Becoming an Entrepreneur by Acquisition

You don’t have to build a “Facebook”

A lot of people out there want to be their own boss (see the remote work and 1099 revolution since 2020). A lot of those people think (as I did) that the only way to do it is to have some sweet idea, launch it, spend a ton of your money getting it going, and then risk being the 90% of startups that fail or become the next unicorn like Mark with Facebook. Fortunately there’s another option that’s been around as long as business has been around – buying a cash flowing business.

Buying your way to CEO

Mergers and Acquisitions happen all the time in business and you’ll sometimes see them in the news. Big dollar amounts and ownership changes for big corporations. Typically it’s to grow into a new market, pad a current market fit, and maybe even remove a pesky competitor by absorbing them. The ones you don’t hear about are the small business ones. The companies with asking prices of $1,000,000+ that have maybe 10 employees. The ones that are bootstrapped but cash flowing for a few years. These are the companies that the everyday human can actually purchase (without your own money to an extent), run, and grow! Why would you ever want to do that? Well….

Why Risk It?

There are numerous reasons why acquiring a cash flowing is a good idea and why I’m planning on doing it. I mean if you have a Harvard Course teaching about it then it must be a legit thing right? Here’s why I’m looking into buying a business:

1) Your income is now controlled by you. No more performance reviews or questioning your work ethic. If you’re a entrepreneur in any sense of the word this one probably hits deep.

2) One of the things you can invest in no matter the economic situation and come out on top. Business owners (pending the industry) do better than most W2 employees and in high times of inflation.

3) You’re in charge. You now become the boss. That’s a lot of pressure and responsibility, but if you can manage it some will be better off (even happier). I’m hoping to be on the latter side of that.

4) I want to expedite my early retirement. I’ve posted about this before, but the fast way there is starting your own business, investing aggressively, or hitting the lotto. You can control the first two.

What I’ve Learned & Done So Far

I’ve explored this for a few years, but just like my real estate investing, I hit a bit of paralysis by analysis. I hit a point where I was finally ready and started seriously exploring how to get this done.

– The first step for me was looking into why I wanted to buy a business and what my big mission statement was. I read Buy Then Build and it was an excellent resource for me. This also providing me numerous other resources and directions that helped in my direction.

– The second step was to figure out what I would bring to a business (which kind of ties to the mission statement in step 1). I’ve been in sales in multiple industries, in different roles, creating processes, and touching all parts of the organization. My strength lies in sales & marketing, revenue operations, and Go-To-Market Strategy. I needed to find a business that was lacking in one of those departments.I

– The third step was to figure out how I going to fund this and what type of income I wanted from a business (Sellers Discretionary Earnings or SDE). That SDE number is important in reviewing businesses for sale because it’s what the SBA will use to evaluate if it’s even worth them lending on (typically 3x SDE is the fair purchase price not counting inventory or real estate), it’s what you as the owner have after add backs, it’s what you’ll have to also grow the business, and it’s what you’ll be using to pay your loan back. This is where I learned a ton about using SBA Loans, found out about SBA Ray (and others), ROBs, and the other ways of funding an acquisition.

– The final step for me was to start looking at different marketplaces, find a local broker (after talking with 4 – Greg with Boss is who I’m working with), and start speaking with Lenders. The easy part here was asking around to find some of these contacts. My long time Realtor and friend, Chris Pixley with Fusilier pointed me in the right direction on brokers. This part of the process also includes regularly signing NDAs and reviewing businesses that were attractive to me.

The Next Steps

The journey has really just begun. I’ve been signing NDAs, recasting tax returns, and deep diving businesses that seem attractive at first glance. I’ve spent a good amount of time learning this process and I have yet to submit an LOI or Letter of Intent. I do plan on getting at least one in by the end of this year and I plan on sharing the complete process once I finally transition into owning my own business.

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