In this episode, we will be interviewing the best selling author of the book Buy Then Build, Walker Deibel. He is also a serial acquisition entrepreneur, M&A advisor, and a successful movie producer. Walker acquired seven companies over ten years and co-founded several startups.
Let’s dive right in and learn how to buy a business without having to have the money that it takes.
[00:01 – 06:00] Opening Segment
- Walker shares the story about his background and the beginning of his career journey
- Acquiring some of the largest companies in the world was achievable
[06:01 – 14:34] Buy Then Build
- Walker talks about the inspiration behind the content of his book, Buy Then Build
- Walker talks about the first company he bought in 2008 that gives him the idea to write his book
[15:30 – 25:59] Don’t Start a Business
- Walker shares his opinion on why he does not recommend starting a business
- Taking the odds of the startup model and just flip it over
[20:40 – 25:39] Ten Trillion Dollars Tsunami
- Walker talks about the Ten Trillion Dollar Tsunami
- There are ten trillion dollars of business value currently owned by baby boomers that need to change
[25:40 – 30:19] Growth Mindset Vs. Fix Mindset
- Walker talks about Carol Dweck’s mindset traits study
- Walker talks about Positive psychology
[30:20 – 37:15] Successful Acquisition
- Walker talks about one of the most important pieces of the puzzle during the acquisition process
- Finding capital to buy a company
[37:26 – 45:24] Closing Segment
- Favorite book:
- Good to Great by Jim Collins
- The Innovation Stack by Jim McKelvey
- Hobbies: Reading and writing, Road biking, Film producing
- Successful e-commerce entrepreneurs vs. people who give up:
- Get up early and set aside time to think.
- Work hard.
- How to Connect with Walker – links below
- Buy Then Build: How Acquisition Entrepreneurs Outsmart the Startup Game
- Good to Great by Jim Collins
- The Innovation Stack by Jim McKelvey
- Carol Dweck
- Martin Seligman
- Quiet Light
Connect with Walker on Linkedin and Buy and Build Facebook Groups. You can also visit his website at buythenbuild.com.
Email us –> support@Firing The Man.
I have seen sub million dollar online businesses that have more profits than very large companies. A successful entrepreneur is an intelligent, driven individual committed to a good opportunity. It’s their level of commitment, and the amount of drive they have to see it through. I weigh heavily the importance of the growth opportunity that someone needs to capitalize on. Because you’re looking for the opportunity, you’re not looking for a business.
Welcome, everyone, to the firing the man podcast, a show for anyone who wants to be their own boss. If you sit in a cubicle every day and know you were capable of more then join us, this show will help you build a business and grow your passive income stream in just a few short hours per day. And now your host serial entrepreneurs David Schomer, and Ken Wilson.
Welcome everyone to the firing the man podcast. On today’s episode, we interview Walker Deibel. Now Ken, I have to say, Walker is one of our dream guests. And the reason for that is every so often you read a book that takes everything that you think and flips it on its head, and Walker’s book by then build when we read that last year did exactly that. It made me rethink my whole business, and my whole strategy for growing and scaling. And he had an awesome interview. And I’m really excited for our audience to listen in. What did you think?
It was a phenomenal interview? We were waiting a while to get Walker on the on the podcast. You know, he’s a, he’s a local friend here in St. Louis. And yeah, it finally happened. And he shared a ton of knowledge. I mean, I read his book, and Buy Then Build, I definitely recommend it to everyone, you know, he covered the $10 trillion tsunami, if you don’t know what that is, he covers that. And he covers some statistics on, you know, startups failing and how it’s, you know, it’s almost a no brainer to buy a company for cash flow versus building and he covers an in depth in the in the episode. And yeah, it was a really good episode, and I can’t wait to share it with the audience.
For sure. And one last teaser I’m going to leave you with is if you have ever thought about buying a business and thought to yourself, I don’t have the money it takes to buy a business. You may rethink that after listening to this episode. Welcome, everyone to the firing the man podcast on today’s episode, we interview Walker Deibel. He is an entrepreneur, certified m&a advisor, author and successful movie producer, we get to find out who Walker Deibel is and dig a little deeper into his recent book by Ben build. Welcome to the show Walker. David, Ken, thanks so much for having me. love being here. You bricks. Thank you. So first things first, tell us a little bit about yourself.
Sure. So, you know, I just want to say that, you know, during my 20s, I pretty much spent the entire decade trying to figure out how to fire the man, right. And what that did was, you know, it sort of like, taught me that, you know, I was really interested in, in, in business. But I was also really interested in the arts and sort of like where they sort of interact, right. And I found that I really enjoyed the concept of trying to start companies. And so I’ve tried multiple times with varying degrees of success, but never having you know, even even frankly, like a like a like a double, I would say on a company that I’ve started, I think that might change with the recent with the recent creation of the acquisition lab, but we’ll see. So, you know, I sort of learned over time that like, maybe I’m just a really bad entrepreneur, right. But then I started looking into the data. And you know, we all know that 90% of startups basically fail and that 10 of them sort of make it right. And it was sort of after I acquired my first business that I really started to understand that 96% of companies in the United States never exceed a million dollars in revenue. So once I started being able to kind of lower the bar of what I thought success looked like, I started to get really comfortable with the thought that you know, acquiring some of the largest companies in the world was actually very, very achievable. And so between my I’m what, 44 now or so over the last 14 years, I’ve done various things, including acquiring over a half a dozen companies, working as a business broker, m&a advisor in the online business space, and doing some of the other things that you mentioned, such as some film production, things like that.
Very nice and in the book that you reference, for those tuning in on video will see me doing the exploding head emoji if you will. I loved that book. I really liked that book and the thing that really stood out to me what was applying those hard facts about Startups versus just acquiring a company that is already up and going in profitable. And this is something that you don’t hear a lot about, especially in the e commerce space. It is always start your own private label brand, and grow and scale. And that’s honestly, that’s what I’ve been doing. That’s what Ken has been doing. And reading your book, gave me a total shift in the way that I thought about business. So what led you to writing that book?
First of all, thanks, thanks so much, I got to tell you that writing it took me about four and a half years, and I wrote it primarily in the middle of the night. And so anytime someone says, I loved your book, it’s a true shot in the arm. And I really appreciate it because I spent a lot of time wondering if I was just crazy. And I was like publishing sort of all of my faulty logic, right? And the concept being that when you release something that that, you know, a book like this, that no one’s really written, it’s kind of like, how come no one’s written this? How come no one sees this, like I do, right? And, and it ended up being quite the opposite. And it’s just been so so well received, which has been an incredible experience. So thank you. But I also the thing was, was that, again, I used my MBA as a career shield to try to start a company while I was like, like, Well, my resume was protected by the fact that I was getting an MBA. Right, so I spent a lot of time, you know, and I went through, you know, sort of the olin cup process at Washington University in St. Louis. And, you know, we, we almost had to deal with Walmart, we have licensed this technology, are trying to raise capital, and we like it was a roadshow, like, we were doing it right. You know, we’re finalists in the business plan competition. And, you know, I saw people that I thought were had a much better startup than we did just sort of like, collapse, you know, as we were continuing down the track, they were just sort of falling off left and right. And like the ones that were sort of, that ended up like, sort of beating us I was like, Yeah, but those aren’t gonna make it and they didn’t, right. And ours fell completely apart. Okay. And I’ve learned over time, you know, in other words, I’ve spent a lot of time in the entrepreneurial community. And I have an MBA with a concentration in entrepreneurship. And like, I’m, I am as big of a geeky fan as any entrepreneur in terms of like, getting the latest copy of ink magazine and reading about, like, what’s the newest technology? And like, how do I start? And how do I do this? And how do I, you know, start a private label company and all the rest of it. And ultimately, you know, like, I knew there was a way to try to, like, I knew there was a way to buy an existing company, and I just didn’t want to do it. And so like, in 2004, I set out to try to do it, and there was no good resources like it all. And I went back, and I started talking with some of my MBA professors who tried to talk me out of it. Like, they were explained to me that it was like a really bad idea to like, go small. And that’s when I really understood that the MBA was really, or middle management at large organizations. And like, entrepreneurship was a very recent thing and these programs, right, and so, living in the entrepreneurial ecosystem, I later knew that, like, there was this whole business model that was just being completely ignored and undervalued. And you look at, you know, say the names, like, it’s like, you know, Steve Jobs, Elon Musk, you know, just like all of the big entrepreneurs that like graced the covers of these magazines that we all sort of like worship, right? These are not the 1% these are the point 000 1%, right? I mean, it is like, you’re it’s one of these words, where starting a business from scratch is like punishment for not understanding statistics. And yet we do it over and over and over. And I’m guilty. I’m guilty of it, right. And so I eventually figured out how to sort of navigate these like, like private, opaque, fragmented marketplace and sort of buy my first company, but it took me four years, okay, from setting out to learn how to do it to actually acquiring one. So I own that company and ran it for about seven years and tried to grow through acquisition and ultimately sold to an acquisition target. And then I did what we all do, I went out and like I my first exit, and I’m like, I am successful, now I can do it. And we did a startup raise capital, oversubscribed, recruited a executive from Microsoft to be our CEO. We’re running beta programs that at you know, half a dozen, like major fortune 500 companies, you would know the names. And you know, we had the CTO of a major fortune 500 company working with our dev team, and like, we were totally doing it this time. And we totally did it. And so and so I then went out and was like, Okay, I need like, I need to go back to where I have success, which is like focusing on these base hits. Right. And for me, it was kind of like we’ve all seen that, that that movie or read the book Moneyball right by Michael Lewis, it’s all about it’s all about how the Boston Red Sox like, like they couldn’t compete on getting home runs. So they just focused on getting on base. When I think about acquisition entrepreneurship. I actually call it like entre metrics right after sabermetrics and book, it’s basically getting on base, how do I get revenue? How do I get customers? How do I get product and infrastructure and all the rest of it first. And then once I’ve got all of that locked in, now we can we can go to we can get started, right? And so I started writing the book, what knowing that people around me were buying companies, and I knew it was happening coast to coast. And so I started like interviewing other people and wanting to make it about the movement. I didn’t want to be the guy. And what I learned over time was that like, if you really wanted to do that, well, to write like a, you know, a Jim Collins caliber book, you need like two dozen Stanford PhDs on staff, like it was just slow going. And every single person I talked to had a very anecdotal experience, right? It was like, Oh, I just was looking for what everyone else is looking for I was looking for. And then they would say something completely different. Right. And then it was like, Oh, I knew a guy who then introduced me to this lady who sold me this thing, like it was just, everything was so messed up and all over the place. And there was no best practices that I could find. And there was, it was just a great opportunity to kind of try to synthesize all of the information. And so during the time I wrote it, I was also acquiring multiple companies. And so all of a sudden, one day, I looked in the mirror, and I was like, Look, just own it, like I can be the guy, I’m on the list of people that can write this book. And so I did. David, one more thing, at the risk of talking too long, I want to say one more thing, because there really was another big component that was really instrumental, which was, okay, I don’t talk about this a whole lot, because I feel like people can kind of take the soundbite. And then like, belittle my entire career. Okay. And the point is this, the first company I bought ended up being my father’s printing company. Okay. And the reason for that was twofold. Um, first of all, I was looking and so all of a sudden, when an opportunity came, you know, he wasn’t giving me anything. First of all, it was the same terms as any other deal. Number two, when the deal showed up, I realized that it was something that, number one, I completely trusted the seller, like, for my first time at bat, like I just didn’t even have to worry about, like, you know, what am I missing or like any of these things. And number two, it was a significantly larger acquisition than I felt like I was going to be able to do without support of a team, right. And so the first company I bought was like 8 million in revenue, okay. And the thing is, is we sat down really like, on the same side of the table, for obvious reasons, I came up with a 27 step plan of how to transfer the company, worked with our CPA worked with our attorney what you know, in all the rest of it, and got it done. And then the second it was done, two things occurred to me. And this was 2013, eight, seven or eight. Number one, all of these small business owners started coming out of the woodwork being like, how did you do that? Like, how do we do that, and all of a sudden, I realized, no one understood how to transfer a business, even if they were in the business, right? Whether they were wanting to buy or sell, or they were, you know, it’s number two, I realized something very interesting, which was, what just happened was that all the startups that I had completely failed. And yet here, I was buying $8 million in revenue, by taking a big ass bank loan and writing the seller, right? In this case, a big check. And then you stopped going to work the very next day, that’s what happened. Okay. And so I had a personal guarantee, I had a big bank loan, I’d collateral with all the assets in the business, and then the cash will the business was coming in and paying down the loan. And I was like, Okay, this is like a leveraged buyout. Like, this is what private equity does, but like I just did it like as an individual. And my realization was everyone at the Open Cup at Washington University running around trying to generate like, their first dollar in revenue. Like they’re, they’re completely missing this, they’re completely missing the fact that like, you can just run out and acquire a million or eight in revenue, right? And so the thing is, is that the reason why I think that is, is because I had the profile of the people that get that done, which is, you know, oldest kid, white male dad owns a company, you know, and is looking to transfer it actually has enough trust in his kid to actually want to try to get it done. And believe me, he told me my whole life, there was no way that I was getting that out. He was ever going to sell me the company because I was useless, right? So eventually, eventually, I was good enough, I guess. But But the point is, is I felt like I was privileged enough to try to navigate this path on my own for three or four years leading up to this day. And then and then I was privileged enough to actually be someone who had the profile to get it done. And once I got it done, and once I looked at the entrepreneurial ecosystem, and how we’re all trying to start these companies, I realized there is like this knowledge gap that needs to close. And it was at that time back in 2008, that like, I got the idea to write the book, and it didn’t come out for 10 years later.
Well, very nice. I’m glad that you public That book, it certainly changed the way I think about business. And like I said, No one’s talking about this. And when you apply hard facts to it, and you have a lot of people involved in business that are have a background in accounting or finance, you know, numbers speak, a lot louder than the anecdotal stories. And so it’s surprising that there are not more people talking about it. But I’m glad that that you are. So thank you for writing that book. Thanks, David.
So Walker, last year, I got the book, and I read it. And, you know, here I am, I was two and a half years into my entrepreneurship journey, building a business and I’m reading, you know, by then build, and I’m like, you know, what did I do wrong? Or maybe I found this book at the right time. So, you know, as I as I read the book, and a couple of the chapters that, you know, dive really deep into it. And there’s a few statistics that’s that stood out to me. Can you kind of dive into why you don’t recommend starting a business?
Sure, well, I mean, we’ve covered some of it, right, like they fail, right. But, you know, a lot of times I think about all of the different like, sort of objections that people might have when they’re listening. And the one that always struck me was, oh, boy, I’m going after venture capital, I’ll beat the odds, right? The thing is, is that you don’t have to be in the startup world very long to figure out that it’s a very few that actually end up getting venture capital money. Okay. So first of all, you got to get through that hurdle. And let’s, you know, D myth, a couple of components, like a lot of people are like, Oh, I’m a great person, and I have this wonderful idea, I’m going to go pitch venture capital, and like, it’ll be no problem. No, what they’re looking for something very, very specific, okay, they’re looking for something that is past the sort of introduction phase of the business cycle, something that’s proven and has a foothold. And it’s expected to now accelerate in growth, okay. And so they’re very strategically looking for the adolescent phase in a business model. And then what they’ll do is they’ll come in, and they’ll and they’ll invest in like 12, or 20 of those companies doing a very similar thing. And then one of them sort of beats out the others. Okay. So it’s not like, Oh, I have this idea. Like, I’ve got this idea of completely, like, you know, how the public markets trade, like, I wouldn’t trade the private markets, okay. The thing is, is like, I need a four sided marketplace in order to do that. And like, if I try to do all of those things in one idea, it’s, it’s, it’s like boiling the ocean, like, you can’t do it, it’s too big, the world is not ready. Okay, it’s too early, there’s no way I could get venture capital money around this idea. Okay. It’s not the time, right. But it’s a great idea. You know, and similarly, you know, if you if you want to start a, you know, a business brokerage, you don’t need, you know, that’s, that doesn’t fit the profile, right, you know, so the point is, it’s very specific, but here’s the rub. 75% of venture capital back firms go completely to zero, okay, only a quarter of them end up exiting, there’s a, there’s a book called, um, oh, gosh, I’m sorry, I can’t really name of the guy. Um, it might be called, like, smaller exits or something, it’s talking about the trends in venture capital, and the exits are getting smaller and smaller and smaller, so they’re still getting wins. But make no mistake, venture capital is a venture capital game. It’s not an entrepreneur game. Okay. It’s the venture capitalists that make money. And the odds of an entrepreneur having a successful exit is one out of four, okay, the other three go to zero, period, okay? If starting from scratch, you know, 90%, fail, 10% make it but out of those 10% that make it 96% of them never really amount to very much, right. Like in other words, those are the people that never exceed a million dollars in revenue, which just very textbook is the moment of product market fit. Okay, now, I want to talk about the other side of my face. In e commerce, we have no overhead, okay, we’re like individuals with with, you know, fractional teams, and, you know, virtual teams and all the rest of it. And, and the thing is, is like I have seen sub million dollar online businesses that have more profits than very large companies. Okay. So the thing is, is I feel like, you know, the proliferation of the internet and e commerce has really kind of changed the equation, and some of the ways in which I think about some of these things, because there’s almost like an exception to the rule. And all of us here on this podcast are playing to that advantage. Let me go back to answering the question, though, when you look at companies that were required with SBA financing, okay, the default rate has remained under 2%. For decades, it hangs out about 1.3 1.5 1.7%. So it’s kind of like you take the odds of success of the startup model and you slip it over and you say instead of going for, you know, being that fraction of a percent that’s going to make it and exceed a million in revenue. I’m just going to start with a 98 plus percent success rate. Okay. And then And then from there, okay, from there that you can chop that up, and it actually tends to fall into thirds, okay, a third kind of struggle or tread water, a third have really good returns, but you know, nothing to nothing exceptional, nothing, nothing to write home about just really, really good returns, and a third of them have truly exceptional returns as a result of acquisition, regardless, you know, anywhere in those two thirds that are doing really well. It’s still the best performing asset class that we know of today. Period. That’s why you buy
nice, yeah, I like those odds. Another thing that jumped out at me in the book, and I’d like for you to explain this to the audience, the 10 trillion tsunami, can you expand
that $10 trillion tsunami? So So right now, there’s sort of a confluence of three things coming together? Okay. The first two are kind of things that we’ve touched on. So let me just kind of bring them home. Number one, is, let me take them in reverse order. Okay. Number three, is is that the fact that access to capital for business acquisitions has never ever in history been this easy to get a hold of, and the trigger for it was January 1 of 2018, the Small Business Administration came out and said, okay, it’s really easy for you know, banks to sort of finance you know, these these goodwill, you know, based loans for business acquisitions on in the middle market, like 50 million hundred million, right? But like these small businesses, they can’t actually transact because unless they’ve got like a big piece of iron called a printing press in a 50,000 square foot facility, they can’t buy it, you know, Walker can’t buy the company, right? I wanted to buy an e commerce site in 2008. I couldn’t do it. The banks won’t lend me the money because there’s nothing there’s, as they like to say there’s no there there. There’s, it’s just like air, right? They call it a um, an airball is what they call it, the banks, okay. But the SBA came out and said, Listen, we want to provide the collateral for Ken, for David for Walker to to the banks to go out and buy these companies. Okay. So they completely they completely removed at the limited access to Goodwill based loans for business acquisition. So all of a sudden, boom, money started coming in. The SBA, by the way, is a standalone, profitable entity at the government that operates in its own vacuum. Okay, which is kind of interesting. So number number three, access to capital. Number two, the proliferation of online businesses, okay, so, so if you just look at like the m&a cycle it m&a cycles, mergers and acquisitions cycle right now, we’re upcycle. Okay. Never before have online based businesses been past the tipping point. And so we are now able to participate in these acquisitions at a very adult way, a very mature way. Okay. It’s still adolescent growth. But like you go back to, you know, the mid 90s. And you tried to buy an online business and it was like, wait, what if there’s like, what if Google, you know, does anything you know, I mean, it was just like, it was it was way too. What’s the word? I’m immature, it was too, too delicate, too. Fragile to unestablished, too volatile. Okay. Today, it’s established. We know the channels. Okay. Google, Amazon, Facebook ads, right? I mean, you know, we know we know where the chance. The other thing is that all of the technology, all of the online marketing that exists today, did not exist when the baby boomer companies matched their product market fit. Okay, so now number one, there is $10 trillion of business value currently owned by baby boomers that needs to change hands, okay? These people own more companies than any generation in the history of mankind. Okay, they are retiring at over 10,000 a day and it’s increasing, it’s going to 11,000 a day and beyond between now and the next 2028 is going to be the first year that will start to decline. Okay, it’s a massive amount. In fact, it’s 45% of the Small Business infrastructure needs to change. So no one has ever said this. Okay. But I you have to suspect that the SBA is simply being driven by the fact that if we don’t transfer this $10 trillion in value, if we don’t transfer 45% of the US economy, what do we think is gonna happen? Okay, and so if you talk to guys like us, who know our way around online marketing, and you look at the massive infrastructure that needs to change hands, then it’s like you put these two things together and you have something like truly special, right? Like, your cell phone, you know, this is this is Apple, but it’s hardware and software. Right? It’s a phone, you know, look at their watch. It’s a watch, but it’s software Were looking at Tesla. It’s not a car company. This is a software company. Look at Amazon, we think it’s a, we think it’s a website. It’s not it’s a series of warehouses. Okay. It’s like the e commerce part is sort of the easy part. The hard part is, you know, how do we get one foot in the old economy and one foot in the new economy? And I believe if we can bridge that gap, that’s that’s where the real magic happens. And this will be the greatest opportunity of our lifetime.
Yeah, that’s, you’re just kind of mind numbing to think about that. But yeah, definitely lots of opportunity. My next question is, you covered a growth mindset versus a fixed mindset in the book? And is this something that you think you can teach? Or is this something that is experienced? Or do you think you can cross back and forth or no?
Yeah, so Okay, it’s a great question, Ken. So first of all, you know, let’s start by saying that that Carol Dweck, is the the PhD, you know, practicing academic that wrote the book mindset that talks about, you know, growth mindset. And the thing is, is that like, as I set out, you know, I’ve like I, you know, I got really, as soon as I figured out what positive psychology was, I became like, addicted to all material positives. So let me be clear about this. Positive Psychology is not like positive thinking, like you can do it. It’s not that positive psychology was started by Martin Seligman, when he became the president of the psychological association. And he said, Look, look, our entire career of psychologists is spent saying like, okay, you know, I’m, I’m negative 10. How do I get someone from negative 10 to negative six? And then and then how do I go from negative six to negative three, how we get from negative three to zero? And once we get to zero, like our job, a psychologist is done. Like, now you’re at zero. Good luck. And so they’re solving problems, right? Martin Seligman came out and said the opposite. He said, we need to focus on how do we thrive? How do we, you know, start to create well being in our lives, like, what are the things that drive happiness, like just very important questions that were ignored by like, the most brilliant minds in the, in that in that industry, right. And so positive psychology came out, a number of a number of awesome books has come out. And but the thing is, is it was also during that time that I started meeting with a lot of psychologists, and business psychologists and learning about personality assessments and all the rest of it. And it was like, Well, what can we learn about successful entrepreneurs based on all of this data that we have? Because there’s a ton of data out there. And, you know, what I figured out was, if you took everything we know, and just like, whittle that down, boiled it down, just like one of the Freebase like, in one sentence, what do we know, a successful entrepreneur is basically an intelligent, driven individual committed to a good opportunity, a good opportunity, not a great opportunity. So a good opportunity makes a great entrepreneur, how it’s their level of commitment, and the amount of drive they have to see it through. Okay, now intelligent has to be in there, because there’s so much data about IQ, they’re like, we can’t separate it out. Okay. Like, there is a correlation between intelligence and success, like, you cannot break that. But, um, EQ, emotional quotient is, you know, sort of like the fastest growing indicator, right? Because all of a sudden, we’ve started studying this and measuring it and going, whoa, hold on a minute, this might be even more important. This is like simply interpersonal skills, right? Which, you know, all you need is to go to Starbucks get caffeinated and talk to anybody. But the point is, the point is, like, having a growth mindset for me, was one of these critical points, just in my experience, being a CEO. Because if you have a fixed mindset, it’s sort of like, okay, you know, I don’t know that. I don’t know this thing, or I’m, you know, I don’t know what that is, you know, so I’m not skilled in that. So I need to go find someone to fix that, or whatever. a growth mindset is very different. It’s, it’s like, okay, everything is malleable, everything is workable, I am driven and committed, I have no idea what this is, but I’m the person to do it, I can do that. This is my company. Okay. And if you’ve got to have that growth mindset to be a CEO, okay. And that’s why I talk about it so much in the book, but just because as my experience leading companies, if you don’t have that you’re dead. I mean, you’re dead. Like, don’t even think about this now. Can your question is, can we cultivate this in our life? And again, I’ve got I’ve got a point to the pro right, Carol Dweck says absolutely, you know, and she gives you steps for it. Um, you know, sort of the, the rough and tumble version is like step one, you have to understand the difference between you know, what is an example of a fixed mindset thought versus a growth mindset. Alternative. Number two is identifying yourself when you’re having this those thoughts. And number three is sort of like correct them, right? I’m sure I’m, if she were on here I’d be embarrassed. But you know, I’m sure I’m missing a step or two but but are over simplifying it, but it’s that kind of a thing. And so if you don’t have that mindset, work on that mindset, before you truly commit to buying a company, that’s what I believe.
I got one more for you before I high five. David here, if you could whittle it down to one, what is the most important piece of the puzzle during the acquisition process?
Okay. Um, that’s sort of like saying, like, what, what is the number one biggest, you know, political obstacle in the world, like, it’s very, very nuanced, but what I would say to that is, you know, I like to bring it all upstream. And I think that, you know, a lot of people will look at companies for sale, and they’ll sort of look at them in a historical frame of mind. And I believe that what you really need to do is not look at it as an investor, but look at it as an entrepreneur. In other words, the first day after closing, you are the CEO of this company, you are the one that with, you know, a personal guarantee on the debt that you use to buy it. Okay, this is your company. Okay. And so the thing is, is I think that when people look at companies for sale, they tend to look at, they tend to look at things kind of like a menu, right? And a lot of times people they don’t even think about like, you know, do I want Italian food? Do I want to go to a steak house? Am I vegetarian, like, they don’t even think that they don’t even know if they’re hungry, and they just like walk into, like, you know, a restaurant, look at look at the menu, please don’t do that. Like you’re just gonna spin and spin and spin without any focus, right. And so I think that there’s certain things that you can do to make your search really focused, efficient, and strong. And I think that the most important component of a successful acquisition really starts with the potential buyer, the acquisition entrepreneur, understanding what it is that they bring to the table, before they start looking for a business, because at the end of the day, I got to say that I’m in the camp that, you know, a distribution company, a manufacturing company, and e commerce company, like businesses business, every company I’ve, I’ve acquired, someone in there says like, Yeah, but like, we don’t work like other businesses, they do. They just think they don’t like all of the laws are kind of the same, right? And so what you need to understand is, what do you bring to the table as the CEO? And what is that growth opportunity that you can leverage? And so I belittle industry, and I accelerate and overweight, the importance of overweight, I weigh heavily, the importance of the growth opportunity that someone needs to capitalize on, because you’re looking for the opportunity, you’re not looking for a business.
So let’s dive into the actual acquisition. And going back a couple years, when I decided to start my own company. I never even considered buying a company. And the answer to that, or the reason for that was I didn’t think that I had enough money. And and I think that’s one thing that holds a lot of people back. Yeah. And I have since learned about SBA loans. But how would you respond to somebody that says, I don’t have the capital it takes to buy a new company? What are what are some ways that they could either fundraise leverage, say, like an SBA program or any other ways that you’ve seen?
Yeah, well, I mean, the SBA is a is a great way to immediately knock out most of it, because they will lend up to 90% of the acquisition 90. So the thing is, is like now you got to come up with 10%. Okay, so let’s just use really loose math and say it’s a million dollar company, you’re going to buy a company for a million dollars, okay. Now, let’s just say that, that it happened to be at a at a three times seller discretionary earnings multiple, I understand I’m getting technical, so I’ll just just assume that’s earnings. Okay. What that means is, is I can go out and buy $333,000 in earnings for $1 million. Okay. With that million I need to come up with the SBA is going to give me 900,000. Okay, and so I, you know, you can you can get 900,000 from the SBA, so 100,000 you know, might seem, I say, unachievable to you, but like, a million is definitely unachievable for most people. So, like, the SBA just says, Okay, come up with 100,000. Can you do that, right? And the thing is, is like, if you go out to start a business, most people on average raise like between 65 and $70,000. Anyway, for the average startup, and that’s like for, you know, I’m going to start a car stereo retail shop? I don’t know, I just made that up. But you know, but the point is, is like, you can raise $100,000 based on here’s a company that I’m acquiring with 10 years of revenue and, and infrastructure and earnings and customers, because it’s totally bankable, right. And so, you know, I like I think, lessons and how to raise capital are probably slightly outside the point of this podcast. But what I would say is, is that like that, that to me makes it totally achievable. And you understand that even that that 900,000 in debt on this example, is only going to cover is only going to cost you about 45% of that discretionary earnings. So I can’t do that in my head. But that would be you know, let’s see 333. I said, so after principal and interest payments, I’m going to do point five, five, you’d get about $183,000 a year in earnings, you’re one on $100,000 investment
in for those people that are wanting to fire the man. Yes, you know, that $183,000 is probably a hell of a lot more than you’re making in your day job. And so if you can scratch and claw and come up with $100,000 Hey, you fired the man, that’s what I love about, about this whole process in thought process that you introduced in your book, we bought the man out and tell them to go home. actly
Exactly. Ask him for a seller note, by the way, ask that man for 10% seller note and the bank will usually cover the rest, you might have to I mean, you got to come up with something. So like if you can come up with 50,000 in this example, and then get a seller note for 100,000 and then get a bank loan for 850,000. The bank would the bank would I’ve seen banks roll with that. There’s ways to do this. Sorry, a seller note would be when that when the seller of the business is actually acting like like a lender to the buyer. And so having a seller note of you know, 10 to 20% is not uncommon at all, it depends on the business and what we’re looking at. If you’re looking at like, you know, sub million dollar acquisitions, seller notes are pretty rare. Unless you start to drop under say like $250,000, right? If you drop under $250,000. Getting a seller note of up to 35 or 40% can be common because banks don’t like to loan on those really small ones.
Well, I’m gonna kick it over to Ken for the lightning round. These are three questions that we ask every guest on our podcast. Take it away, Ken,
I’ve listened to every episode. So like you just answer him. Go
ahead. All right, I don’t want to steal your thunder.
No, no, no, you’re good. What is your favorite book?
Good to Great by Jim Collins. I mean, duh, right. But it but it’s like, you know, this was the book that has just stood the test of time for me. It’s also one that that you know, gifted the most I think it’s the most insightful, the most brilliant the one that uses that leans on so much empirical evidence to learn about you know, operating businesses and what we can learn from it. I’ve kind of sleeper hit as well. And since we’re all from St. Louis, I’m just gonna throw it out there which is Jim McKelvey just wrote just wrote a book called uh so Jimmy Kelby is the co founder of square, and he just wrote a book, and I just read it, and it’s not in front of me, the title is the innovation stack innovation stack. And I thought it was going to be one of these like, okay, you know, successful CEO writes a book, if you read the innovation stack next to buy them build, he, we all have, we have the same exact fundamental beliefs and like, I go to the right, and he goes to the left, right. And it was a really surprising and awesome read. So in order Buy Then Build, Good to Great, Innovation stack.
I like the order. I’m gonna I’m gonna add the last two in my, my list of must reads now that’s awesome. What are your hobbies? Walker?
Well, you know, I mean, I’d like to say that I write I really fret a lot about what I’m going to write about is basically what I do. Secondly, I ride my road bike. You know, in 2010, I was the Missouri State Champion, actually in. So I was pretty, I’m an aggressive hobbyist. And let’s see, other than that, I’ve got three kids, those, those little people take up a lot of time. And I’m, you know, you guys, you mentioned at the beginning that I’m a film producer, you need to understand that in in my world, that’s a hobby. It’s not like what I do, right. So that’s, that’s something that I kind of do on the side.
Nice. That’s awesome. Okay, last one, what do you think sets apart successful ecommerce entrepreneurs from those who give up fail or never get started?
You know, um, kind of what we said at the beginning, like, starting up is hard. And I don’t think that there’s that There’s never an easy answer because it’s so messy. And it’s so anecdotal. And, you know, you know, like, we just talked about square like jack Dorsey started Twitter. He had no idea what he was inventing. It started out as like a, he was able to text message everyone in his phone at the same exact time. That was the first iteration of Twitter. Right. And everyone texted back and said, I don’t care where you are, you know, he wrote, like, I met the I met the, you know, the, what, you know, the, the, the Golden Gate Bridge, and everyone wrote back was like, I don’t care. You know? Like, why did he make it? Well, you know, it was it was it just, I mean, I think he would tell you, it’s because, like, I think he would tell you, I’ve met him, I’ve heard a story. And so I don’t mean this in any kind of, like, you know, like, like, I’m a geek in certain areas. Okay, I totally geek out, he totally geeked out on stuff, right. And in the fact that he totally geeks out as a hobby, is what ultimately led to, you know, this thing called Twitter. And, you know, he probably took a lot of at bats. And so for me, what I will tell you is, there’s two things that really drove my success in my career. Number one, as like Ben Franklin, as it sounds, get up early, and just set aside time to think, okay, and, you know, early in my career, even in my late 20s, I sort of even in my 20s, my early 20s, I sort of felt like I got more done by 10am than anyone else did all day. And it wasn’t even that I was like getting tasks done, it was just the sheer volume of thinking, and in, in thinking about your life and thinking about, like taking the long view, and like, what am I trying to get to, like, what am I trying to do with my life? Like, this is your life design it you know what I mean? And then you know, number two is work hard. Right? And take a lot of at bats, right? And the thing is, is is all startup entrepreneurs will tell you that take at bats get up at bat get up at bat take at bats. Now, I will tell you, I took plenty of at bats. I took a lot of at bats. And in the startup world, they just never worked for me. But I learned lessons, some of them very hard. And in the end, I sort of found the the will to stick with the analogy that the ballgame that fits. And I needed I needed to stop swinging for fences and just go get on base.
Lastly, how can people get a hold of you?
Sure. So just in the interest of time, I don’t want to tell the quiet light story. But it’s such a good one. What I would say is, is I now work as an advisor with quiet light brokerage. And it’s not by accident, right? Like I like I had one broker who decided I was his succession plan and tried to sell me a whole brokerage. I had like these middle market firms like flying in from the coast and taking me out to lunch trying to recruit me like unsolicited style. And I just picked up the phone and I called Mark doused and I said, Listen, you know, I’ve worked in the public markets, I’ve worked offline offline, like, I know, middle market, well, I know Main Street well, like if I ever were to become a broker, I would only do it a quiet light, because the summaries are so thorough. And I love the online space. And so if I was ever going to be a broker that I would only do it at quiet white. And so if you’ll have me, I’d love to be a part of the team. And if not, that’s fine, I just will never do this. And so the thing is, is, um, I’m now part of the team been a part of the team. Um, I love what I do on that side. And so the point is, is if you are interested in buying a business, I believe that the best way to get an education on what you like and don’t like is just look at a lot of prospectuses. Right. So go to quiet light, sign up for the, you know, for the prospectuses and just tell yourself, hey, I’m going to look at like 30 of these not even allowing myself to truly consider acquiring it. But just reading it and thinking about Okay, what do I like? What do I not like? What are the risks? What would need to be true in order for me to move forward with this and just use it as fodder to kind of start you know, sharpening your own saw, right? I’m on LinkedIn, that’s that’s probably the best place to reach me. I’ve got a buy then build Facebook group that’s now rapidly approaching like 1000 members like pretty quickly. Rule number one I didn’t know which was like don’t have a group on LinkedIn have a group on Facebook right if I didn’t know that, I’ve learned it. But so I’ve got a free Facebook group. I’ve got a lot of free resources on by then bill calm. There you go. There’s a bunch of free stuff and ways to find me.
Very nice. Thank you everyone for tuning in to today’s Firing The Man Podcast. If you like this episode, head on over to www.firingtheman.com And check out our resource library for exclusive firing demand discounts on popular e commerce subscription services that is www.firingtheman.com/resource. You can also find a comprehensive library of over 50 books books that Ken and I have read in the last few years that have made a meaningful impact on our business, or that head on over to www.firingtheman.com/library. Lastly, check us out on social media at Firing The Man on YouTube at Firing The Man for exclusive content. This is David Schomer and Ken Wilson. We’re out
Transcribed by https://otter.ai