Do You Want To Buy A Business? Start Here

Newsletter · Nov 17, 2024

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An entrepreneur's recipe for sweet success

1.98 min Read

There’s a great quote by Albert Einstein that you’ve probably heard that goes:

“If you can’t explain it simply, you don’t understand it well enough.”

I truly believe that to my core. That’s why as much as I can, I really try to simplify the complicated entrepreneurial jargon down to the essentials in these emails.

I don’t always hit the mark, BUT I sure try. And today is no different. I’ll explain as simply as I can the first phase of buying a business.

Mergers and Acquisitions has become a popular topic these days with all the baby boomers retiring and their businesses going up for sale. People like Codie Sanchez talk about the glamour life of buying businesses and cash flowing your way to financial freedom…

But is it as easy as she says it is?

Not really. Nothing is really as easy as it might appear on social media when someone is trying to sell a course. BUT, is it doable? Yes 1000%!

You don’t want easy. If it was easy, everyone would be crushing it. You want “doable”. And this is certainly doable. But you have to start somewhere.. so where?

Right here.

This email will cover JUST where you should start in your journey with buying a business. I’ll add more to this series as time goes on, but for now I just want you to focus on this first part. Figure this part out, THEN we can move on to the next. If you want a crash course, the welcome series emails talk about this as well.

BUYING A BUSINESS - PHASE 1 - Begin with the end in mind.

In order to really hone in on where you are putting all your time and energy for this business search you’re on, you need to get SUPER clear on what you’re solving for. What do you want out of this search?

Why do you want to buy a business? What’s your end game? What’s your plan?

Your reasons might look like this:

WHY do we want to buy a business?

SHORT TERM: IMMEDIATE Cash flow, Exiting W2s
LONG TERM: Future growth, Multiple acquisitions

WHAT is the end game?

Buy/ hold play.
Multiple acquisitions.
Build portfolio that generates cash

WHAT is the plan? Are you going to buy, grow and sell? Are you going to buy, HOLD and then harvest dividends over time? What is the horizon (1,2,3,5,7, infinite?)

Generate BLANK profit in the next 3 years, BLANK profit by 5 years, etc

From there, you’re going to want to think about the type of deal that you might like. This might not always be super at first, but you’ll want to get the wheels spinning about this from the beginning. This breaks down into 4 different avatars.

THE SEED EXPERT:

S E E D - Sweat Equity and Earned in Deals

Lower capital, but willing to get in and provide value for a small percentage

This is essentially you coming into a deal with the experience / expertise you have and adding value to the business in exchange for equity. I talk about this with my podcast co-host John. He has done this with his marketing experience and a storage deal.

THE OWNER OPERATOR:

Here, you plan to work IN the business. In this case, you’ll be getting training from the seller and the business is reliant on the owner to operate it. Deals like this can be on the cheaper side because you’re essentially buying a job until you can scale yourself out.

Other factors:

Need good relationship with seller
Can be done with a small loan in most part
Little to no equity needed potentially

THE SBA BUYER:

This is the most sought after scenario generally. You find the business and the owner stays on or you find an operator. You will typically have to put some money down. You probably won't be able to do ZERO down, but potentially zero out of pocket. More on that at another time. You could operate it OR just be on the board and have an operator in place, for a cost. The main thing here is that SMB Buyers typically already have money ready to go. Self funded, but nonetheless ready to deploy.

THE INDEPENDENT SPONSOR:

This is very similar to the SMB buyer avatar, but in this case you might not have any capital yet. You are looking for the deals THEN raising the capital. That’s the main difference.

The last part here on phase 1 is trying to figure out HOW TO PICK AN INDUSTRY.

I covered that here

But lets simplify it down again because its pretty important:

Think about these 3 things:

What is your existing expertise - Your skills, knowledge, experience, etc.
Who is in your network - Do you have any relationships or contacts with people in this space or adjacent to this?
Trends - What industries are growing, what housing markets are growing, where are you seeing trends?

For help with finding trends, just go to Google or use your favorite AI tool and search for things like

“What are the top 10 fastest growing industries”
“What are the fastest growing and most popular housing markets”
“I’m looking for a business to buy that I don’t need any special certifications for and is in an industry that is profitable and growing and something that I could get in for under $5M”

Be as specific as you want.

To summarize:

Get clear on your WHY
Figure out which avatar you might lean towards
Answer those 3 questions to hone in on what you are looking for

There’s SO much more that can be said. I barely even scratched the surface. I hope even this helped though. I’ll keep this series going and send out phase 2 another time. Until then, start working on phase 1 and let me know how it goes!

Do you have any questions on any of this? It's a lot. Let me know if you do and I'd be happy to work through it with you!

Until next time...

Stay in the fight,

My best tweet this week:

@kevinasrx

By the early 2000s,

@TonyRobbins

was already successful, but there was ONE thing that he did that marked a pivot point in his career.

By doing this one thing, he went from a successful coach to an out of this world, top 1%, ELITE level coach.

🧵

3:21 PM • Nov 10, 2024 ↗

My favorite tweet this week:

@tyromper

My dad's a genius.

•Read a book a week for 30 years.

•Socially strong & networks well.

•Can fix anything.

•Great leader.

He NEVER moved up in his company.

I asked him WHY & his answer brought me to tears.

Here’s THE BEST LESSON my dad taught me that you need to hear.

4:49 AM • Nov 4, 2024 ↗