Monday, November 2, 2020

Acquisition Entrepreneurship - Buy Then Build Book Review Summary

 Buy Then Build Book Review Summary Take Aways

I have always enjoyed entrepreneurship, in fact I earned a Master's in Entrepreneurship from Western Carolina at a time when I was starting and acquiring businesses, after realizing the MBA program I was already deeply into was not focused enough on start-up dynamics, innovation, or growth strategy. 

I'm currently reading the 2018 book "Buy Then Build" by Walker Deibel which received 4.5 stars on Amazon. The summary highlights I found most valuable are below: 

  • Big distinction between launching a startup and running a small business. 
  • It's better to buy an existing company that already made it because most startups fail (90% chance of failure and losing the 65k in invested capital -- a common case is running out of cash, having a non-functioning / inferior / non sellable product, and not having any or enough customers -- again, do not start a business, buy one (acquisition entrepreneurship). 
  • Best to buy a business greater than 1 million in revenue to eliminate most of the risk inherent to entrepreneurship.
  • Buying doesn't mean a lot of money out of pocket - in some cases it can be like 65k paired with a 90% loan for a company generating over 1m.
  • It's not easy to sell a small business so still need to be careful taking on risk.
  • Adhere to the adage of making money when you buy (which means get a deep discount coming in and don't over extend yourself)
  • Odds of success are 98+% whereas start up is 10%
  • Napolean Hill quote worth remembering: Set your mind on a definite goal and observe how quickly the world stands aside to let you pass
  • Don't start with what industry to target or what type of business do you want to find - but knowing how and why you will win by looking at the 3 As of attitude, aptitude, and action which help you move forward with conviction...basically start with yourself and the rest will come.
  • To be successful you need: strategic thinking skills, interpersonal skills, intellectual ability, industry experience, ability to deal with uncertainty, tenacity, organization skills, focus, be achievement oriented, thick skinned, risk tolerant, self confident, creative, assertive, decisive, methodical, perfectionistic and optimistic. Take a CEO mindset which includes doing a SWOT analysis on yourself.
All of this leads us up to the chapter on The Search on page 89...in some ways a lot of fluff so far, inspiring fluff, but fluff imo.

How do you find good companies for sale? 

  • One of ten people looking to buy a business will purchase one.
  • The current process of buying a business is flawed and opaque, involving a high level of confidentiality. 
  • Your first job as CEO is to find the right business so don't depend on just one business broker, look just at listings.
  • Realize that every business is for sale but owners usually want more money than they're worth which is why having a business broker is important in resolving this gap.
From here there is a lot of discussion on using lawyers, and CPAs, etc, but really nothing I'm seeing that is unique to expand on the book's proposition, just the basics - but still good information to consider. A lot of accounting formulas, etc. 

There is a good chapter on making an offer, with a nice graphic on the phases of business acquisition: commitment> preparation>search & analysis > letter of intent >(APA, due diligence, contingency removal, financing) > closing > ownership

From LOI to closing will be emotional. 

In the letter of intent there should be: 

  1. the type of purchase (asset or stock)
  2. how much you offer and when (structure, financing, etc.)
  3. date of closing - 6-8 wks out
  4. contingencies
  5. asset purchase agreement in the future agreement
  6. outline of escrow deposit 
  7. outline of expenses for each party
  8. confidentiality and exclusivity 
Comments on what you found helpful in the book?

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