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Podcast: Amazing FBA
Episode:

Business Buying Process with Walker Deibel
Category: Business
Duration: 00:38:56
Publish Date: 2020-04-01 00:00:10
Description: On this podcast, Walker Deibel of Quiet Light Brokerage will be talking about startups and the business buying process. “Buy then Build” Part of the business buying process is “Buy then Build” has been adopted by two universities as a required textbook But Walker spends 40 hours a week at Quiet Light Brokerage And there’s a reason why he wants to help “acquisition entrepreneurs”. Walker Background Walker is the author of Buy then Build - how acquisition entrepreneurs outsmart the startup game and a business broker at Quiet Light Brokerage Was an SEC-registered, stockbroker Also M & A person - familiar with private middle markets Also works as a business broker ⁃ Has bought ½ dozen companies himself - only one was a straight-up e-commerce Also done a couple of startups and had a couple of exits himself ⁃ Had a fulfillment center ⁃ Now works for Quiet Light Brokerage The other is “buy than build” which is also a book What brought you to Quiet Light Brokerage? Pre 2010 the first company he bought was a book printing company. He was charged with the mission of getting a brick and mortar entity online They called it “print is dead”. Walker had some strategic business issues to address and grow through acquisition. Searching for a business to acquire Looked at 100s of companies from lists and 27 in real life Quiet Light has a team made up of entrepreneurs that have done this means they make a better prospectus. In the end, Walker was given a chance to sell him a brokerage. Walker ended up buying a company from QLB and it came up organically. He just asked Mark. Prospectus Most entrepreneurs don’t even think about buying business until they’ve sold. Then 60-90 “Gosh that startup period is so hard, I’d rather buy and cashflow immediately” Zero to One startup - Peter Thiel - creating a whole new marketplace. That is a true venture capital market Most people are trying to do an N+1 thing - you’re not creating a whole new market. What is the purpose of a startup? But most people are aiming for creativity, autonomy, financial independence. Part of the business buying process is to give away stock in your company for equity aim: “build infrastructure such that the output of the infrastructure is bigger than the cost” The startup phase is defined by not having a bigger output Only 4% of companies in the USA ever exceed $1M (“Scaling up” Verne Harnish) SBA lends up to 90% of the transaction value of businesses. Downpayment close to that of a home in America The minute you can stop focussing on cash flow, you can start focussing on how you Moneyball There is an analysis on SABRE metrics - batters who get on base, rather than home runs, they cost less money and they can win at baseball. The Red Sox adopted this. IF you acquire a business generating $1M in annual revenue, you’re already It’s somewhat affordable, it’s a margin of safety, Lower multiples than the middle-market so cheaper. Startup success rates vs SBA acquisition People put in capital, sweat, 2 years trying to get it off the ground. 90% of them fail - they go to ZERO! Businesses that have been acquired using loans from the SBA - 3 years ⁃ Default rate has been as 2% So if you define Entrepreneurship Despite the necessity and importance of entrepreneurship, it’s still a crude and error-prone process Investment perspective Pretend you’re going to buy a business with Metrics $1.4M in revenue $200K in earnings Buy for 3X profit SBA loan plus 10% down payment So invest $94,120 Future You’ll hold it for 10 years Grow at 10% a year Then at the end $3.9M rev, $600K earnings Sell for $2.5M After interest etc. discretionary earnings are $5M approx. including exit cash 27X ROI on the 94K “We’re going to 10X this sucker” Entrepreneurs in a startup often say this. But you just 27x your capital.
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