The first thing you really want to accomplish with the filter is understanding if this is going to be a deal worth doing.
Sometimes a deal or opportunity might come up, there’s just not enough upside in, or isn’t rightly aligned with you, and just isn’t a right fit for you. I found with what I looked at at the moment is, you’re probably going to say no to most deals, like, not every deal is right for you. I think going into my first deal, I was being very opportunistic and had a lot of FOMO around the idea that, like, maybe another deal will never come up. But in reality, there’s so many deals that are actually out there and available.
I was quite surprised by how many people are open to the idea of a revenue share deal, it’s just that they’ve never been approached. This isn’t something that’s coming out in the common marketplace. You’d be surprised, even in this room right now, I think a few people are sitting there and go, I might be open to this idea. This is something that could be really good for my business, they just never considered it before. So bringing it up, and understanding that can be a really valuable way to go about it. So I wanted to give you guys something, because of my vastly great first experience.
This is actually the filter I use. This is what I go through point by point when I’m assessing a deal. So, you may need to tweak them, depending on the type of business you are. And I personally will tweak them depending on the deal I look at, but I want to go through this one by one because I feel like there might be some hints in how you can work your filter here.
So, number one is I like industries and niches I understand. I don’t want to get involved in businesses where I don’t understand what they do. And I think it was Warren Buffett who very famously made that – is he would never buy a stock in anything he didn’t understand. And the simple truth is, let’s say, if I was to go into something heavily complex in medical, is that the chances of me becoming undone are very high. I just don’t have the experience and understanding. So I think that’s a really healthy first filter.
The second part is that it has a working offer. And this is something James, obviously, talks a lot about. And even in his book, he’s got a great chapter on this. But if a business doesn’t have a working offer, it’s very, very hard to add petrol to that fire. Unless your specialty is coming up with working offers and that’s what you’re bringing to this business. Something I quickly look at is they’re already selling a product and service. And it’s more about scaling than it is actually building a product and service. So that’s my point number two.
Point number three is that as I go further and further into business, I understand that experience counts for a lot. I think when I look back on me, in my first year in business, I was just negligent and hungry. In all honesty, there was a ton of things and I look back on that and go, I wouldn’t want to work with the first-year version of myself. I like to work with business owners that have been in it for a few years, because they’ve had their time, they’ve got some battle wounds. They’re going to be far more reliable than someone that’s early in. And I think it’s a really good way to look about it.
So how long has the company been around and how many people are in it? Again, I tend to avoid one-man bands because their skills in dealing with team or understanding of systems don’t often exist. Where someone who’s got 10 staff, you know they’ve had to deal with a lot of HR before. They’ve dealt with hiring and firing. They understand what it is to have a system so things can get done consistently. So those things play into my decisions a lot with revenue share deals.
Learn more about the filters you can use for revenue share deals inside SuperFastBusiness
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