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Book Review: Buy Then Build

Buy Then Build is a great resource for investors looking to buy a business. The author, Walker Deibel, is a self proclaimed “acquisition entrepreneur,” which is what he calls the intersection of entrepreneurship and investing.

Overall, I strongly recommend the book for anyone interested in buying a business for the first time.

Real Estate Was Too Slow

I became interested in buying a business after setting some pretty over the top financial goals. Kate and I were making $70,000 a year from our Airbnb investments, allowing Kate to quit her job.

But we wanted to create $350,000 of yearly income over the next two years, and real estate investing wasn’t going to get us there.

As I continued researching the most lucrative investments, the one that clearly seemed to be the best for both short and long term was business acquisition.

Not only can you put 10% down for a business purchase (compared with 20-25% for real estate), but you can get 200% cash on cash return (compared with 20-30% for real estate).

Since we value cash on cash return over other types of return on investment, the business purchase began to look exceedingly attractive.

That’s when I started looking for some resources for an aspiring business buyer.

Buy Then Build

Buy Then Build because my biggest fear isn’t that I’ll buy a terrible business, but that I’ll buy a great business and slowly drive it into the ground.

I wanted to learn how to buy a business and double its revenue.

Overall, I feel like the book delivered on this promise.

Why buy a business?

To start things off, Deibel talks about all the benefits of buying a business. I didn’t personally need any convincing because I was already aware of the benefits.

For me, I want to quit my job ASAP to free up more time to focus on my investments. And business acquisition, as far as I’ve seen, is the fastest way to create cash flow through investing.

Deibel also talks about how business acquisition is the quickest route to become a CEO. For many, the allure of leaping the professional ladder is a huge reason to look into business acquisition.

Defining your perfect business

Buy Then Build advocates for acquisition entrepreneurs to define what their business looks like before they begin looking for the business.

It’s important to name your strengths, understand your financial position, and be able to recognize the right opportunity when it comes along.

The book helps you align your own strengths with a particular business model and pushes you to write down a sort of mission statement. This statement helps frame your entire business search while you meet brokers and talk to sellers and muddle through the various stages of understanding your potential business.

Finding your perfect business

Once you know what your perfect business looks like, it’s time to get connected with whoever might be willing to sell you a business that fits your mission statement.

There are many paths to finding those businesses, but the most common is by getting in touch with brokers. These are sort of like realtors for businesses. Their whole job is to connect buyers and sellers of businesses.

Buy Then Build helps you present yourself to a broker in a way that helps you to be taken seriously.

It’s important for brokers to consider you to be a serious buyer because they will only want to help you if they believe you will follow through with a deal. And if they do believe that, then they will work hard to find a good fit for you, because that’s how they get paid!

Understand the seller

Ownership transitions of assets worth $1 million or more can take a long time to work through. Kate and I went through a 9 month negotiation to purchase a building in our downtown area. After 9 months of working with the sellers and several thousands of dollars in lawyer fees, inspection costs and other expenses, we had to walk away from the deal.

Nobody wants to spend 9 months working to end up back where they started. You don’t and the sellers of the business don’t either.

Understanding the owner of the business you are purchasing can be extremely important for making the negotiations smoother and frankly for even getting the deal done period.

Deibel has been a buyer and a seller and he shares his insights from both sides of the table. I found his action items to be very insightful, at least based on my own experiences.

Negotiation

When thinking about terms for a business purchase, it’s easy to consider price to be the only meaningful negotiation point. The reality is that sometimes price isn’t even the most important negotiation point.

Sellers care about different things.

Sometimes the seller wants to close as fast as possible. They may be willing to accept a lower price if it means they can close on the deal faster.

Other sellers may care deeply about the business they are selling and really want to pass the business on to someone who they believe will take good care of it. They may pass on buyers willing to overpay because they don’t like the buyer.

It’s important not only to generally understand sellers, but to understand what’s important to the specific seller that owns the business you want to buy.

If you can learn what’s most important to the seller of your business, then you can likely find a situation that everyone is happy with.

Due Diligence

As you sift through potential businesses to buy you will have the opportunity to view various statements by the business owner about revenue and expenses, how the business makes money, who buys the goods or services and possibly other things as well.

You’ll probably go through some preliminary verification of these claims by the business owner.

Based on your initial research, you’ll decide whether to sign a letter of intent to buy the business.

Once you official claim that you intend to buy the business you’ll want to meticulously verify all the revenue and expenses. You’ll want to verify every claim made by the seller. And ultimately you just want to get a very deep understanding of how the business operates.

During this process it’s your job to find any inconsistencies, risks and opportunities for growth.

Buy Then Build offered plenty of templates and examples for identifying these things. In fact, the chapters around due diligence were my favorite. It made me excited to go through that process myself.

Running your business

It’s not uncommon for guides around buying a business to stop right around the closing of the deal. Or even more common is a discussion about keeping the business running as it was, or possibly some easy wins to boost your revenue.

A common theme throughout Buy Then Build is the idea of finding a business that fits well with your skill set, and inspires a vision in you for growth over the next 4 years.

The spirit of the book isn’t simply to buy a dependable cash flowing asset, it’s to light the fire of entrepreneurship inside you. To find that business that you can see the path to doubling revenue. The business you’ll be passionately building on for years to come.

While doing this in practice seems to be something of an art form, Deibel does provide some real life examples from his own business ventures and offers some common templates for growing a business over time.

To me the business building piece of this book is what makes it unique from others of its kind.

Conclusion

Buy Then Build is an accessible and thorough introduction to the business acquisition investing model.

For me, it gave me even more confidence and drive to continue pushing forward in my goal to buy a business in the next 12 months.

Happy investing.

Michael

I'm living the path to financial success and sharing everything I learn in this blog. I believe in the power of cash flowing investments, due diligence and time. This is my journey so far.

Before 2016: Just living my life, working full time and trying to get by.

2016: Kate and I start to discuss the possibility of getting into real estate investment. We read books like Rich Dad Poor Dad and listen to the Bigger Pockets Podcast. We find a Realtor and start looking at property. We even make an offer or two, but nothing happens.

2017: Kate and I continue looking for property. We meet with banks and find lenders willing to work with us. In one month (August), we turn our basement into an Airbnb and list it AND we purchase our first long term rental property, which is a triplex. We can't find good tenants for our triplex.

2018: In April, we finally get our first tenant in the triplex, our second in June and get it fully rented in July. Our basement Airbnb makes so much money that in September we decided to buy another property to exclusively rent out on Airbnb. It makes us even more money than the first one!

2019: Kate decides we should put together a mastermind group. So we get in touch with people we know who care about money and start sharing knowledge with each other. Our triplex is profitable, but our two Airbnb properties are making way more money, so we buy another property to put up on Airbnb and VRBO.

2020: Coronavirus hits in March and all the guests booked at our Airbnb properties cancel. We freak out, but after a few weeks everything comes back and we're making money again. Discussion and research from the mastermind group makes me want to investigate online business as an investment strategy. Kate and I started Unbound Investor with plans to purchase a website in 2021.

OK you're all caught up!

I learned everything I know from books, podcasts, conversations with friends and family and of course through real world experience as a cash flow investor. And I'm always pushing to learn more.

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