Buy Then Build by Walker Deibel: Book Overview
Are you thinking about starting a business? Have you considered buying an existing one instead of starting from scratch?
In Buy Then Build, Walker Deibel explores the benefits of acquisition entrepreneurship. He explains why purchasing an established business can be a faster path to success than launching a startup.
Let's dive into the key ideas from Deibel's Buy Then Build and see how they could shape your entrepreneurial journey.
Overview of Buy Then Build
Many entrepreneurs dream of building a business from the ground up. But Walker Deibel, in Buy Then Build by Walker Deibel, illustrates an alternative path: acquiring an existing business. With acquisition entrepreneurship, you skip the early growing pains of a startup by taking over a profitable company with established operations.
Deibel provides guidance on finding and negotiating deals, financing acquisitions, transitioning to leadership roles, and implementing growth strategies. For those seeking a more stable pathway to building wealth through entrepreneurship, acquisition offers an appealing alternative to the high-risk world of startups.
Benefits of Acquiring an Existing Business
When you're looking to become an entrepreneur, buying an established business can offer several advantages over starting from scratch. Let's explore why acquisition entrepreneurship might be a smart move for you.
Acquiring a business gives you a head start with a proven model and existing infrastructure. You'll have customers, cash flow, and a team in place from day one. This means you can skip the risky early stages of a startup and focus on growth right away. For example, Walker Deibel himself bought a printing business and turned it into an industry leader. He didn't have to worry about building a brand or assembling a team - those pieces were already in place.
Another big plus is the potential for faster wealth building. Companies that are attractive acquisition targets usually have earnings over a million dollars and come with less risk than startups. In fact, buying an existing business has a success rate of nearly 98%, compared to the high failure rate of new startups. You're also more likely to get financing for an acquisition, as banks can use the company's assets as collateral. This leverage can amplify your returns.
It's worth noting that even venture-backed startups often struggle. About three-quarters of VC-funded firms don't achieve lasting success. By acquiring an established business, you're starting with a thriving operation and focusing on making it even better. This approach aligns your personal financial progress with the company's growth, potentially accelerating your path to economic success.
Preparing for Acquisition Entrepreneurship
If you're considering becoming an acquisition entrepreneur, you'll need to align your mindset, skills, and actions with your goals. Here's how you can prepare yourself for success in this field.
First, cultivate a growth mindset. This concept, developed by Carol Dweck, is crucial for success in the business world. It means viewing challenges as opportunities to learn and grow, rather than insurmountable obstacles. With a growth mindset, you'll be better equipped to handle the ups and downs of business ownership, learn from your mistakes, and continuously improve your leadership skills.
Next, take a hard look at your daily routine and figure out which tasks align best with your strengths. Self-awareness is key here. After an acquisition, you'll need to understand your new role and responsibilities. This goes beyond just leveraging your past career successes - it's about creating a daily schedule that fits with your goals and abilities.
Finally, commit to a timeline for your acquisition. Setting a six-month deadline to complete a business purchase can create a sense of urgency that many buyers lack. This commitment helps you transition from just thinking about potential deals to actually closing them.
Evaluating Potential Acquisitions
When you're looking at potential businesses to buy, it's important to focus on growth potential and profitability rather than just industry norms. Here's what to consider:
Look at the company's revenue and value it based on the seller's discretionary earnings or cash flow. Understanding how to categorize these earnings correctly is crucial. Don't limit yourself to one industry - explore various sectors like manufacturing, distribution, digital platforms, or services. This broad approach can uncover unexpected opportunities that match your skills and growth plans.
Remember, your unique combination of mindset, skills, and actions should align with specific goals aimed at seizing new opportunities. Having a clear objective will guide your conversations and inquiries with key players, facilitating a successful acquisition and subsequent growth.
Finding and Approaching Potential Acquisitions
Finding the right business to buy involves more than just browsing online listings. Here's how you can improve your chances of finding a great opportunity:
Build relationships with business brokers and intermediaries. These professionals often have access to better opportunities that aren't publicly listed. They can help identify potential acquisitions and initiate conversations with current owners. To make a good impression, be punctual, dress professionally, and demonstrate your financial capability by showing liquid assets of at least 50% of the total acquisition cost.
Don't be afraid to reach out directly to business owners, even if their companies aren't currently for sale. Express your interest and emphasize your research and enthusiasm for their business. This proactive approach can position you as the go-to person when an opportunity does arise.
Understanding the role of intermediaries is crucial. They often approach entrepreneurs to gauge interest in selling, help determine the company's value, and assist in negotiations. To succeed in this process, you'll need to demonstrate financial acumen and be able to identify promising companies for acquisition.
Navigating Due Diligence and Negotiations
Once you've found a potential acquisition, you'll need to navigate the due diligence and negotiation process carefully. Here's what you need to know:
Understanding the seller's perspective is key to achieving a win-win outcome. Involving intermediaries in initial discussions can help manage the evaluation process and set realistic expectations. It's also important to understand the intricacies of real estate financing and the importance of personal guarantees when dealing with banks.
A typical acquisition deal is structured using a mix of equity and debt. You'll need to demonstrate your financial strength, engage in discussions that could lead to improvements during due diligence, and understand the complexities of securing financing. Be aware that brokers, motivated by closing deals, might push for a transaction that could risk not achieving the maximum sale price.
During due diligence, you'll need to thoroughly examine every aspect of the business. This includes scrutinizing financial records like tax returns and payroll information, as well as understanding the company's operations, sales and marketing strategies, and team structure. This comprehensive understanding is crucial for a smooth transition post-acquisition.
Taking the Reins as CEO
Once you've successfully acquired a business, your focus shifts to taking charge as the new CEO. Here's how to make a smooth transition:
Start by building relationships with employees, customers, and suppliers. Be honest and transparent to quickly build trust. Meet with key team members to communicate your goals and understand their perspectives on operations and expectations.
Familiarize yourself with the company's existing processes and organizational norms. Have one-on-one conversations with each team member to fully understand the workflow. This not only helps you recognize early wins but also lays the groundwork for setting future goals and growth plans.
As the new CEO, your main priority is developing and implementing a strategic vision. Set clear objectives, create a system to track progress, and be flexible in response to unexpected changes. When introducing new procedures, be mindful of employees who are accustomed to existing practices.
Remember, successful acquisition entrepreneurship requires thorough research, careful planning, and strong leadership skills. By maintaining open and consistent communication throughout the process, you can foster growth and success in your newly acquired organization.