I've done two different types of equity deals. I want to talk about those today. What I've learned, what my opinion is, what I would do differently, and just overall how I feel about the whole situation. So let's start with some of my opinions that you may or may not agree with. I don't like equity deals. I don't. I used to think that they were special. you know, I grew up watching Shark Tank, seeing all these investors, put in money for a certain percentage of the business.
Let me ask you a question. When do you get paid out on an equity deal? Liquidity event is the answer. What's a liquidity event, you might ask? Sale, acquisition, buyout, IPO. Yeah, most stuff can fit into that category. Most companies don't ever do those things. Most companies don't IPO. Most companies don't get bought. Most companies don't have these liquidity events, which leads me to my next point. You can't eat equity. You can't eat equity until you get to a liquidity event.
Let's unpack that really quick, because what that means to me is that your equity is worthless until a business is sold. Your equity is worthless until a business IPOs. Your equity is worthless until you get acquired or some sort of rearrangement of the capitalization table occurs. Your equity is worthless. I've looked at it in a couple different ways because people have offered me equity for their business or to buy into their businesses before, but I have never really taken them up on that.
And then people have parts of my business as equity owners and I'm like, you're not going to get paid until we sell. It's a long time. It's a long time to not get a return on your investment and the likelihood of getting that return as time goes on, it goes down and down. So it's really interesting looking at it from like a risk versus reward type of standpoint. There isn't a set multiplier.
There is whatever you're able to achieve and however much value you're able to create while the business exists. Okay. So let's back up a little bit. That's my opinion on equity, right? You can't eat it and you don't get to realize the gains until there's a liquidity event that happens. So then why do people do it all the time? I think that's a really good question. I think there's a couple reasons. One is glamour and ego. Second is just, I was just naive, right?
Naive thinking that it's the way to go. And three. There's no upfront capital expense to the business owner, right? So think about it from the business owner's perspective. You have no cash. You have a great idea. You've got a great team. You're executing. You have nothing to give aside from promises. The only thing that you can offer to somebody in exchange for money is the promise and sharing in the upside of what you're building.
And that's really why investors will purchase equity from a brand or why investors will give money and invest money into a business for a piece of equity so that they can get paid back when those promises are met, when the entrepreneur does what they say they're going to do, that's when investors get paid back. So if you're looking at it from that, perspective, it's like, Whoa, A lot of this really depends on the business, but mainly the entrepreneur themselves.
Yes. Yes. Okay, so let's talk about now that my opinions are out of the way and like how I feel like I just want to make sure that was clear as we go into this discussion because I don't want you to think that I am totally against equity deals. I'm not. I think that they can be great in the right situation, in the right circumstance. But do I prefer them? Nah, I don't. I prefer them as the brand because you get the better end of the deal, but I don't prefer them as the investor.
So much so that and we'll get this out of the way too. When you look at the vision, the business plan for Operator Academy and Vanadar and what we're trying to accomplish here. If you look in the end game section and you can all see this by the way, it's in the example section of the business plan templates and the legal docs in circle. But if you look at the end game there, what's our exit strategy? What's our plan? What are we going to do with all the profits that we've generated?
We are going to do the opposite of buying equity and businesses. We are not going to be investing in people's brands like other people that I know in this space. We are going to take those profits and we are going to buy businesses to serve our customers in a different, new and unique way. So let me explain what I mean. Let's say Nick, right? Forefathers apparel. Let's say that he starts crushing it. He joins operator Academy. He applies everything. The business is, it's showing record profits.
It is growth trajectory. It is amazing. And he says, Evan, I would love for you to take 5 percent in this company, buy in at this valuation and on advise and expertise and where our shirts in your content, which is a reasonable deal. And it would be smart, honestly. However, That's not what I'm interested in. I'm not interested in potentially getting a piece of the upside of the business down the road. It's just, it's too risky and it's not the game that I want to play. All right.
I want to play a different game. So I would say no to something like that to stay true to the mission. So now that I've said that, let me explain what the mission is. end game. to buy businesses that would serve Nick. So instead of getting equity in his business, I would take that cash and instead of investing it in him, I would go buy a warehouse to house and ship his products for him.
I would buy the warehouse and put a manager in place, understanding, that business And I would purchase one and I'd be like no. Instead of like me investing, like just use our people, use our business, use the businesses in our network that we own. We can give you favorable rates and I can guarantee you that the people put in place are killers and they will do right by you.
So Nick would get an affordably priced, high quality partner or service to help him grow his brand even more successfully and we would get paid when he pays that company as a service. This does a couple of things. One, it's sounds more fun to me because we get to own a bunch of different companies. Mergers and acquisitions sounds like a ton of fun and around a million dollars in EBITDA is when I believe you can start. Looking at that seriously. So that's a million dollars in profit a year.
It's the threshold that you need to start looking at other businesses to buy them, to bring them into the company, to grow the valuation. So what that would look like is we get to a million dollars in EBITDA and instead of investing in businesses like Nick's, we would say, Hey dude, we've got the warehouse, we've got the printing company we've got the advertising agency. Just use our people. And we'll help you grow this brand. That way you get to keep all your equity.
You're going to be using these contractors and professionals anyway, just use our people that are the best. And that way we're growing a portfolio of businesses that all serve each other and are very synergistic. Yet we aren't taking from the business itself. Imagine Vander owning warehouses and injection molding companies and blow molding companies and printing companies and label companies and manufacturing companies and shipping and advertising agencies and media companies and writing.
Like we can do all this stuff, editing companies, right? That's where my head's at because of my opinion. on equity deals. And I have that opinion on equity deals, because like I said, I've been through a couple of them. So now that we've gotten that out of the way, the opinions, and then my intention with how we intend to build this business, let me share with you some of those deals or the details of those deals and why I feel the way that I feel.
Now, I've tried to do equity deals in the past. I tried to make them work with various individuals. And none of them really worked out most likely because I wasn't the person capable of providing enough value to these people to get them excited and bought in. Also, they weren't the right fit. I was trying to force it. I was trying to make it work because I wanted it to work, because I wanted to do one of those deals.
I've always wanted to raise money and get investors and give them equity for it. Like I've always wanted to. And after having done that, I'm just like, Oh. That wasn't very fun.
So I Tried to in the past multiple times didn't work out and I'm glad it didn't because they weren't the right people there was once where a time where I offered a contractor a Smaller monthly retainer and a percentage of the upside of the company the percentage of the profits five percent And that was like my first, equity style deal and no complicated contracts handshakes and a documents to sign and and that was fairly straightforward and fairly
simple just amend the operating agreement Agree to it when we sell you can have a piece of it right very simple stuff, that's like introductory under the table kind of deals. The deals that I'm talking about are the ones that are fully built out, have full contractual obligations and are a little bit more serious. Not saying there's a difference in seriousness in my mind, but just like different ways of approaching things.
So the two other deals that I did, So there have really been like two equity deals that I've done really to the first is with my partner, Nick, and the second is with an investment fund. Now I want to talk about my partner, Nick second, because that's a deal that feels really good.
And then the deal with the investment fund was just deal with the investment fund was I went through this program and I created a pitch deck and the whole goal of the program was to learn how to pitch your business, raise money, take on an investor, grow the business, and exit. That's what I wanted at the time. I don't want that anymore. I don't necessarily want to have a giant exit right now or even focus on selling the business. That may be a discussion for another time, but long story short.
Sell a business for what? Why? For a big pile of cash? And then what? What am I going to do? This business is my opportunity vehicle. This business is a method for me to work on myself and become the person capable of, the person capable of managing money and people and relationships and growth and, time and all the things. I work on the business, but the business works on me far more, and it's shaping me into the person that I want to become. And the thought of selling that is just ugh.
And then starting over? Why? So that's where my head's at now. I expect my opinion to change a little bit, but that's where my head's at now. So I'm not as interested in an exit. I'm interested in a profitable business that continues to create cash flow. I'm interested in a business that, continues to create opportunities. That's my mission. After all, meaningful work, meaningful people, opportunity and abundance. So the first equity deal. I put together a pitch deck.
I spent, damn near 100 hours practicing. Recording, critiquing, changing my pitch so that it would resonate and be exciting. And I got a lot of interest. And in fact, that the people that I pitched to were like, yes we're in, this is what we want to do. And so they, wrote up a bunch of documentation for me using their attorneys. And after looking at it, I was just like, Oh, this is really weird. It wasn't like a straight up shark tank equity style investment.
We're going to give you a hundred grand for 10%. It wasn't like that. It was like, we're going to give you this much at this valuation. And then we have the option to buy more or do this and further down the road. But you can't do these 10 things because that would compromise the deal. You have to do it in this way, on these timelines, and then if this is met, we can do this. And it was just convoluted. It was confusing. I didn't understand it. It didn't sit right, right here.
So ultimately, I was just like, No. This is weird. I don't like this deal. I feel like your attorneys wrote this in your favor greatly, and it doesn't sit right with me. And so I kiboshed it. And they were like, okay what would feel good? I'm like, straight up, man, just a straight up regular ass deal, right? Buy into the company for this much at this valuation. So I think at the time it was like a 2 or 3 million valuation and we're, Oh, 2 million valuation, 100, 000 investment for 5%.
And I was like, okay, I'm good with that. And what we ended up doing is changing that investment. So instead of 100, 000 of cash, it was 350, 000 of debt financing. And so instead of giving me 100, 000 for 5%, they were going to give me access to 350, 000 so I could buy inventory with it, grow the business, and their payment was going to be 5%. Right, which I was good with because I wanted to take that money and invest it into inventory and marketing and grow the business.
I spent that money on the wrong inventory. And now I have to pay it back with inventory that's not turning. Discussion for another day. But, nonetheless. That was my experience with like my first equity deal. I spent 10, 000 on attorneys to rewrite the contracts in my favor from my people in my way because it's my business, my responsibility. And eventually that's what we settled on. So 5 percent of my company is owned, Scorchmarker that is, is owned by an investment fund and I owe them money.
At one point they were going to have an option to buy more, but that leads me to my next point. I don't know that those are people that are going to be a good fit for me long term. So I don't want to continue to involve them more and more in the business because I don't believe that they're the right fit. At the time when we were doing everything, I was like, oh yeah, this is great, this is amazing.
But as I've grown and made mistakes and learned and done more, I'm like, oh, maybe they aren't the right people for me. And that was a sobering realization because I was just like, dang, man, that it's a bummer. And so I say all this because when you do an equity deal with somebody, you are work married to them. You are going to be working with them for a long time, whether you like it or not, like their future is now intertwined with your future.
So if you do these types of deals, you've got to make sure these are people that you want to get work married to. What do they bring into the table? Skills, time, or money. Hopefully they're bringing multiple, but in this situation they were only bringing money. They don't have the skills and they don't have the time to be able to move the needle or assist and help in ways that I need them to help in.
If I could go back in time, I would have practiced the art of pitching and gotten good at it, but I wouldn't have said yes to any money, any debt financing, any equity. I wasn't ready for it. I didn't, I thought I knew how, but I wasn't responsible and knowledgeable enough to be able to spend it in a way that could create more value. I just, I was naive. I wanted to do the deal more than I wanted to execute on what the deal was going to allow me to do. So that was the first equity deal. I'm meh.
Meh. Expensive lesson, right? Expensive lesson. I'm learning a lot. I've got some money to pay back, that's for sure. And we're chunking away at it. But nonetheless, it just didn't feel, didn't and doesn't feel like something I'm really excited about. Which is my next point. Listen to your gut. Make sure you're excited about it. Make sure it feels right. Because it's messy. and challenging to unwind and unravel and have conversations about this type of stuff. Just throwing that out there.
Everyone's different. Your experience is not my experience. So take that with a grain of salt, obviously, but do what feels right. If you're anything like me, business banking can feel intimidating and overwhelming. That's why this podcast is sponsored by Relay, a business banking platform, that's better than all the others. Why do I say it's better though? Because I've used it. I still use it. I love it. And it's way better than all the big name banks that I've used.
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Now let's talk about the second equity deal that I've done, which I am actually quite pleased with. And that's with my partner, Nick. Nick gets 10 percent of the business scorch marker and he is coming in as the CMO. He is bringing skills and time to the table. He is not bringing money, which arguably is more valuable to me because I need his expertise. This is a guy who has taken over 20 companies from a million to 10 million in sales through strategic sales and marketing.
Like he is a CMO, a chief marketing officer through and through. He gets it. He knows Google and Meta and he understands ad platforms and the numbers and the analytics. He's a very complementary skill set to me, like super complementary. We are both into the same things, but we have very different skill sets and ways of going about doing business. So we are very complementary. So it was great synergy. I invited him into the business. He gets 10 percent of it.
When we get to 15 million, he gets 10 15 percent when we get to 20 million he gets 20 percent of the business. We've set that up in a way to be, he also is getting a small salary too, by the way. When things got tight and challenging, like he stopped getting paid, just like when I stopped getting paid, like he knows that we're in this together, we are building an asset that we are going to co own. When the going gets tough, we both, pull back and don't get paid.
That's the kind of partner that I needed. So his job is to own the sales and marketing side. My job is to own the product and operations and content side, and we work together on this, knowing full well that there will probably come a time where we are more equal in terms of equity because we are both putting in like the hard work, like we are both doing it. That partnership I feel really good about, and I am more than happy to give him his fair share. And he didn't even put in any money.
Do you know why? Because he fucking shows up. That's why. Because he's just there. He gets the work done. He cares. He shows up. He puts in effort. He thinks about it. He gives it attention. He gives it his time. And when he applies his attention and his time, it does good things. I've learned so much from Nick. He has taught me so many valuable skills and so many good things. Great ways of looking at things.
He's the one that taught me how to do all my financial reporting, like big boy style with his dashboard and understand AOV to CAC and budgeting and like all of these things that are absolutely essential to get to the next level that I didn't know. And he brought those skills to the table. He brought relationships, he brought expertise, he brought patience, he brought friendship. Like he's helped me put together our mission and vision and values and do all of these incredible things.
He shows up and that is what is most important to me. Effort and attention showing up, man. So of all the equity deals that I've talked about, that one is by far my favorite because I feel like I really truly have his buy in his attention and he gives a shit. And I, that's the point I really want to make with this discussion. Equity deals can work. They can align people. Just make sure it's the right person. I didn't know what the right person looked like until I found Nick.
And Nick is, oh my gosh, he's the right person. And I tell you why I believe that he's the right person. Because I want to give him more. I want to give him more. I don't want him to have less. Whereas the other deal. I would prefer that they had none or less instead of more. But with Nick, like I want him to have it. I want him to have more buy and I want him to be a part of it. I want him to join me and get even more involved because it's so synergistic and it's so fun.
Moving forward, I am now looking for those types of relationships. The type of people who make me want to be with them. I want to call them up on the phone. I want to talk with them. I want to be their friend. I want them to come visit me in the Redwoods and do our masterminds together. I want to call them when I'm driving home from the post office. I want to talk to these guys. I want them involved. I want their buy in.
That is what I now look for and that's what I think that you should look for. people who can bring skills, money, and time to the table. And money is arguably the least valuable when it comes to skills and time. That's what I really needed. And I found that's what a lot of us need anyway, because I wasn't ready to take on that money and spend it. I didn't have a clear enough plan. I thought I did. And so did they, but I was wrong. I was just wrong.
So let's back up and let's unpack this whole thing. My opinions on equity are probably different than a lot of people's out there. And I have very little experience with this. I've only done it a handful of times and work through these contracts and read through them and figured out how we were going to execute on this. Oh, actually, you know what?
Before I recap, let me tell you how it works with Nick and I and in scorch marker so that you can better understand how people get paid when they own equity in the business. Okay. So yes, you do own a percentage of the company, but you don't get paid on shit until there's a liquidity event. And there may not be a liquidity event with Scorchmarker for a long time. So here's how we've structured it.
We set aside 5 percent of all top line to go into the profit account because we use profit first accounting. That 5 percent gets distributed every single quarter. Depending on your percentage of ownership in the business, you get a piece of those profits every time we disperse them every quarter, based on the amount of equity that you own in the business. So if you get 10, if you have 10 percent of the business, like Nick, he will get 10 percent of the profits when we distribute them.
That's how we pay out our members and our equity holders in real time. And then of course percentage wise based on when we have that liquidity event, when we sell or when we get acquired or when we IPO, which I'm not interested in as of now. So that's how we've structured things in the operating agreement and just amongst each other to get a little bit while, while we're working on it. Now we also take a small salary from Scorchmarker, but right now, nothing crazy.
If anything, maybe like a couple thousand bucks a month. But right now we've decided to forego that to put it back into the business to grow it as opposed to taking out of it. So the only money that we really make from Scorch Marker in the meantime, while we're in growth mode is those profit distributions that we take in the quarter. Anyways, let's unpack this and back up and touch on the original points that I had.
My opinion on equity, the equity deals that I've done, what it's looked like and why I feel the way that I feel. I think we've answered that. I think we've talked through the meat and potatoes of it, but long story short, I've done two equity deals. The deal with Nick feels really good. The deal with the fund doesn't feel that good because I just feel like, yeah, there's something missing there. Will I do more equity deals in the future? Probably not. It's not something I'm looking to.
So what would I do instead? Profit sharing, rev sharing. Upside or just straight up paying people as contractors to do work for me. It's less messy, they're happier. And most people realistically, they want money now. They don't want potential money later. And so it's better for everyone. I now avoid any equity discussions or talks or deals. Because I think they're messy, time consuming, and they're not worth it for the parties involved. You now understand where my opinions come from.
But at the same time I think it can be a valuable skill and as something that can really set your business up for success if executed on in the right way. And the right way is key. Like it must be done in the right way. So what is the right way? A deal where you want that person in and you want to give them more and you feel good about it and you're both showing up and you're both building the business together in a meaningful, positive way.
Whether you need money, skills, or time, I would encourage you to make sure that you're getting at least one of those, ideally two or three of them, before signing any paperwork. Ask yourself if you want to be work married to this person, because you will be. Ask yourself what happens if we don't get along anymore or things change, because that will happen. What do you do? And that's where you can line all that stuff out in your agreements.
To cap it all out I think there's a time and a place for equity deals. Everybody's business is different. Everybody can do things differently. That's just my opinion. I would much rather take my profits and buy businesses that can serve people like you. Versus buying into your business, Giving you a bunch of money, helping you get there, and then getting paid back on the liquidity event. You'd be happier if you had more of your company anyway.
I'd be happier if I didn't have the stress and the pressure and the weirdness there. I do believe that my mind will change on this one day. I think that I've been a little bit jaded by the experiences that I've had. And I don't anticipate getting there. I'm not holding on to these opinions for the rest of my life. In fact, I know they'll change because they've changed in the past, but this is where I'm at right now. And I wanted to clarify that.
If you have any questions on this type of stuff, or if are going through it and you want to see contracts or talk to me about the attorneys that I used in the process or what I found to be true or not true. And in that stuff feel free to message me and reach out. But otherwise, I'm out. I think that's it. I think that's a good breakdown of the deals that I've done and where my head's at and how I feel about it and my big takeaways from having gone through the process out of everything.
And I'll end with this, which is the most valuable thing that I learned from the whole process. The most valuable thing that I learned was learning how to pitch, learning how to get people excited about my business. That's a skill that I will be able to use for the rest of my life. That is by far the most valuable part of the process. That and understanding the reality of what it's really like. It's it's not all sunshine and rainbows all the time. It's work. It's challenging.
And expect it to be work and be challenging. It's never going to be just perfect and smooth all the time. I watched a YouTube video on shark tank, like, where are they now? Type of stuff. And they studied all the deals, like what percentage of deals like actually went through. And it was like 1%. Most deals end up falling through. Most deals end up not working out. Most deals, like they'll say yes in the TV show, but after due diligence, they don't work out.
And most of the deals that they do get, they don't make money. There's only been like a handful of shark tank deals that have been like great investments. Like less than 10 and they've done a lot. Throwing that out there for some perspective. Figure out what you, figure out what you need, figure out what you want, figure out what would make you feel good about growing and building this business and chase and go after that. That would be the big takeaway from this.
Equity isn't all that it's cracked up to be. All right, let's talk some numbers. I'm going to include TikTok Shop now. We're going to talk about TikTok shop every time we talk about the numbers. So that's Shopify, Amazon, TikTok shop, and now retail. So we have four to choose from sales figures and conversion rate. We're no longer sending traffic from our TikTok to our Amazon or our Shopify.
So we're going to talk about TikTok in and of itself as its own entity, especially now that we are implementing the strategies that have been sharing with you and reaching out to affiliates. So over the last 30 days on Shopify, we did 33, 000 in sales. at a 2. 23 percent conversion rate. Slow season. Remember that. We are in the like literally the peak of our slow season. So I'm not super mad about it. Amazon is at 65, 000 with a 12 percent conversion rate.
TikTok is at 756, just under a thousand at a 4. 2 percent conversion rate and retail is at zero. I'm expecting some retail checks this month, however, so that should jump up by the end of March. And we also rolled out a sale in the beginning of March on our Shopify store and Amazon as well. Plus TikTok starting to pick up some speed. So I'm really excited to see how these numbers transform. I'd like to take a moment to thank you for listening. Your attention means the world to me.
It really does. If you've gotten to a point where you have any questions or you're ready to apply for the Operator Academy, shoot me a DM so I can take care of you. Otherwise, keep doing the boring work and be good to future you.