How I’m taking on McKinsey, Bain & BCG

About a year ago, I partnered with Kasey Grelle to launch Aux Insights, our private equity consulting company. The business has rapidly scaled to millions in profit.

It has the best team I've ever worked with.

I’m confident it will be the biggest business I've ever started.

Its success shares a lot of similarities with GrowthAssistant, which got me thinking about focusing the strategy of Gateway X around similar businesses.

“So Jesse, what IS Aux Insights?”

I had the privilege to attend The Wharton School at University of Pennsylvania.  For those who don't know, tons of Wharton students end up atop the finance world, especially in private equity.

In fact, I have friends who are "MDs" (Managing Directors) at firms like KKR, Blackstone, Carlyle, and hundreds of other PE firms.

So a few years ago, I started getting calls like this every month:

Sometimes, I can be dense

So I’d get these calls and wow my friends with my smarts by explaining digital marketing 101. Maybe I’d give them a handful of questions to ask and then tell them I had to run…

But on the 5th or 6th call like this, my buddy said:

This call happened right as Kasey and I started exploring working together.  She had acquired several businesses and divested a couple. She saw the same problem herself as a CEO buying/selling companies and trying to have the appropriate diligence.

We talked about it, whiteboarded, and texted for a week about the name… and Aux was born (Aux means "growth" in Greek!)

Now some of you are thinking: “Ok Jesse, cool story.  But what the hell does the company actually do?  How does it make money??”

Aux is a "tech-enabled consulting" firm. 

To help you understand what we do, let me first reveal a multi-billion dollar industry you didn't know existed:

Private Equity Due Diligence

If you've ever bought a house, you are familiar with hiring experts to "inspect" your house to ensure the plumbing, electrical, foundation, etc is working well. 

There's an entire multi-billion dollar industry doing this for PE firms.

It started 20-30 years ago and McKinsey, Bain, and BCG have $3 Billion+ in revenue specific to PE firms.

When a big PE firm is going to spend billions of dollars on a company, there is an individual partner who "leads the deal" - this is the senior person who likely found the company, believes it’s a good investment, and has the plan to buy and grow the business.

Once he or she has a deal they like, they have to convince both themselves and their partners that it’s a good deal. 

This typically happens through a group of partners called the "Investment Committee" - in a sense, the partner is "selling" the deal to them.

PE Firm Analysis

They are doing this while several other competitive firms are ALSO looking at the same deal and usually participating in a competitive auction under a VERY short timeline. (Weeks, typically.)

Given the amount of work that is needed with tons of rigor in a short period of time, PE firms look for trusted partners to help them with the analysis.

This started with "MBB" (McKinsey Bain BCG) doing what is known as 'Market Studies' - these studies consist of answering two big questions:

MBB will answer these questions in ~3 weeks with PRIMARY research (meaning they are going out and surveying people).

They charge close to $1,000,000 to do one of these projects (or roughly $200k a week)!

But if you're buying a company for $1 BN, this is a tiny sum to have "McKinsey" sign off on the deal size/competitive positioning.

It’s rumored that McKinsey is doing >$1 BILLION in revenue with 50% EBITDA margins in PE due diligence alone.

Now that sounds like a lot, but it’s roughly 80 deals a month, globally.  They’re just one player in a huge market.

As MBB got this market going, several other firms popped up.  Some do "tech" diligence where they review code bases to make sure everything is legit. Others do accounting diligence to ensure the earnings are legit.  You get the idea.

Based on the calls I kept getting from friends, it appeared there was a white space:

My lightbulb moment. I had both unique insight AND unfair advantages here.

I knew this space a little bit because I was an analyst at McKinsey doing this diligence work ~18 years ago.  My friends had re-opened my eyes to the potential.

My unique insight:

PE firms needed help analyzing the marketing footprint of a target to determine risks and opportunities.

And my unfair advantages (there are many):

The most important one.

Lucky me, I went to college with scores of people who are now PE leaders!

I helped some of them prep for interviews when we were in our 20s.  Others, I gave marriage advice to.  Some, I’ve just stayed in touch with over the years!

The hardest part of this business is getting in the room with PE.  Fortunately, this was the easy part for me.

Once you get in the room with PE, you have to stay in it.

That means they have to think you add value. They have to think you’re smart in a very specific way.

Of course, I asked my friends: “Why doesn't a firm like Aux exist already?” They had a clear answer:

"MBB" is too high level and doesn't KNOW the marketing shit cold.  And agencies can't communicate strategically, we get lost when they talk.

Kasey and I are amongst a few people in the world who can speak "marketing" AND "strategic private equity." A lot of what we do is translate between these & we've built the whole firm around this premise.

We even have a training where we coach CMOs on how to speak to their PE owners and PE owners on how to understand what their CMOs are saying!

Kasey and I have both run digital marketing companies and are well-known in the industry.

We can bring killer talent who can dive in quickly, evaluate the marketing performance, and then deliver insights to our clients.

Further, my public profile has driven hundreds of amazing people who find this to be a compelling career opportunity!

There are 3 primary project types and 1 NEW business we just launched inside of Aux.  Here’s the rundown:

Due Diligence

This is typically a 3-4 week project where we will work with the PE firm to review both the "outside in" and "inside out" of the target company.

That means comparing their ads, landing pages, etc, to competitor firms.  But it also means actually auditing their Google Analytics, Adwords, Meta, CRM, and more.

We come back to them with a detailed report card and sizing of risks/opportunities.

Value Creation

This is usually a 12-24 week project, typically after the PE firm has acquired the business.

We'll partner with them and the new CMO, do an audit similar to the above and create a multi-year marketing strategy for the business.

Then, we'll identify the biggest immediate and long-term opportunities and put them in place.  This usually involves identifying the people, process, partners and tools to ensure they are set up for success.

Special Situation

This wasn't part of our plan originally, but it’s come up often.

Sometimes, there's a marketing issue so critical that it shows up at "the board level."

Given the trust we've built, we'll be put in for a 6-8 week project where we look to fix the issue and ensure it never happens again.

Biz inside a biz

After a year of running Aux, we kept hearing our customers give the same feedback:

"We LOVE the work you did, but now you’re moving on.  We need people like you to GET THE WORK DONE!"

So after we heard this a few times, we started a new fraction CMO and staffing business!

We lovingly call it "Aux in a Box."  This is where we will help them place/staff the various talent they need to perform the marketing initiatives once the consulting part of the business ends its work.

So… that's the story of Aux.

There's so much more I could share about challenges, how to sell it, pricing, and a million other things!

Should I do a series?  Reply and let me know!

-jesse