the KPIs we're using to accelerate growth and profits.

Or how about Emry, who says, and I love this, and I quote, the Deep Wealth Mastery Program helped me create the right mindset for both growing my business and later my future exit. I now know what questions to ask, what to do and what not to do, which is priceless. The team and I have found dangerous skeletons and gaps that we're now addressing due to the Deep Wealth program. Today, our actions have a massive ROI. 

Absolutely love that. 

And now, speaking of growth and adding value, check out what Bruce says, and I quote, As a business owner, I'm always looking for new programs, systems, CEO peer groups, and strategies to improve my business. Hands down, the Deep Wealth Mastery program is the absolute best. I'm [00:02:00] both growing my business and preparing for a future exit at the same time. It doesn't get any better. 

And I gotta tell you, as I hear these testimonials, this is exactly why I do what I do. My mission, the team's mission here at Deep Wealth, is to literally change the social fabric of society, one business owner at a time and one liquidity event at a time.

The Deep Wealth Mastery program, it's the only one based on a nine figure deal. And that deal, that was my deal. You know my story. I said no to a seven figure offer. I created a system that we now call Deep Wealth Mastery and that's exactly what helped myself and my business partners welcome from a different buyer, a different offer, a nine figure deal.

So if you're interested in growing your profits, preparing for a future liquidity event, Whether that's three years away or 33 years away, and if you want to optimize your post exit life, Deep Wealth Mastery is for you. 

Please email success at deepwealth. com. Again, that's success, S U C C E S S at deepwealth. [00:03:00] com. 

We'll send you all the information about the Deep Wealth Mastery Program, otherwise known as the Scale for Ultimate Sales System. Better yet, why not hop on a complimentary strategy call? We'll see where you are at your business and what's standing between you and your financial independence and your dreams.

So that's where you want to be. You want to be with other successful business owners, entrepreneurs, and founders, just like you, who are looking to create market disruptions, whether you're a startup, whether you've been in business for three or four decades, whether you're manufacturing, whether you're a high tech, SaaS, low tech, whatever the case may be.

Come on in and network with other business owners, with other businesses, just like you, because they all want to lock in their financial freedom and enjoy both success and fulfillment. Again, the 90 day Deep Wealth Mastery Program, it has your name on it. All you need to do is take the next step. Please send an email to success at deepwealth. com. 

Welcome to the Deep Wealth Podcast. Deep Wealth Nation, you heard it in the official introduction, we have a fellow entrepreneur, a successful entrepreneur, and he is going to [00:04:00] help us answer some questions. And you know me, I love my rhetorical questions. Deep Wealth Nation, would you love to grow your business, perhaps through acquisitions?

Down the road, would you love to not only sell your business, but know what to do and what not to do and everything else in between. We're going to be covering all of that. So Michael, welcome to the Deep Wealth Podcast. It's an absolute pleasure and delight to have you with us. And I'm curious, there's always a story behind the story.

Michael, what's your story? What got you from where you were to where you are today?

Michael Frew: Oh, it's really great to be here. Thanks for having me. Yeah. So story behind the story, I am probably a very typical engineer that worked in corporate America. I always say I was a very average engineer, like a C kind of engineer, nothing special. And I spent two decades in doing development, doing engineering and doing consulting at a whole variety of different companies across the globe, which was really fantastic to get that experience.

But the whole time I continued to have what I always call like the quarter life crisis, where I just knew I wasn't doing the right thing. There was just [00:05:00] something out of sync in my life and what my purpose was, for the long term. And I would quit my job and take six months off trying to figure something out.

But when you're in technology, there's such an investment in your education and you get that golden handcuff problem because we make so much money. That you always kind of go back, and I would try and go back maybe with a different angle of, hey, I'm looking for a different goal this time, and I'd work a few more years, and I'd have another quarter life crisis, and I'd up and quit and try it again from a different angle.

So it wasn't until after those two decades of doing that on yet another crisis moment I took a little bit of a sabbatical and started thinking of how would I rotate and pivot that career such that I am working on the same projects that I really enjoy, but I'm not Having to go to meetings I don't want to.

I can build the team that I think would be effective and I can be the manager and boss that I wish I always had. And for many of us that is to start our own business or to even have your own business and continue to grow it. What I was very fortunate enough to come across [00:06:00] was that there are plenty of really good software businesses, which is my specialty, that are actually for sale on a day to day basis.

And once I So I took a chance at, I bought a really small business and it just did small affiliate sales. I think a lot of us have seen these sites online and I had cash in my bank account day one. And for those of us that have tried to start a business, that doesn't happen. And I already had that product market fit.

There was marketing to it. And by exchanging just a little bit of money and already to have that cashflow, that completely changed my perspective of what I wanted to do with my career. And that's when I started looking at acquiring businesses.

Jeffrey Feldberg: Wow. So quite the background. And I have to ask, you worked with some really large logos, some of the titans of business. And so as you look at what your time was like there, the inside track that you got to know as a company and you're being there with the whole team and helping them with their strategies.

And now you're taking that to startups, small business, medium sized businesses. I'm wondering [00:07:00] anything that you can care to share of what they're doing that perhaps we're not doing on our side. Maybe we're deluding ourselves saying, well, I'm not that big. I don't need to do it. Or I don't have that kind of capital or resources, but that's all a myth.

Michael Frew: Yeah one thing that's fantastic is you don't need a tremendous amount of capital. You're buying an asset in a business many ways like you're buying a house where you just have to put a little bit down and then you can get financing for the other piece. One thing I would say is I'm not one of these people that is trying to tell everyone, hey, quit your WII job, quit your corporate job and go out on your own.

I found having that corporate experience incredibly beneficial to where I am today because if you think about it, all of us small and medium sized businesses, guess who we're selling to. We're selling to ourselves on the corporate side for the next 20 or 30 years. If you don't understand how corporate politics works, if you don't understand how budgeting works inside of small and large corporate teams, It's really hard to sell into those groups.

So take that corporate experience that you get and, use that to your advantage. Try and be in different departments if you can do some [00:08:00] marketing and if you can do some HR and you can do some accounting. That's really fantastic if you're ever considering running your own business. So I definitely don't want to ever throw shade at working in corporate cause you can really leverage that in the future.

Jeffrey Feldberg: I love those insights. And again, Deep Wealth Nation, I hope you're listening. There's some real gems with that. And so Michael, from there to what you're doing now, because I'm sure there's some listeners who are saying, okay, and like I said earlier in the introduction, I have a terrific company. My exit is a while away, but when I show up for my exit, I want to have a bigger, more profitable company.

I want to have the deal of a lifetime, not any deal, but the best deal. So talk them through, if they've never looked at acquiring a business, this is new for them. And coincidentally, or perhaps not coincidentally, we've had entrepreneurs go through the Deep Wealth Mastery program and coming out of it, even though we never intended it for this way, they say, you know what?

When I'm buying a company, I'm going to reverse engineer everything I learned in the 98 Deep Wealth Mastery to know what to look for and not look for in businesses. But for that business owner out there who's never done [00:09:00] this before, they're saying, okay, I know how to grow my business. Where in the world do I start when I'm looking to buy a business?

What does that look like? What would you tell them?

Michael Frew: Right, yeah, and it's fantastic to see both sides here, where I see sellers come out and I think, boy, if you would let me talk to you for a few months beforehand, we could have gotten you a better acquisition exit but on the buy side this is a market I started about 10 years ago, and it was a market that was a bit of a Wild West back then.

I was buying things all cash, and that has changed. Now there are more brokers it's been professionalized. So you do get the brokers. You are starting to see some financing. The SBA is now financing online businesses, which was a huge change. And that allows you to put something around 10, 20 percent down as long as you can qualify for an SBA loan.

You can acquire a business that can very easily replace your income that you're making somewhere else. So this industry has matured. One of the reasons why I'm out here trying to speak about it is to help bring more buyers in. That creates more deal flow for sellers as well, and it continues to mature that [00:10:00] business.

So yeah, a lot easier than it used to be. It's a lot more competitive, but think the future for this as an asset class is only increasing.

Jeffrey Feldberg: Terrific. And so when doing that, so these are the benefits, like you said, when you, particularly when you can buy right, you're not overpaying, you're getting the right kind of resource, hopefully you found any skeletons in the closet. And we'll talk all about that in the Deep Wealth Mastery Program. But once you've done that, and we'll make a big assumption, which is, okay, I've bought right, and I now have this resource.

I have additional cashflow that's coming in. I have some kind of a marketplace. I'm not having to really start it from scratch. I have even perhaps a talent pool that I can really begin to work with and do. So what do I do in terms of, again, identifying number one, this is the best opportunity, but beyond the dollar signs.

I've also now integrating it into my company. What would you want us to know?

Michael Frew: Yeah, it might even depend on what your criteria and what your goals are. I know there's some acquirers like myself that use that cash flow to [00:11:00] invest in other wealth appreciating assets like real estate, stocks, and bonds, or others like myself who then look to use it to acquire other businesses.

So once you start doing two, three, and four, you do have to, well, I won't say you have to, I'll say it's really beneficial to try and plan out that portfolio so that hopefully there's some synergy with all of the businesses. So for example, for me, I have. Multiple businesses that run on the same tech stack.

So viewers, listeners, everybody on the web will see completely different front ends. It's different marketing. It's a completely different business, but in the end, it's me and the same team of engineers working on a tech stack. They're completely separate, of course, for each business, but we know that Language, we know how to put all that together.

So in that sense, when you see a business come up for sale that might be in that same tech stack, even if it's in an industry you don't know, you already know the hard part, which is running the core engineering and infrastructure technology. And to be able to bring that synergy into your portfolio, I have found has been very [00:12:00] beneficial.

However, I imagine listeners can come up with many different ways that you can build a portfolio that focuses maybe just on WordPress sites. You can build a portfolio that works just on Amazon e commerce sites. And so you can really get some synergies in there as well.

Jeffrey Feldberg: Excellent. Okay. So you're looking for the synergies, hopefully something that's already within maybe your realm of expertise or something that could be within your expertise. That's going to be an extension of that. And this question, I suppose we can look at it from both angles and perhaps we should. So when I'm looking at companies, so I'm now in the buying mode and what's interesting here at the Deep Wealth Podcast, usually we're on the other side of the seat, we're in the selling seat, but here we're on the buy side of the table.

So Michael, in your experience, what would be some red flags that you're seeing, either what's being said or what's not being said or. Perhaps some KPIs or other telltale signs of, Hey, when you get beyond the pretty stories that are being told around here, this is not such [00:13:00] a great opportunity. You may want to think about taking a pass.

What would you share?

Michael Frew: Yes. And I think it's actually fascinating for your audience to talk to buyers like me, because a lot of times, we discuss the selling part and you never have the conversation with us that can tell you very quickly here's the five things that turned me off and I didn't even reach out to talk to you.

So in the narrow software space specifically SaaS software, a lot of things revolve around subscriptions, right? And that's why people really enjoy SaaS and subscriptions. So the type of sale of these subscription, it is much more preferable to have monthly subscriptions than it is to have annual.

And the worst thing you can do is sell lifetime subscriptions. And if you ask the average engineer when they're starting their business, they'll put it on those websites that do these lifetime sales. For 50 bucks, you get lifetime access to this person's business. And they don't recognize how much that hurts their long term sale opportunity because those customers will never earn you any money and a buyer won't pay for them anymore.

Other things that we look at is how tight are your books? We definitely don't expect your accounting to be very strong. Typically [00:14:00] entrepreneurs, that is not their strength and not what they're interested in working with. But as long as it doesn't look like you've got those personal expenses mixed in there, all those things that you hear, they tell you don't do personal one for me, if you have to send me your social security number to get me to look at your tax returns and everything, that's probably a mistake.

That means you aren't professionalized in how you're running your business. So look at your company and say, is there anything here where I'm passing on personal information because if you're running a real business, that should never happen. And so it's just little things like that are telling me a bit about how the business was run. And honestly, for me, the biggest thing that I look at, is this something fun? Is this something I would enjoy running? Is this something I can be proud of that I feel like is giving back to my community? Those are the, top level before I even look at cost before profit. Is this something I would wake up every day and want to do?

So I don't know if that's much helpful for your sellers if they're doing something that they say, hey, this is just boring in itself, but it generates cash that can also be rewarding as well. So, yeah, there's a variety of things that I look at as a buyer and so hopefully a [00:15:00] few of those kind of give you that insight.

Change the lens around to look at it from our point of view.

Jeffrey Feldberg: Some terrific insights there and use one of our favorite F words, the fun word. Hey, it's gotta be fun for you as well. If not, well, that's a whole other conversation, but Michael, I want to circle back to something that you said that's not necessarily so obvious. So it's obvious that, Hey, if you give away a lifetime subscription, probably not the best thing for a business model.

And obviously you're limiting. The kind of revenue and profits that you're going to be able to do, but you also said, and this is interesting, and whether it's buy side, sell side, just business models in general would love your insights about this. You prefer not doing an annual or yearly subscription, keeping it on the monthly side.

So what's going on with that? Why are you saying that?

Michael Frew: Yes, because I know everyone's told, hey, offer annual subscriptions and offer 20 percent off. So I guess I hit that on two directions. First of all, if I'm running a cash positive business, I don't need to give you 20 percent off. So I'm not sure what that's doing for me as a business owner. I don't need that cash right now.

And that's only if you can answer the [00:16:00] question If someone gave me a million dollars, can I turn it into two million by plugging more advertising or something in here? If you can, then maybe you do need that money a little earlier and that can accelerate your growth. But if you can't, which is in the case of most of mine I don't need to give that 20 percent off.

And so the second aspect here that maybe isn't obvious when you're selling, when you have a monthly subscriber, it is mid April right now. I can look at my monthly subscribers and I can tell you with 98 percent confidence what I'm going to make in May, 97 percent confidence what I'm going to make in June, and you can kind of take that out, and that makes your valuation much more solid and much more sticky.

The problem is when you have annual subscriptions, and I think a lot of us have done this, we get excited about that 20 percent off, but then we never ever Buy again, because it's been 12 months, how many times have you reached out and asked for a refund of, hey, I forgot I signed up for this 12 months ago, I haven't used it since month one.

You get a lot of that when you're selling annual subscriptions. So as a buyer, I'm looking at [00:17:00] monthly subscriptions as a 99 percent chance it's going to be here the day it closes. And the annual subscriptions, it's going to be a lot less of that percentage. So if you have a churn of annual subscriptions, that's quite high, then I can already discount all of those and say, all right, none of this revenue is coming back next year.

I'm basically starting over. So that's where annual revenues can really hurt you. Instead of just saying, I have all monthly revenues, I've got a few annuals that have to do it because of their corporate policies. But if 95 percent of your business is based on MRR, you're going to get a much higher multiple and a much higher value for selling your business.

Jeffrey Feldberg: Okay. Really interesting. And for a moment, if we can go down this rabbit hole, because there's a lot to learn for the listener here. So I'm hearing a few things. So for starters, just saying, Hey, if you're already profitable or cashflow positive, why give a discount if you don't need to give the discount in the first place?

Because there's an expectation. If I'm paying a year upfront, I expect something for that. And so right away. We're putting 20 percent back into our books or back into profits. And then I'm also [00:18:00] hearing you say, and this is interesting from a buyer's perspective, if you're looking at a business that has more annual subscriptions than monthly subscriptions, in the back of your mind, you're saying, okay, I wonder how many of these annual subscriptions Are going to not renew.

They forgot about it. They're not using it versus you're placing more value on a business that has monthly subscriptions. Hey, it's top of mind. They renewed last month. The likelihood is they're going to renew next month. How am I doing with that so far?

Michael Frew: That's perfect. And you know, I can feel the gut punch when I, because usually you can see how much a user is using your product or service. So when those annual subscriptions start to come up, especially after I've just acquired a business, so that first year, it's really anxiety producing, right? With these annual subscriptions, and I feel, you can look at it and say, none of these people have used it in the last year.

Maybe one or two of them will, Renew but most of them are gone and that's a horrible feeling. And again, I'm telling you something I learned from an acquisition, right? It's a horrible feeling to realize, wow, maybe this thing made a million bucks last year, but I [00:19:00] bet 500, 000 of that isn't coming back.

I got to somehow re up new people, right? And so you really have to look at that annual churn because it's not the same as your monthly churn.

Jeffrey Feldberg: Interesting. So keep it more current, keep it on the monthly. It's better for the business day in, day out. It's also down the road. If there's ever going to be some kind of a sale, it's going to be better on the sell side. To give more confidence to the buyer.

Michael Frew: Yeah, and I'm sure you touch on this with your listeners as well as I always try and, it's hard to do, but I always try and keep my businesses within 30 days I could sell them. If I find out, if I get hit by a car or if I find out I have something where I've got six months to live and I just want to go live on a beach with my family, how fast can I sell this?

And so you don't want to be making those changes where you're trying to stop those annual subscriptions at that time. So yeah, as quickly as you can make a business sellable, run it like that as much as you can.

Jeffrey Feldberg: Terrific. And Michael, I asked this next question again, both with the buy and sell side of mine, because you just flip it and you have your answer there. So as a buyer, what makes you run as [00:20:00] fast as you can in the opposite direction? Hey, I'm not going to do this deal. It looked really attractive when I read the description, but now I'm here, it's upfront and personal or upfront and close, or I'm looking at my diligence and hey, it's just not happening.

And the flip side of that is, wow, this is even better than I thought. I may even consider upping the investment price of what is going to pay. I really want to get this deal.

Michael Frew: Yeah, let me hit that a couple points in the buying process. So typically what you'll see at first is a description of the company, maybe a prospectus and then a valuation. The valuation many times tells you what's going on in the seller's mind and whether they've even spoken to a broker. Now, again, I'm in the tech world where valuations can be a little bit crazy and what you find a lot is, hey, my Stanford professor said I should use this formula based on revenue even though my company doesn't make any money, it's worth 30 million.

So, that's an easy one where you're going to run away because this is Silicon Valley Mindset, and that's not the real world out here. Once you get past that, if you think the [00:21:00] valuation is okay and once you start to get kind of that pre LOI information, but not, due diligence information, I'm going to go back to well the finances are put together, what that makeup of subscriptions is like.

And a little bit about how the software has been built and how mature that code base is. Those are all very mushy kind of things where it's more feel than just throwing it into a spreadsheet. And again, my company's typically They aren't as easy just to throw into a spreadsheet and say, this is a go, no go.

Because there's so much more to a software business than there is maybe to a content site, where you're just looking at numbers, it hits our numbers, we can buy this. So, there's a little bit of that squishiness when you get a little bit more information. Now, on the flip side, what makes me say, hey, this is fantastic, A company that's been growing slowly, predictably, without any spikes, it doesn't have hockey stick growth, it's not something trendy, so it's not NFTs, it's not AI based, [00:22:00] and it's something you can imagine actually still running for a few years, which in technology is a little bit hard.

I've now had a business for about a decade and that's quite long for technology and hopefully it continues. If I see a business that is continually growing, continually increasing profit because it's scaling without increasing expenses at the same time, that's something where I immediately am interested in and I will say so are all other buyers.

So that's skills at X Factor. Who are you as a buyer? Are you a good match for the seller? Can you speak with the seller and get them to understand why you are a good match for their business? How you can take their vision forward? How to care about their customers probably as much as they do?

Because this is their baby, don't really want to sell it just for the money and have it just disappear two days later. Everyone hates that when a large company buys it and shuts it down. So, all of those little pieces, it's such a big moving project, but Something that I really like is that smooth growth without an equal [00:23:00] size of expense growth.

Jeffrey Feldberg: Okay. Interesting. As we hear the wheels turning in your mind of what you're looking for, what to do and what not to do. And I'm wondering for our listeners who are listening, Aren't so familiar with your world, primarily the software world, the technology world, in this case, they want to add that component to what they're doing.

And so where would they begin to look for these kinds of opportunities? Where do you find them? How does that work?

Michael Frew: Yes, so there's a whole list of brokers that are out there and so each broker that's based online, a lot of them have a specialty. So if you find your background matches maybe doing direct to consumer or e commerce a little better, There's a certain set of brokers out there that are really well positioned because they are the ones that sellers go to and they have the businesses to sell.

If you're interested in SaaS like myself, there's different brokers for that. Pretty simple internet searches. There's probably about, I'm going to say there's 20 out there of which 10 are very reputable, and there's some marketplaces. And so a quick Difference between the two marketplaces, if we think about it like [00:24:00] eBay, there's no guidance.

You just throw something up there. There's no review of the documentation, whether it's true or not valuation, you just kind of put out there, whatever you want. So you're dealing straight with the seller that probably doesn't have any education on what they're doing versus broker sites where the broker has walked them through.

A lot of that probably tempered down what they expect to sell for probably helped solve all these problems that, You just don't have solved when you're trying to sell and you don't realize, hey, I need to, I need my books in QuickBooks. I can't just do it on Excel anymore. And so that's the challenge.

If you're doing something through a marketplace, you have to educate the seller and it's going to be a much longer process and many times it's not going to be fruitful. That's why brokers are more helpful. Sure, they have a cost for the seller. It's a lot more time, but they are helping with the education on the buyer side.

So when I say that for sellers too, I know sellers hate paying that broker fee, but trust me, it's getting you more money. There's a lot of businesses I won't even look at if it's on a marketplace. I don't even care because it's not my job to teach people how to settle, you know?

Jeffrey Feldberg: fair [00:25:00] enough.

Michael Frew: So hopefully that helps answer your question, but Yeah, all out there.

If you like let's say e commerce, online broker, business for sale, you'll probably get the top listing of those five, reach out to the brokers, explain who you are, what your situation is, what you're looking for, what kind of cash you have, and they'll start putting you on the right lists so that they send out the information to you when new prospectuses and new businesses come for sale.

Jeffrey Feldberg: Terrific, and speaking of which, because you bring up a really valuable point, how can you master something you've never done before? So in other words, you don't know what you don't know. And so for the listener out there who's saying, okay, I really like what Michael's saying. I want to embark upon that.

They're going to make all the newbie mistakes. It costs time. It costs money. It doesn't have to be that way. So I know for starters, firstly, you have a newsletter and you're sharing all kinds of wisdom and insight. But beyond that, if a listener was saying, okay, I want to get some help. I don't want to make all the typical mistakes.

I want to save the time, the headaches, the heartache, the dollars do it right. So with working with [00:26:00] someone like yourself, Michael, with your system, what does that look like? What would you have me if I said, okay, Michael, let's start working together today, here's what I want to do. Here's what I would like to acquire.

Let's start. What would happen from there?

Michael Frew: Yeah, I have made all those mistakes because, yeah, ten years ago this stuff didn't exist. The first thing I think is really important is financial literacy and by that I mean general financial literacy, especially around businesses. So, the more I'm guilty like many of us. I have bought every course in the world to try and teach myself this stuff.

And even if you get one thing out of every course, it does help. So, get that financial literacy piece first. Then read everything you can about acquisitions and then, if you can, niche down online acquisitions. It is different because we don't have the real estate, we don't have all the brick and mortar challenges.

actually makes it easier, but it is a little bit different. And then from there, start researching. You can obviously, my newsletter, I'm trying to help with things that I see from the buy side. Much of our industry information is published by brokers, which means it's a broker point of [00:27:00] view. If you think about real estate, if all we read were books by real estate agents, we would all be investing very differently.

But there's a huge educational segment out there that's teaching people how to buy multifamily homes, how to do this as an investment, how to do it as a career. trying to put that out in the online space as well. So I'm trying to help by putting out, here's what I see as a buyer. Here's what I see as a seller.

There are places like Walker Dybel had written the book Buy Then Build. And so he's got an acquisition lab, which walks people right through the steps that they need to do. It's both online and offline. So there's a few labs like that where you can learn a little bit more. You're always welcome to reach out to me.

I love trying to help as much as I can. I am a tad bit busy, but I've never formalized an official course that would help. But I do try and walk people through some videos that I've put together. I do the four questions I get at every party which is, what the heck do you do? How would I finance this?

How would I figure out what's good for me and why would a seller ever sell a good business? I walk through those as if we're talking at a bar and just [00:28:00] trying to get people comfortable with the idea because you're right. It's a big step and the path to buy a house is very well run. People understand what that's like to put 20 percent down for a house.

Putting 20 percent down for a business is not as well versed. And so, just trying to get some more of that information out there. So, just keep looking, find people like myself, read as much as we can, talk with us, and learn as much as you can about it.

Jeffrey Feldberg: And as you're talking about that, where we sit today, which is interesting because artificial intelligence, AI continues to make the headlines. And I suspect we'll continue to do so for the foreseeable future. So how has AI. Impacted your world, Michael, that you can share with our listener, whether it's looking at companies to buy, whether it's actually running the company itself or everything else in between.

We'd love your thoughts on that.

Michael Frew: Yes it's it's hit different niches in different ways, and I've been on a few calls today actually discussing this, so it's fresh in mind. If you look at content sites, and I think a lot of people are familiar with this, content sites that are [00:29:00] putting out information, educational information, possibly selling affiliate links or trying to get advertising revenue from traffic, those have been very severely impacted both by changes at Google and by AI, which Google, I think the change is trying to combat the AI problem.

That has made the content section of online acquisitions almost come to a stop. Now there's other sides you could look at like service providers that are helping people with marketing, helping businesses with marketing. They are leveraging AI very intelligently and they're actually accelerating their businesses.

So it's helping them quite a bit. I probably fit in the middle. As a software person, there's certain things that now I look at businesses and I recognize, ah, the reason they're selling this is they're scared of AI. But there's other ones that I look at and say, this is so complicated. It can only be done by an engineering team, at least at where we are today.

It's, again, it's April, 2024. We're only 18 months into this. So if you hear this two years from now, it'll probably be interesting to see what's changed. But at the moment, I see [00:30:00] businesses for sale where I think AI is at. is a threat to continue that cash flow for five years and sell it in five years. And there's others where I think, okay, AI can help us, but and augment us, but it's not a threat to taking the business off market.

Jeffrey Feldberg: Interesting. And I know it's a best guest and really no one has a crystal ball and it's interesting to see where this is going. If you were to look out five years and five years, it doesn't sound like a long time in the world of AI, it's eternity because every day we have new breakthroughs. Five years from now, what's your best guess?

What are we looking at? How has AI integrated itself into what we're doing? How has it changed things?

Michael Frew: Boy, it's interesting because I think, and I'm going to borrow this from a couple talks that I've heard. When you and I were growing up, we thought AI would take over the non skilled jobs robot labor, and it's completely the reverse, right? It's taken over creativity and kind of started at the top, and it's moving down.

Whereas, We've watched how hard robotics has become and that's become the last thing that it seems like [00:31:00] AI is going to take over. So when I look at five years down the line, which businesses fall in that direction and which businesses maybe are in the creativity space, which would be harder to justify both valuation as well as cashflow in the future.

That's the optic and lens I'm looking at it right now. My first job was an AI researcher way back in early 2000s. So I've had the pleasure of watching this change over time, and even with that background, I can't tell you what's happening in a year and in five years, so really, it's a constant education, just try and think ahead as best you can I know it's challenging, especially as you get older, There's somewhere an age where you want to stop having to learn all the time, and I think we engineers hit this because language has changed so often and everything's new and cool, but this is one of those things that you're always going to have to stay educated if you want to stay relevant.

And so, we have to get over that part that, you just do have to pay attention to this and try and think it out as best you can in the future.

Jeffrey Feldberg: It's interesting. And, Michael, I know a [00:32:00] lot of the work that you do is geared towards the software engineers, generally speaking. So for the engineers in Deep Wealth Nation, what would you tell them? Because they do likely have the golden handcuffs. There is a better way.

There is a better life. They perhaps don't know how to get there. You've been there. You've traversed both sides of this now, and you've been where they are, and you are where they want to get to. They just don't know how to get there. So what would you tell them?

Michael Frew: Right. Yeah. And that was the thing that I didn't see in the first 20 years of my engineering career was everyone tells you on the internet, go start a business, go start a business. I have an archive of hundreds of failed projects, dozens of domain names that never worked out. And what I just didn't know is that you could just go acquire it.

And you can acquire that cash flow, get that marketing. So for the few of us out here where that kind of flips that light bulb, where you say, Oh my gosh, I never even thought of this. Why don't I start saving money for that? That's who I'm trying to reach and get that message across. There's also a significant [00:33:00] segment that fit very well in the corporate or the consulting role.

It fits with their family. It fits with their goals. And you should not feel guilty about not wanting to be an entrepreneur. I really don't like even using the word entrepreneur for myself because I'm buying from entrepreneurs and I'm an operations person. So, for me, when I was working corporate, I felt really good as a firefighter.

I felt really good on quick projects to fix things. I was not good at zero to one. So, I consider myself I buy something from someone that took it from zero to one, and I take it from one to ten, and then I sell it to the next group that can take it from ten to a hundred. So what I want people to hear out here is that you can be that one to ten person.

You don't always have to start it yourself, and don't feel guilty about not being the entrepreneur. I know it's cool. I know that's what we talk about in the daily world, but being an operator, it can be fantastic for your wealth. It's fantastic for your mental health. Like me, you might find that's your niche career wise as you've accumulated all that experience in the [00:34:00] past, and now you can apply it moving forward.

Jeffrey Feldberg: Michael, it's great advice, not just for software engineers. I would say really for any entrepreneur out there and what you're saying really hit home with myself and my business partners. We grew our e learning company, Embanet, started with zero. It was just a dream and really got it out there, became an industry leader.

We realized though that for Embanet to continue to thrive and prosper, take it to the next level. The skillset that was required really wasn't our strengths. Could we do it? Yeah, we probably could. Would we enjoy it? Absolutely not. What kind of capital would be required to do it? It would require us to really take a lot of the profits that we had put aside for our future, reinvest it back into the company with skill sets that we really weren't that comfortable with and something that we didn't enjoy doing.

And so there's always a time and place. And the next group that came in, they picked it up, they elevated the company, took it to the next level. It's really a terrific story and very proud of what everyone achieved. So what you're saying [00:35:00] is spot on. You know what? We take our skills, we leverage them, take our company to where we can.

And then there's always a time and place. Where perhaps there's an opportunity for someone else to take it to the next level. So really terrific advice that you're sharing out there. And for the listeners, think about that. If you don't like doing it, or you don't want to do it, there's nothing wrong in saying, you know what, I brought the company to here, let someone else take it to over there.

Would love your, any additional thoughts.

Michael Frew: Yes. And just recognize there's people that are excited to take it from that spot because that's what they like to do. And that's what I really love about when I'm buying a business is how excited the seller is to get working on their next project. And I'd love it, over time where I have the same person sell to me again in 10 years when they do their next business, because that's what the entrepreneur really wants to do.

They want to think of something and get going on it the next day. And unfortunately they have this cash generating thing that has customers and it's starting to have scalability issues. And these are not fun projects. And that's where something selling it to me, I would be excited about it. And the same with your business situation.

You would reach that point where, [00:36:00] you know, even the things we have to learn, I'm not that excited about, and you're going to lose that passion and it's going to show up in the business. It's going to show up on the bottom line, turn it over to someone that does love it and get working on your next thing.

And so we all fit in that business life cycle in a different spot. And don't feel bad if you just fit in a different spot. You don't have to do what everybody keeps yelling at you to do, which is start that business on your own.

Jeffrey Feldberg: Exactly. And what's interesting about that, after the fact, when we spoke to the new owners, they both said the same things in different words. And, for us, it was, Hey. Really admire what you're doing because I can't do what you're doing. You do it so well. And say, Jeffrey, it's funny you said that because I want to say the same thing about you.

I can't do what you did. I could not have started where you started, could not have taken the company to here, but now that the company's here, I can do lots of things without really excited about that. So it's just interesting. Where we have a meetings of the minds and the skills, we can make a net contribution out there to the world and really make it a better marketplace, a better company, better for all the stakeholders.

So, Michael, with all that said, it's time to go [00:37:00] into wrap up mode, and it's a tradition here in the Deep Wealth Podcast.

I have the privilege, I have the honor to ask every single guest this question. It's a fun one. Let me set it up for you. When you think of the movie Back to the Future, you have that magical DeLorean car that will take you to any point in time. So, Michael, the fun part is tomorrow morning, You look outside your window.

Not only is the lorry and car there, it's curbside, doors open. It's waiting for you to hop on in, which you do. And you're now going to go back to any point in time, Michael, as a young child, Michael, as a teenager, whatever point in time that would be, what would you tell your younger self in terms of life lessons or life wisdom, or, Hey, Michael, do this, but don't do that.

What would that sound like?

Michael Frew: Boy, it sounds like I've even already answered my question by saying, I wanted to talk to Michael through from 10, 15, 20 years ago when I started my corporate career just knowing that there's different avenues, but definitely going back one of the things I maybe did wrong is I always wanted to be older.

I was very excited about getting my life moving. And I enjoyed [00:38:00] high school. I enjoyed college, but I left college the minute my last class was out. I haven't gone to a graduation from any school that I've gone to. I was always really excited about moving forward on one hand. That's fantastic. You've got that ability, but maybe You know enjoy a little bit of the places that you've been and take your time because you're gonna reach there anyway.

And that's probably what I would say back to myself is look at all the different options, even if they're not popular, and enjoy the time that you're in.

Jeffrey Feldberg: Wow. Great advice. And I hear you loud and clear. I look back to my life as well. I'm rushing rushing, and I'm looking back, Jeffrey, where's the rush? What are you doing? It's the journey. Enjoy the journey because the destination, let's face it as entrepreneurs, we get to the top of one mountain.

Okay. I'm going to the top of the next mountain. So enjoy the journey. That's where the magic happens. Absolutely. And Michael, before we wrap things up. If somebody has a question, they want to learn more about the newsletter, or they even want to reach out, perhaps even have an opportunity they want to discuss, where's the best place online for someone to [00:39:00] reach you?

Michael Frew: Very easy. I bought my domain, oh gosh, it's probably 20, 25 years, whenever they came out, it's michaelfru. com. My last name's spelled F R E W. com. You can reach me there, newsletter, I've got the videos and everything, not selling anything. Just reach out if you need help. you have questions, always happy to help anytime I can.

Jeffrey Feldberg: Terrific. And for our listeners, it's all in the show notes, it's a point and click. And Michael, what I love about what you've done, and we spoke about this offline and for the benefit of Deep Wealth Nation, when you go there, when you see what Michael's done, this is the present day Michael, Writing and recording for the earlier Michael of what he wish he would have known back in the day to save him the time and the trials and the tribulation.

So it's a terrific resource. And thank you for putting that out there. Well, Michael is official. This is a wrap. And as we love to say here at Deep Wealth, firstly, congratulations and may you continue to thrive and prosper while you remain healthy and safe. Thank you so much.

Michael Frew: Thanks so much for having me. 

Jeffrey Feldberg: So there you have it, Deep Wealth Nation. What did you think? So with all that said and as we wrap it up, I have another [00:40:00] question for you.

Actually, it's more of a personal favor. Did you find this episode helpful? Have you found other episodes of the Deep Wealth Podcast empowering and a game changer for your journey? And if you said yes, and I really hope you did, I have a small but really meaningful way that you can actually help us out and keep these episodes coming to you.

Are you ready for it? The dramatic pause. I'll just wait a moment. Drumroll, please. Subscribe. Please subscribe to the Deep Wealth Podcast on your favorite podcast channel. When you subscribe to the Deep Wealth Podcast, you're saving yourself time. Every episode automatically comes to you, and I want you to know that we meticulously craft Every one of our episodes to have impactful strategies, stories, expert insights that are designed to help you grow your profits, increase the value of your business, and yes, even optimize your post exit life and your life right now, whatever you want that to look like.

And every time you subscribe and a fellow entrepreneur subscribe, it's a testament to how together, Yes, we are. We are changing the social fabric of society. [00:41:00] One business owner at a time, one liquidity event at a time. So don't let the momentum stop here. Subscribe now on your favorite podcast channel.

You'll never miss an episode. You'll be the first to hear from the top industry leaders, the innovators, the disruptors that are really changing and shaping the business world, and maybe you're commuting, maybe you're at the gym, maybe you're taking a well deserved break that we spoke all about on this episode.

The Deep Wealth Podcast, it's your reliable source for the next big idea that could literally revolutionize your business. So once again, please hit that subscribe button, stay connected, inspired, and ahead of the curve. And again, your next big breakthrough moment, it might just be one episode away. Maybe it was even this episode.

So all that said. Thank you so much for listening. And remember your wealth isn't just about the money in the bank. It's about the depth of your journey and the impact that you're creating. So let's continue this journey together. And from the bottom of my heart, thank you so much for listening to this episode.

And as we love to say here at Deep Wealth, may you continue to thrive and prosper while you remain healthy and safe. [00:42:00] Thank you so much. God bless.