How He Made Millions from Yellow Pages

Key Concepts:

• Yellow Pages business model (print advertising)
• EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)
• Decline of print advertising
• Transition to CRM (Customer Relationship Management) company
• Consolidation strategy (acquiring and merging companies)
• Cost cutting
• Cash flow positive/creative
• Dex deal (acquisition of Yellow Pages companies)
• 10x return

Yellow Pages Business and Decline:

The speaker discusses a past investment in a Yellow Pages company, highlighting its initial strength as a business with $600 million in revenue and $280 million in EBITDA. However, the core business of print advertising was declining at a rate of 12% per year, similar to the obsolescence of AOL dial-up internet. The speaker uses the example of local plumbers advertising in the Yellow Pages to illustrate the business model.

Transition to CRM:

The company attempted to transition from a print advertising business to a CRM company. The rationale was that the company's core asset was its relationships with numerous small and medium-sized businesses. They started selling calendaring and client management software to these businesses.

Consolidation Strategy and Dex Deals:

The speaker describes a consolidation strategy involving acquiring other Yellow Pages companies. The approach was to acquire these companies, close their headquarters, retain the top 30% of the sales force, and let go of the remaining employees. The key was to cut costs faster than the 12% annual decline in revenue through consolidation. This strategy made the company cash flow positive, and the stock price increased each year. The speaker mentions having four or five "Dex deals" and achieving a 10x return on investment.