How to define your buy box when you don't know where to start

Newsletter · Nov 03, 2024

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An entrepreneur's recipe for sweet success

2.14 min Read

I was on a call the other day with a few guys that’s are just starting their acquisition journey and the question about defining their buy box came up.

We talked about it long enough that I realized this was a necessary topic to go into here. So that’s the subject today;

DEFINING YOUR BUY BOX.

It matters, but also doesn’t. I’ll explain.

It’s not a life choice that permanently brands you. it can and WILL change over time.

What’s most important in your search is to ROUGHLY find the ball park that your buy box is in and go with it. Start and then iterate.

Same concept with starting anything. It’s not about HOW you start, it’s just the fact that you started.

If you’re wrestling over your buy box for months, you’re not searching. And searching is what’s going to land you a deal.

A great place to start is with what you already know or have experience in:

What kind of Industry knowledge do you have?
Do you have any valuable relationships that you can leverage?
Who do you know in your network that might be connected to small businesses
What skills do you have that could lend a hand in a specific industry?
Do you have any past experiences in a specific space that might be beneficial?

If you don’t have anything that stands out, that’s okay. Not everyone does. Start looking at trends.

HOW👇

It sounds too simple to be true, but all you need to do is a Google or Chat GPT search asking for something like this:

Show me the top 10 growing tech industries
Show me the top 10 growing home service industries
What markets in the US are growing the fastest and why? What businesses are most prevalent in those areas?
Where is the largest population of baby boomers? What services do most baby boomers need?

The list goes on. Just start poking around to see if something pops out.

Do you need to live close to the business you buy?

Well, it depends.

It depends on the business
The management team you have or don’t have in place
Your comfort level for operating remotely
Is the business capable of operating remotely
Is there enough room in SDE to even afford a manager
etc.

Think through where you’d be willing and able to travel to as needed. Ideally it’s not all that often, but you want to have the ability to get there when you need to.

If geography / proximity matters to you, then you just narrowed down your search right there! Nice work!

Just for example, I have a couple storage facilities in two different states. And I don’t live in either. It can be done.

Financial buy box:

Another way to go about your search is reverse engineering your ideal cashflow number.

What’s the financial goal?

Work backwards from the SDE to determine what asking price range you want to be in.

If you plan on paying an operator, work in a conservative 100k. It’s most likely not that much, but you also want the room to hire well.

If haven’t figured out the industry, stay industry agnostic for a bit and let the cashflow and/or location direct your search. Hunt with those in mind until you can hone it in on an industry

My hot take 🔥

Start by looking in specific areas that you feel good about and have SOME connections in, THEN branch out.

But here’s the deal:

Building deal flow takes time. It helps to have some direction, but it’s also good to just get reps in. Even if you know it might not be the winning deal.

Talking to owners and brokers can ONLY help. It’s those conversations that help you cut your teeth and build a network in this space. Even if you know that you won’t do those deals, you’ll learn a ton just by going through the motions.

This was a 10,000 ft view of really defining your buy box. If you have questions or want to dive deeper, I’d love to chat more with you and help. Seriously.

Until next time...

Stay in the fight,