Right, so you want to know what a roll up is?

Well, to put it simply, it's when you buy small businesses in the same industry, roll them up together into one company, and then sell that company for more than you bought the businesses for.

Essentially, it's arbitrage. You'll often buy the small companies at a low multiple of profits (maybe 3-5x EBITDA), and then because the new company is much larger, it's valued at a higher multiple of its profits.

Arbitrage, yes.

Oh, and there are some efficiencies in there, like merging multiple back-office functions.

Sounds easy? Well, it's not. 

Here's Why It's Hard:

Mainly...people.

You try getting ten small business owners, and make them all follow the same systems and processes. They all think they know better and they've done it a particular way for years - old habits die hard.

Here's some more reasons why it's hard:

• Complex Integration: Merging different systems, processes, and structures across companies can create significant operational headaches.
• Redundant Departments: Deciding which departments to merge or eliminate can lead to inefficiencies and operational delays.
• Hidden Liabilities: Acquisitions can uncover unforeseen legal or financial issues that weren’t obvious during due diligence.
• Time-Consuming: Rollups require immense time and focus, often diverting attention from the core business operations and growth.
• Loss of Focus: The complexities of integrating multiple companies can distract from growth, innovation, and strategy.

The Process of Rolling Up Companies

Okay, so you're happy that you want to do a roll up, despite it being difficult. Cool, well, here’s the basic process for doing it:

1. Pre-Acquisition Planning: Before making any acquisition, it's essential to know what kind of company you're targeting. Build a detailed profile, or "avatar," of the ideal acquisition. What’s the revenue, earnings, customer base, and company culture like? This prep work helps ensure you’re buying the right businesses that can easily integrate.
2. Due Diligence: Once you’ve found a target, do a deep dive into their operations. Understand how their departments function - accounts, payroll, HR, etc. - and compare them with your existing business (if you have one). Look for synergies and redundancies.
3. Legal Structure: Most acquisitions are done as asset deals, which means you buy the assets, not the liabilities. This keeps you safe from legacy issues (think environmental cleanups from decades ago). However, in some cases, especially where contracts are involved, a stock deal might make more sense.
4. Integration: Day one after the acquisition is crucial. Plan meticulously - get employees into your payroll system, reassure them about job security, and have a solid communication strategy to prevent chaos. Every department needs to know what the integration looks like and how the merged entity will operate.
5. Streamlining: Over the next 4 to 6 months, work on streamlining operations. This could mean consolidating customer service departments or merging accounting functions. Your goal is to make the combined entity more efficient while maximizing synergies.

Tips for Success

• Start with a Strong Foundation: Your first acquisition should be a company with a solid back office and scalable processes. This will become the platform from which you roll up smaller, less sophisticated businesses.
• Build Relationships: Keep the original owners involved, especially if they have a significant equity stake. But be wary of entrepreneurs who aren’t team players - if they’re too attached to doing things “their way,” they could derail the entire integration process.
• Cross-Sell and Upsell: Grow revenue organically by offering additional products or services to the existing customer base of the acquired companies. For example, in roofing companies, adding services like gutter replacement alongside roof installation can dramatically increase revenue.
• Focus on Culture: Culture clashes are common in mergers. Take the time to reassure employees and align everyone to the same goals. Employee buy-in is essential for a smooth transition.

Can You Make Nine Figures Doing This?

Absolutely! Rollups are a proven strategy for entrepreneurs looking to scale quickly and sell at a much higher multiple. By acquiring smaller businesses at lower valuations and selling the consolidated entity at a higher one, you create arbitrage—the difference between what you paid and what you sell for. This is how many entrepreneurs have turned millions into billions.

Let's Hear More Detail:

These dudes know what they're doing. I've watched it, clever boys. Here's 30 minutes of them spilling the beans...

Conclusion

In summary, rollups can be incredibly profitable when done right. But they require careful planning, a good understanding of the businesses you’re buying, and a solid integration strategy. Follow the steps outlined here, and you could be on your way to making nine figures!