The Personal Finance Podcast - How to Buy Then Build a Business with Walker Deibel

Episode Date: June 12, 2023

In this episode of the Personal Finance Podcast, we're gonna talk to Walker Diebel about how you can buy, then build a business. How Andrew Can Help You:  Join The Master Money Newsletter where you will become smarter with your money in 5 minutes or less per week Here! Learn to invest by joining  Index Fund Pro! This is Andrew’s course teaching you how to invest!  Watch The Master Money Youtube Channel!  Ask Andrew a question on Instagram or TikTok.  Learn how to get out of Debt by joining our Free Course  Leave Feedback or Episode Requests here.  Thanks to Our Amazing Sponsors for supporting The Personal Finance Podcast. Chime: Start your credit journey with Chime. Sign-up takes only two minutes and doesn’t affect your credit score. Get started at chime.com/ Shopify: Shopify makes it so easy to sell. Sign up for a one-dollar-per-month trial period at  shopify.com/pfp Policygenius: This is where I got my term life insurance. Policygenius is made so easy. To get your term policy go to policygenius.com and make sure your loved ones are safe. Connect with Walker Deibel Website Linkedin Twitter Buy Then Build: How Acquisition Entrepreneurs Outsmart the Startup Game Connect With Andrew on Social Media:  Instagram  TikTok Twitter  Master Money Website  Master Money Youtube Channel   Free Guides:   The Stairway to Wealth: The Order of Operations for your Money  How to Negotiate Your Salary  The 75 Day Money Challenge  Get out Of Debt Fast  Take the Money Personality Quiz Learn more about your ad choices. Visit megaphone.fm/adchoices

Let's talk groceries, specifically your groceries. With Instacart, you want your groceries just the way you like them, right? Well, the Instacart app lets you do just that. They have a new preference picker that lets you pick how ripe or unripe you want your bananas. Shoppers can see your preferences up front, helping guide their choices. Instacart, get groceries just how you like. On this episode of the Personal Finance podcast, we're going to talk to Walker Dibble about how you can buy, then build a business. What's up, everybody, and welcome to the personal finance podcast.

I'm your host, Andrew founder of mastermoney.com. And today on the personal finance podcast, we're going to be talking to Walker Dibble about how to buy, then build a business. If you guys have any questions, make sure to hit us up on Instagram or TikTok at Master Money Co. And follow us on Spotify, Apple Podcasts, or whatever podcast player, you love listening to this podcast on right now. And if you want to help out the show, leave a five-star. rating and review on Apple Podcasts, Spotify, or whatever your favorite podcast player is. Now, today, we're going to be talking to Walker Dibble about how to buy, then build a business. And if you've ever heard me raving about this book called Buy Then Build, Walker is the author

of that book. And what this book talks about is how you can go out and you can buy an existing business and grow that business to increase revenues and you can support your lifestyle and be able to own a multi-million dollar business for much less down than you actually think there is. is. And if you heard our episode, we talked about this massive generational wealth transfer that's about to happen. This is where a massive opportunity lies for a lot of people who are interested in buying businesses or investing their dollars into businesses. So today with Walker, we're going to dive into all different aspects of this, including how to go out and find businesses. How to finance

these businesses and what are some of the best ways to finance these businesses? How you do your due diligence when you're researching some of these businesses and how do you actually make sure it's a smooth transition once you actually buy a business. So we're going to go through all of these different aspects. And in fact, you're going to be very surprised on how much you can buy a business for and some of them are even around the same price as a rental property and they cash flow much more than a rental property would. So really excited to dive into this episode. Without further ado, let's welcome Walker to the personal finance podcast. Walker, welcome to the personal finance podcast. Andrew, thanks so much. I'm so happy to be here. Personal finance is a big passion of

mine. And I love your podcast. I'm just thrilled and happy to hang out with you today. Well, I'm so excited to have you on as well because you wrote a book that truly did change my life and changed my perspective on a number of different things called buy than build. And when I first read buy them build, it was one thing where we always talked about here on this podcast. We talk about investing in index funds and ETFs, investing in real estate, that type of thing. We've added a third option talking about buying businesses because of your book. Your book is the actual impetus that actually changed my entire perspective. So today I want to dive into buying businesses and some of the reasons why somebody would want to consider something like this.

But before we dive into that, can you kind of talk through your background and what made you an expert in buying businesses? Sure. I mean, you know, I feel the need to share that I got the idea for buy them build because when I was getting my MBA between 02 and 04, okay, I was really trying desperately to start a business from scratch, right? And that didn't work out, okay? which it turns out is, you know, that's very common for it not to work out, right? It's sort of like punishment for not understanding statistics, right? But the thing was, was I knew that there was a way to go out and sort of like acquire a business, but I couldn't find any materials on how to do it. And of course, coming out of an organized business institution, I was completely surprised

that there was this sort of like little capital market that had like no materials and no best practices and everything was like opaque and fragmented and subjective. It was so bizarre. And I realized at that time that I would love to one day be able to write that book, right? And I considered for a minute sort of like, well, maybe I could just go interview a bunch of people and write it now. And I was like, well, that book would be terrible. I want to write the book, right? So I decided I needed to live it first. And then one day, if I got around to it, that'd be good.

And so the seed was planted back in 2004. I then, I bought my first company in 2006, ran that for CEO for seven years, sold it to an acquisition, target and then use the proceeds and additional bank financing to go out and acquire another six businesses. So all in, I've acquired about $16.5 million in revenue and then sort of grown it from there over about a 17 year period. I also, when I was doing all this, I wanted to understand the private capital markets as best I could. So not only was I already a stock broker and had experience in the public markets, but I went out on just any certification, like certified M&A advisor, certified M&A professional, exit planning advisor, like anything that had

anything to do with it. So I've lived it. I've lived it, Andrew, for a number of years. And the thing was, was I started to get introduced to other entrepreneurs as like, this is Walker. He buys and sells businesses. And there was this separation. People thought that I wasn't doing what they were doing.

And I was like, everyone's missing it. Like acquisition is not, not entrepreneurship. It is entrepreneurship. I'm doing the same things you guys are. I'm just sort of starting at a different level and sort of doing this money ball game where I start with, you know, revenue infrastructure, cash flow, customers, et cetera. And it really shines through through your book on how much expertise you actually have. So I'm so glad you actually waited and kind of lived it first because there's so much expertise that

shined through with all the examples that you give in the book. And I really highly encourage anybody who's listening to this podcast to pick up his book because it is one of the best things. I use it as a handbook, really, when I kind of go through some of this stuff. And it really resonated with me because Warren Buffett's one of my. heroes. And I thought to myself, well, what if you can create like a micro company where you just kind of do what Warren Buffett did just in a smaller sense? And I think that's really cool and what kind of shines through with your book. So I want to kind of dive into some of the basics first for

people who don't understand this concept. Maybe they've never been thought about buying a business before. So what kind of is the difference between buying a business or starting up a business? And what are the pros and cons of each? Sure. Okay. So starting a business from scratch is just like, hey, I've got this idea and I'm going to go like create this business out of nothing. Okay. And we We all sort of know that like 90% of startups fail. Okay? What's slightly less well understood is what do the 10% that make it actually look like? And the truth is, is that 96% of them never even exceed a million dollars in revenue.

We all want to go out and read Peter Thiel's zero to one and we want to start the next Facebook, the next square, the next like, you know, massively innovative startup, right? These are the people that, you know, we celebrate on the covers of our magazines and on the headlines and all the rest of it. But the truth is, is that's not what entrepreneurship looks like most of the time. Usually it's like, hey, I'm Walker and I love SEO. So I'm going to go start another SEO business in St. Louis. Or pick your favorite trade, right? I mean, that's usually what it looks like.

Sort of the e-met. Like, hey, I'm going to open my pie bakery or whatever. And when you start to understand those two things, number one, that most startups never exceeded a million dollars in revenue, which is a really low hurdle rate for being so exceptional. And number two, most of those. businesses don't deserve. Most businesses don't deserve this kind of zero to one approach to entrepreneurship. And when you go out and acquire an existing business, again, I refer to it as like the money ball of entrepreneurship, because instead of saying, hey, I'm going to start this infrastructure

from scratch and try to generate revenue and customers and hopefully earnings so that my business is sustainable and I can keep doing it, you reverse engineer it. And you say, okay, look, I'm going to buy a company, maybe one that's been around for 80 years, okay? And it's got revenue, it's got customers, it's got infrastructure, it's got knowledge, it's got people, and it has profitable earnings, or else you shouldn't buy it. Spoiler alert, okay? And so you start with the sustainability aspect of owning a business. And then basically, you grow it from there.

And that's the build part, right? So buy that build, right? So the concept is just flipping the startup model on its head. One thing, Andrew, that I want to underscore here, though, a lot of times we look at acquisition versus starting up. And that's obvious because I'm obviously a proponent for the latter. I am truly a proponent for both. And the thing is that I believe ultimately that innovation and acquisition

are both equally important. And if you do successfully start a business from scratch, Sometimes you grow up and buy Whole Foods. In other words, acquisition is always a part of a company's lineage, right? It's always a part of their path because it's just a function of how companies grow. So innovation and acquisition together are the true secret to business mastery. And I completely agree with that because I think one of the cool things that you kind of talk about in this book is you can kind of think through. I want people who have never thought about this concept before to kind of think through this a little bit because you are literally able to buy an existing business that already has the customer's,

in place. It already has all of the infrastructure in place, the systems in place that you can look at and improve on if they need to be improved on. And it has the revenue in place. So you don't have to try to get all of these new customers. You don't have to try to go out and try to find that revenue. It already exists. So your job is to take it over, create efficiencies, and then try to grow it over time. And this is the beautiful thing about what this concept teaches. And like you said, if you even have a startup, you should still be looking at doing stuff like this because you can acquire competitors. A lot of things can happen along the way throughout your career as you go through this process. So I love that idea, and I think this could be for anybody out there, whether you

want to acquire businesses now or even in the future if you're an entrepreneur. And one big thing to talk about here is, and we've had an episode on this on how big of an opportunity this truly is, is the fact that the baby boomer generation is retiring at a very rapid rate. So can you kind of talk through why this is a big opportunity for a lot of people at this point in time since the baby boomer generation owns a large portion of small businesses? Yeah. So as I was kind of getting into this, there's a book called the $10 trillion opportunity that came out. And this was probably 13 years ago or something when this book came out. And I was like, wait, what? And I started to understand a couple of things. First, baby boomers own more companies than any other generation

in all of history, in any country, at any time, any place, whatever. And when you look at the small business infrastructure that the baby boomers still own, it's estimated to be $10 trillion in business value that really needs to change hands. by the end of this decade. It's massive. When I looked at the numbers recently, it's something like 43% or 47% of the entire economy is still owned by the boomers.

And so we've got this massive transfer. Now, the thing is, you also have these two other things that are kind of trending as well at the same time that make this kind of unique opportunity, meaning unique time for this opportunity, which is, number one, baby boomers retiring just this massive infrastructure.

Number two is this tech wave, right? So if you think about just the baby boomers and their companies, like the internet did not exist when they found product market fit. Most of them have very little to no debt. They've already put all their kids through college or whatever they're going to do with the cash flow. They're half retired. They have no interest in reinvesting or taking on any risk.

And they maybe have never even really looked at online marketing or what kind of no code, low code systems can we put in place or whatever. Right. So I'm not going to say that there's this low-hanging fruit, but there's this possibility where online and offline can sort of like marry together, kind of like never before. Also in that same vein of this tech wave, you know, one of the things that I've bought manufacturing companies with 50 employees and 50,000 square feet and big machines. I've done that. I've also bought the four-hour work week. And I acquired an e-com business in 2016. I've been able to grow that slowly and steadily over time. And so it's one of these, where if your desire is to go out and have a major impact by like lifting this big tech innovation on like a bricks and mortar business, you can do that. If your passion is, hey, I want to own an online business selling toilets or whatever and like travel the world or just have more free time, you can do that too. Or you can be like me and be like, wait a minute, if I can run this company in four hours,

like I want nine more. And then the third thing is simply that getting money for these types of transactions, although it's always been way easier than starting a business from scratch and raising capital, it's never been easier to get financing for your acquisition for these companies. Absolutely. And I think that is one of the most enticing things that we'll talk about here is kind of how to get the financing because I think there's some really valuable things that you can look at and put into play here, specifically with baby boomer generation, if they're retiring, you could do seller financing

and other stuff that we'll talk about here in a second. And I think one big thing to think about here for people who are kind of thinking through this process is I traditionally have invested in index funds, ETFs, real estate like we talked about earlier. But in addition, one thing to think about here is that when you buy businesses, there's no piece of real estate in the world that you can turn from, say, a $500,000 piece of property there, into a multimillion dollar property. There's no piece of real estate that you can kind of grow and build wealth that way. But with businesses, you can. And you can acquire it in the same type of financing or sometimes it's even better terms in order to kind of build wealth as we go about this. So for people listening, if you're trying to think through maybe real estate or.

buying businesses. There's a lot of really cool options here that you have available to you to build a lot of wealth very quickly by buying businesses, especially if you know what you're doing as an operator, which is a really, really cool aspect of this. Now, maybe people are listening and they realize, oh, this is an amazing opportunity for me. I want to start looking into how to do some of this stuff. So they want to start searching for businesses and seeing what's out there. So what are some of your favorite ways to search for businesses when it comes to maybe starting your search and then doing some advanced searches when you get really, really serious? Yeah. I don't know that my answer actually changes all that much for either one of these profiles. And I think that here's

the thing, it's really easy to popularize sort of proprietary deal flow, meaning just going out and trying to find off market deals. And I'm not going to go so far as to say that that's sort of like borrowed from real estate, okay? But the thing is, is that like, I think that there's way too much emphasis on it. And I've been a participant at one level or another proprietary deal flow for almost two decades. And the fruit of that labor is very minimal. I mean, you sort of get like a, you know, you grow this big tree with your effort and you get like a blueberry. Okay. It's massively inefficient, but it's easy to popularize. Instead, I want you to understand that when you're a business owner, the odds that you are going to sell your business without consulting some sort of

professional are approaching zero, unless you're like totally screwed. And even then, you should still go to a business broker of some kind, right now have a conversation because they probably know who the buyers are. The point is, is I believe that broker outreach is actually the fastest way to the most efficient deal flow. And the reason why is because once you actually start navigating this market, trying to buy a business, you will find on the buy side that the single hardest thing to uncover is the sellers or potential sellers willingness to actually sell the business. If that seller is already working with a broker. That means they are ready to sell. That's huge. I mean, you're like already on third base, just right there. Moreover, and perhaps more importantly, the broker has already

educated the seller on what the expectations are for selling their business. Because I've never met an entrepreneur who thinks that their business isn't worth 20 or 30 times, you know, whatever number they think. You put your blood and your sweat and your sweat. and your tears and you're in the arena and you've got blood on your face and dust on your hands or maybe that's reversed and you're just out there doing it. You're putting your life in your business. It comes time to sell it. How much is that worth? It's your whole life, Andrew, right? I don't care if it's four years or 30. It's still your life and you have built something that creates value that generates money and it's going to be valuable to somebody. That broker explains to

them, hey, look, I know you have all these dreams, but let's get you down to reality and start looking at what these businesses actually transact for and what kind of deal structures we can expect. So not only are they ready to sell, but they already have some kind of expectation that is much closer to what that business is going to transact for than anything off market that I've ever found. So the point is, is people will go to brokers and they start their outreach and then they decide something along the lines of, well, I'm not getting enough. I'm going to go start spending my time on proprietary deal flow and stuff like that. And that's fine. Put yourself out there, okay? But the thing is, is that most people, they fiend over more and more and more deal flow,

when in reality, you just need a few good sources and then you wait. It's like fishing. You don't throw your line in and you catch a fish on the first cast. You have to sit there and wait for a minute. You need the fish to swim by it, right? You don't just, you know, the sellers aren't sitting there waiting for you. It does take time. And so I think you need to restructure how you're thinking about it.

and really just focus on find the best brokers in your geographic territory, find the best brokers working in your industry, you know, or whatever it is, however you're deciding to go after your search. Those are the people that you need to meet and get upstream to. Andrew, one more example. But the truth is,

is I actually work as a broker too, okay? And so I sell online-based businesses only, all right? I've done about 51 transactions in the last four years. I was just looking last week. Wow. And there's certain people that I know. are buying in a certain space or certain people that I know are looking right then or whatever, and I'll know that I've got one coming up that should be of interest to them.

And I will often let them know before it goes live. And they'll get sort of an early preview. And I'm not doing it to stack the deck. I don't care if they're going to buy it or not. The point is that that's the best way to get early deal flow is to talk to the people that are getting all the deals to begin with. And Biden and Bill does a beautiful job on kind of talking through how to network with these brokers to show them that you're very serious because making sure that that broker knows that you're serious is a very important thing because they have a lot of people coming through that never actually go out and buy a business. So it's very important to show them that you are a very serious buyer. And one big thing obviously is figuring out what sectors you want to be in or in what industries you want to start buying businesses. And so how do you kind of narrow down that search? Maybe you're brand new to this. You're looking to see maybe there's a different industry. that I want to start buying businesses in,

but how do you kind of narrow down that search for either your specific personality, maybe your experience, and or anything else that is related to that? Yeah, you started to get there in the question. In other words, I think, like, what industry should I look for is actually the wrong question?

And when I first started writing Buy Than Build, my ambition was actually to write a very different book than what came out of it. And I thought that I wanted to write sort of like a Jim Collins-esque, you know, best practices in this sort of a reason And what I found was that if there were best practices, they were kind of wrong, but they were sort of like rules of thumb that everyone was sort of using. And there was so many different examples of people saying like, well, you know, Walker. So I did all these interviews is the point. I did like 60 interviews of people who had done this like me. And it was like, okay, tell me your story. And then ultimately I'd be like, so what were you looking for? And they'd say, well, Walker, I was looking for the same thing everyone's looking for. I was looking for. And then they would say something completely different. And it was like, okay, and so I started to figure out that what this space needed was not best practices,

but frameworks. Okay. And one of the frameworks in there is what I call the prep funnel. And the concept is, is that when you start to talk with a business broker, M&A advisor, investment banker, whatever title they have, and don't be intimidated by any of these titles. It's all the same thing. Not really, but it's used to the same way. But the point is they often would say like, Andrew, like, all right, tell me about your background. What industry are you looking? for. And to your point, it's completely wrong. They're trying to figure out, like, okay, where am I going to place this person? But the truth is, is that every single person that is conducting a search, okay, they've got a certain skill set that they bring to the table. They have a certain way that they want to

design their life. If I don't mind being an industrial park, you know, and the only place to grab lunch is a McDonald's connected to a gas station, that's fine. Other people need to be in an urban an area, others don't mind being way out in the sticks. It doesn't matter. But there's sort of like this, what do I bring to the table? And I think one of the things that a lot of buyers get wrong is they look at a business and they're looking at it historically, trying to figure out like, okay, do I want to buy this? But the truth is, is you need to reverse it and say, like, you're CEO of this company starting like tomorrow. What are you going to do? What are you going to bring to the table to take this company to the next level? Or do you want to just sit around and

like treat it like a cash cow? Either one of those is okay. It's just a decision. And the truth is, is that when you go out and buy a business, what I don't want you doing is going out and saying, oh, I'm going to buy this company and it's going to cash flow and everything's going to be so easy. It's not. You've never done anything like this before. I don't care what you've done. The truth is, is that you are now CEO of this company and you need to figure out how are you going to be interacting with this company and leading it to the vision that you want to see. And I think that's such an important add-on because it really is one of those things where you have no idea what's going to happen once you acquire this company. And there could be a lot of difficulties, but it's not something that you could just sit back and relax and kind of enjoy this passively. This is something where you have to be very active when it comes to this. And so kind of preparing yourself as you go through this search process is one of the big things. And then you can kind of think through, hey, what do I bring to the table? What can I add on to this company so that I can increase profitability and some of these other things? Now, say somebody is looking through and they're doing their searches and they realize there's companies out there. And maybe this is something that

they're interested and they want to get really, really serious. Well, obviously they have to talk to brokers. But even before they do that, getting the financing in order is very, very important. So As we go through looking at buying businesses, making sure that we have that financing in order is going to be just one of the key things and networking with banks, all these different things. So what are some of the ways that you can actually finance buying a business like this? Sure. I mean, you know, just to land that last rant, Andrew, was, you know, I think ultimately you're not looking for a business to buy. You're looking for an opportunity that fits you, right? And that's ultimately what you're looking for. And so then it's like, okay, well, now that I've got

this opportunity, there's some kind of value on this. And I could talk at length about, about financing, but let me just make it very simple. Everyone is going to want you to have skin in the game. I know that I can run ads for acquisition lab or buy-then-builder or whatever that say, like, here's how you buy businesses with none of your own money. Okay, if that's actually your strategy, and this is the first time you're going out there and do it, doing it, good luck. It happens.

Sure, it happens. I mean, I was at an MLM conference when I was in high school and some guy stood up in the front and was like, I made a million dollars, whatever. I'm like, okay, fine, whatever. But it's not what normally happens. Like, I've done it myself. I can teach people how to do it. I just don't because not many are going to be successful.

And the truth is you need to be in the game before those types of opportunities start showing up. So to come in and win the Super Bowl, the first time you play football is just unrealistic. Okay. So like, don't have, hey, I'm going to be an A-list actor or be your career path. It might happen. But like, you know, there's other ways to go about it. To make it overly simple, the SBA came out. I think it was in January 1st of 2016.

and basically said, look, banks, we are going to provide Walker and Andrew with up to 90% financing with a maximum of $5 million in exchange for a personal guarantee from one of them. But we don't need, we no longer require that the business have all of these hard assets to collateralize the loan. So, Andrew, in short, if you want to do this and you want to succeed, I want you to get real comfortable with signing a personally guaranteed loan with the SBA. And I want you to be ready to put your own cash into it. Now, as you start to look at different valuations and different structures, sure, things like seller financing, things like earnouts and all the rest of it can come into play. But I've bought every single business I've bought. I've written the seller a check at closing and been done with them.

And that's how I prefer to do it. And I think that's a great ad as well because I think you do have to have skin in the game on most of these. And it's a great reality check for a lot of people because there's people out there saying, no money down all these different types of things. But really what happens here is get a quality deal and have that deal in place. You really want to have skin in the game. It's a very important thing to have and have available there. And I think SBA loans, you can go and you talk about this in the book also. You can go as low as, you know, 10% down on a million dollar business. You're putting $100,000 down acquiring a million dollar business. So there's a lot of cool things that you can do with SBA loans,

but you still have to have that skin in the game. I think that's very, very important. Are there any ways that you can think of? Do you just go directly to your local bank? What are some of the banks that you recommend for people to kind of talk through when you go do something like this? Okay, sure. Well, I think that by and large, you know, at the acquisition lab, we've got certain lenders that work with our buyers and whatnot because they can cover a lot of geographic areas across the country. But I think that every single city has, you know, some kind of equivalent of a business journal and every year they come out with, here's who's issuing the most SBA loans. That's who you want to talk to. Exactly. Like, you want to go in ahead of time and start conversations with

and say like, look, here's my background. Maybe you have a resume going with your personal financial statement, right? And just start having conversations and say, here's what I'm trying to do. And so I don't want to introduce myself to you after I found the business. And I'm coming in and saying, hi, I'm Walker. Nice to meet you. Here's a business I want to buy. And I like to put an LOI tomorrow.

They're sort of like, okay, whoa, hold it back up. That's okay. You can get through it. But I think that building your network of lenders is more important than building your network of potential investors. Because let's face it, the lender is the one with 80 to 90% of the money. And if you've got lending in place and you've got a little cash you're putting in yourself and you need to bring in an investor to round it out, you're showing up to the investors with like,

look, I've got a deal, I've got the financing. Now I need a little help. And now they're like, okay, that's a real opportunity. Let's look at it. Having the right lenders in place that are kind of in your corner makes the process so much easier. And so having that ahead of time and making sure that you have that set up accordingly is going to be a really important thing, especially when you find those deals.

that you're really, really interested in. So maybe we go through this process and we're looking at, you know, the acquisition process. We're looking through some deals. We find our financing. We have that financing in place and we finally get a deal. We have a deal in place that we want to put a contract on or we put a contract on and we have a contract on that business. So as we go forward here, what are some key factors that buyers should potentially look

into when evaluating a business for purchase? Do you mean after they're under LOI or while they're evaluating? While they're evaluating up front, we'll start with. Yeah, got it. Andrew, I think that it's one of these things where it's really easy to look at, you know, one of these small businesses and think like, okay, it's got this history of cash flow, right? And it just assumed like one of my pet peeves is when people are like, oh, bro, this company is like kicking off a mill. And it's just like nothing's kicking off a million.

It takes work. Like there's more going on, right? So ultimately, I'm looking at number one. I want to understand the technological alternatives and the sort of trends in technology because the absolute worst case study in the world is, you know, Fox Photo, I think is what it was called. So if anyone remembers this, but basically before digital cameras were widely available, you know, you would drop off your photos and you'd come back in an hour or four hours or whatever and you'd pick up your photos. And there was just these little stands like all over, pretty much

like if there was a Walgreens, there was a Fox photo. I think that's what it's called. Yep. And the point is, is that Kodak, the company that owned, all the film was also the inventor of the digital camera. And they withheld it for like two decades because they were making all their money and they didn't want to cannibalize their own business. Right. And so ultimately, the technology came up elsewhere. And I mean, Fox, this photo developing industry was like one of the biggest industry. I mean, it was like, I don't want to make numbers up. Let's go ahead and say like a billion. It was like a billion dollar industry that was completely wiped out to zero in about 12 months. And,

When I was in high school, I know someone who bought three of those. Wow. You know, I think he came out okay, but like, it was sort of like, wow. And so I saw that pretty up close. I mean, different generation, but like I saw it. So I'm always like, and same in the printing business, right? I mean, let me reverse it, Andrew. So when I bought the printing company, my first company, there was three reasons I did it.

But one of them was because I saw the trend moving to digital book printing and online ordering books. And everyone else in the industry was freaking out because there were the, these gray-haired fat cats complaining that it wasn't the 90s. And I'm sitting here like, you guys, like, I bought this company. I was working with like 125 publishers. And they were not offering digital printing low run. So it was like they have all of these like libraries that they're not running books on. We can print all of those.

So I bought the company and I put in, I installed digital book printing. And then we used that to sell to the existing cost. So it works both ways, right? But you just have to understand what technology is doing. And then frankly, Andrew, I always use like, Porter's by forces, just like textbook, MBA, business evaluation stuff, right? It's just sort of like, what's the competitive landscape? What's the barriers to entry?

What's the supplier power? What's the customer power? When you look at just all these different aspects, because the buying a business is tough because there's a lot of variables moving around. And you have to learn how to wait them. And I want to be very clear about something. For me, it's not about finding a business with no risk. If you want no risk, go buy a laundromat, I guess.

Like, I can think of no other business that has like lower risk than a laundromat. It still has risks, okay? And I would argue it's actually a real estate purchase and not a business, but let's not go into that. Anything with moving parts is the thing that has upside potential, but also is complex to evaluate. And so you need to learn to identify what the risks are and then sort of be comfortable with like, okay, I'm going to jump in and lead through these. am I comfortable taking on these risks here? Because you're never going to find a business with no risk.

It's impossible. And that risk tolerance is a great ad, too, because I think making sure that you are okay with some of the downsides that are available when you go and buy this business is one of the biggest things because the problems that come up are going to be partially from those downsides, and it's how you handle those and how you deal with that stress is going to be a major factor that comes into play. So I remember when I needed to hire someone fast, but finding the right person quickly felt impossible.

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Not noise. CBC News. Okay, when I sell my business, I want the best tax and investment advice. I want to help my kids, and I want to give back to the community. Ooh, then it's the vacation of a lifetime. I wonder if my out-of-office has a forever setting.

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We like the business. It's under contract. What are some of the due diligence items you want to do after you get a business under contract? Sure. I always encourage buyers to always start with your financial and legal diligence and just like, get it done. Okay. Like, it should not take two months to do financial diligence.

Okay. It's just sort of like get it done is what was represented true or not Because you don't want to get to the end and be two, three months into this deal and all of a sudden you look at the P&L for the first time and you're like, some of these numbers don't add up. Like, figure that out right away, please. Okay. Like do everyone a favor, including yourself and your legal bill. Okay. And just get that financial diligence done.

I personally, this is probably shocks some people. I've never paid for a quality of earnings. I've never gone that far or that professional. But I almost always hire a diligence firm of some kind. Okay. And the reason is because I would rather spend more money on diligence than legal. Because in legal, like, you're taking a risk anyway. Look, this is like faulty logic. Like, everyone should hire a lawyer. Everyone do whatever they say, right? You know, but the point is legal is basically like an, oh shit, let me undo what happened or like, what are my protections, right? But the truth is,

I want the lawyer. When I work with an attorney, like the legal due diligence is like, here, go look at this. Is it an entity? Are they being sued? Have they been sued before? Maybe a background check. Like just look at the documents with their clients, right? And be like, okay, do I need to switch this to a stock purchase? Because they've got these agreements that are non-transferable. Do that legal and financial.

Get it done. Okay. Then you're going to be comfortable at that moment moving forward with a purchase agreement. And it's sort of like that part where you're able to do this sort of operational due diligence. And once you tell a seller like, hey, I did financial diligence and we're all good. that's code for, I don't have any foundation for renegotiating the contract that we've already agreed to, and I'm just trying to close. And if you have speed and confidence to closing and your corner is a buyer, you're going to win. You're going to win.

And that's key. Okay, if you're fickle or you're waffling or you're trying to like find an angle, people can't wait to eject you. It's just true. So, yeah, that's due diligence. And I guess what I would say is, is like, also don't rely on. on a due diligence firm to completely, they're not buying the business. I mean, I don't want to belittle them, but this is some accountant or whatever that you hired to like review financial statements from the comfort of their office.

They're not looking at the operational. No one's checking the time cards. You know, no one's like following an order through the facility to figure out like, right now where does this go or whatever? Like, that's your responsibility. So no matter how many third parties you hire, it's still on you to make sure you're not making some massive mistake. And I think that that can be totally nerve-wracking for a lot of people.

Listen, Andrew, this is the personal finance podcast. When I talk to ultra-high net worth individuals, okay, or even people that are, you know, just high net worth individuals. And you ask them the question, like, what did you do to get there? Their answer is some version of the same thing, which is I took risks that no one else was willing to take. Right. And then they get out of their Maserati or whatever.

I mean, it's just like, that's the thing. And, you know, business ownership is a calculation. risk. So it's all about finding that opportunity that fits you, finding, identifying the risks that are there inside a business that you're comfortable with saying like, I'm the person that can lead through this and can take this on. And number two, getting the closing and buying that business and getting going. That's the deal. And you are so right on that where people who really have those high net worths. I mean, net worths above, you know, $10 million are typically folks who do things like this. They buy businesses where they start businesses and business is kind of how you get to that level,

which is a major factor when it comes to this. Now, if someone goes out there, and they want to acquire a business, do you recommend that they have experience in that industry? And if they have limited experience in that industry and they acquire a business, what kind of tips do you have for them as they acquire that? Yeah, I think it's one of these where if you're familiar with search funds, they sort of got popularized in Cambridge and then spread to Stanford. And you can follow the direct lineage of the spread of search funds. And the concept is, hey, let's get a bunch of investors together, get some bank debt, and, you know,

back these sort of Ivy League MBAs graduating with very limited experience and then we'll sort of buy businesses with very low risk and engineer safety into the acquisition and then buy it and put them in control and we'll sort of sit on the board and help them. If I were graduating with my MBA today, I can think of nothing better than going that direction. I think that's awesome. I mean, you end up with maybe 20% of the company if you're like a rock star, but it's sort of like, hey, let's help you make this leap and then we'll kind of back you and call me anytime, you know, kind of situation. But short of graduating from a top MBA program and being blessed with a boardroom of people who are willing to back you, I'm going to anchor this in, I think that entrepreneurship is a bit

of a condition, right? It's not a job, right? It's something that you have to do. And I think that there's this kind of myth out there that buy a business, it's easy, you can do this, like, you know, whatever. And there's some truth to that. You can. You absolutely can. It's unlike anything you've ever done before. All I can say is, you know, I work with a lot of sort of mid-career first-time buyers through the Acquisition Lab. And like one of them, she went to Harvard. She ran every single division for like a big startup company that everyone listening would know. And then she quit, joined the lab, bought a business. And she worked pretty quickly, got it done in about four months. And then I called her about, I don't know, one of three months after and was like, how's it going?

and she said Walker, nothing that's happening is a complete surprise because everyone told me, you told me this is what it was going to be like. But the truth is, it's exactly what you said, but there's no way to understand until you're actually in it. And I'm like, that's right. And the thing, Andrew, is that like when you talk to entrepreneurs, they often will say, like, if I had known how hard that was, I never would have done it. Right.

I never would have done it. But I didn't know. So like I just did it. And those are my favorite people in the lab because they come in and they're like, I started a business from scratch. I sold it. There's no way I'm doing that startup part again. I'm going to buy a business and we're going to go.

And I love those guys because they know what it takes to operate a business, right? To run a company. And that's ultimately what you're doing. So I forgot the question, but hopefully I answered it. Yeah, you did. And I think for this, I think it's really important to talk about this because I think when you acquire some of these businesses and, you know, I've started businesses in the past and stuff. There is a lot on the emotional side that happens to you, specifically how you deal with

the stressors that happen, solving those problems. Some people are just not made to solve problems in the way in high stress environments. And sometimes that has to happen when you own a business. So I think it's really important to kind of talk through some of that. And I'm glad you're bringing that up because I think it's one of the most imperative things for people to understand before they go into this is you got to be able to kind of deal with some of those different things. Now, when it comes to this, if you want to buy multiple businesses like you have and some other people out there, what are some of your suggestions if you need to own multiple businesses, do you put operators in place? Or what is your thought process on that? And how do you find operators if that's the case? Sure. I have a couple

thoughts on this. And on the one hand, I can support any path. But on the other hand, life is subjective, and I'd like to give you my opinion, which is if you want to buy a lot of companies, my suggestion is buy one. And I want you to take a crawl, walk, run approach. And I think that even if you work in private equity. And you're coming into this and you're like, okay, I'm going to go buy whatever, 12 to 24 companies in this one vertical and whatever. That's fine. You can sort of structure it like that from the beginning, but it's not going to go how you think. That's all I'm going to say. So it's sort of like buy one and run it for a while. That's my advice. Now, if you're going to load up on operators, a couple of things, please don't buy a business and then run an ad for a president. What I want

you to do in how I have found success with operators, okay, is I find the operator first. And, you know, I think it was Steve Jobs. It's something along the lines that I'm going to butcher this. Something along the lines of like creativity is just connecting two dots that already exist that haven't been connected. You need to find your operators first. And then you need to understand in the same way that I'm asking buyers to run through the prep funnel, okay, and understand that they've got the right attitude, what's their aptitude, what's the action they want to take and marry it with an opportunity, you need to do that with your operators before you search. And when you do what we've talked about earlier in the call and you go out and you connect with brokers, the problem,

Andrew, is that once you buy a business, you have a whole bunch of businesses still hitting your inbox because you spent all this time getting deal flow, right? And so your eye kind of starts to wander. So it's a little like, I don't know the analogy. I guess I've never been on a dating app, but I guess it'd be like, I'm on a dating app and I did all this work and then I got married, but like the dating app is still like showing me all these people. Like I don't know if that's, you know, analogous, but but the point is, is like, you still get all these deals. And what's happened to me every single time is that it's like, you know, you work your network. You know who the people are. And then all of a sudden I'll see a business. And I'm like, huh. And I'll make a call and

say, you know, Andrew, do you want to go see this podcast company? And you're like, yeah, let's go, doc. And I'm like, great. And we go in and we look at it together. And then I'm like, well, I've got money. And you're like, I've got time. there we go, right? I mean, that's how it works. Okay, that's how it works. And so find your operators first. Exactly. I think that makes perfect sense because I think, you know, kind of having that in place and thinking through some of that is some of the key things here. Now, one thing you did mention is online businesses that we haven't really touched on a ton yet. And I think online business are one of my favorite ways to invest in businesses. And I think it's one of the cool ways that you can really

scale and not have a ton of different people that you have to have involved, depending on what the type of business is. So can all these systems kind of work in play when it comes to online businesses, you have different systems in place when you want to acquire something like that? So online business provide a very unique opportunity for buying multiple companies at once or in rapid order. And why is that? And I think it's because, number one, there's no geographic limitations to management. Number two, it's low headcount.

And number three, probably most importantly, all the core competencies are basically the same. It's like online marketing, customer service, and whatever, ordering inventory. I don't know. something like that. So if you can build a core competency and just pick one, okay, and say, like, I do Google paid ads better than anyone on the planet. And I actually think I know the guy that can. And he has exactly gone out. And, you know, he's bought probably between 20 and 30 companies, all because he can in one day jump in, get access to analytics, look at what he's looking for and see if he can grow it or not. He can decide within a 24-hour period if he's going to buy the business or not.

Wow. I have seen this over and over and over, okay, because it's like, I know people, same thing in FBI businesses. And, you know, if you want to go buy a distressed company, like here's another headline. Oh, the recession's coming. There's like, America is going to be on sale. Let's get ready to buy all these businesses dirt cheap. It's not going to happen like that. But okay. And the thing is, is that if you want to buy a distressed business and you don't have a core competency and a skill set honed in, you're not actually going to close. Because it's going to look. look like a falling knife. And you don't have what it takes to turn that thing around and you don't know. And you're going to try to buy the whole thing on seller financing or whatever and good luck with that. Right. So the point is just going back to how do I buy a lot of companies? Go slow, then go fast.

Get really dialed in on your core competency. So for online businesses, everything that we've talked about is there. I think that the thing that I find is that a lot of potential buyers are slow to get there. and it's okay because the brain has a hard time with there's nothing there. Like there's nothing there. And it's real easy to spook yourself. Like in other words, you know, when I bought my e-com business originally, I was like, look, Google is legit. And the bank was like, all right, how's this work?

And I'm like, people search and then we're there. And they're like, okay, what? And then the next phase of that was like, wait, it's on Amazon. Like Amazon has way too much power. They could just choose not to, you know, but then all of a sudden people realized, wait, Amazon is a legit channel. And then like $12 billion got pushed in in 2021 to buy all the Amazon companies, right? Right. And now, you know, what's today?

Like, today is like, AI is here. Okay. And so now everyone's like, well, I wouldn't buy a content business because AI is going to destroy the internet. And I'm like, okay, I don't know. You know, it's sort of like you have to understand that these intangible assets freak most people out. And if you have a skill set to work through that and understand that like all businesses need to morph and grow and change. And you as the leader need to get in there and just like lead it into the next thing, then that's what's going to ultimately lead to your success. When it comes to online business, one question that I get a lot is will banks finance online business?

And you kind of mentioned that shortly there. But will banks finance them in the same way they would with physical businesses and kind of how do they look at those assets? It just comes back to which banks should you be talking to, right? And it's kind of like there's plenty of banks out there that work with online businesses. Most of them will not because they're looking at it the same way that a lot of humans do. But any broker, again, going back to what I want you to do is find the brokers, okay? And find those brokers. There's a great site.

If you're looking for online businesses, there's a great site called Centurica MarketWatch. And that gives you access to all of the online brokers that are, it's a great site. an aggregator, right? It just pulls all of the brokers in there. I rarely recommend that site to new buyers because not all brokers are created equal. So it would be a little careful, but that's where they all are. And so what I would tell you is, if you're serious about it, go to that website, start looking at deals. It'll take you five minutes to get in touch with a broker and they will be eager to introduce you to the bankers that they work with that are lending in that space. Perfect. I think that's perfect. So Walker, this has been amazing. I want to shift gears real quick here and do some of the

that we like to ask a lot of our guests, these go a little bit deeper than some of the stuff that we're talking about here, but some of them relate to finance and some of them are outside of finance. So what part of your work or life makes you come alive? Right now, it's the Acquisition Lab, Andrew. And I'm sorry, I don't want this to sound like any kind of sales pitch and forgive me if it does. But the thing is, is that, like, I got the idea for Buy Them Build in 2004. And in 2010, I got the idea for, what if I could build an accelerator that can help

buyers. And it's anchored in world-class education, a vetted community. When we started, we had a 12% acceptance rate. I can't believe I'm a member of this group. I mean, it's like we've got a guy that took two companies public on the NASDAQ. We've got a recently retired NFL, Super Bowl MVP. We've got a guy that grew a company of 50 million. But then we have all these people that are just like dripping with potential ready to go. Like the group is amazing. And then all of the other pieces that sort of go along with this. And again, we started very slow. And now we've gotten to the point where we're We're about to at 200 million in member acquisitions. Amazing.

Yeah. And I'm starting to look at, okay, how are we going to grow this? And we've just brought on another three people on staff last week. And I'm just like so excited. And I want to be very clear. This is not like, hey, I'm Walker. I'm an entrepreneur. I wrote a book, joined my mastermind.

That's not what's going on here. We're trying to build the single best accelerator in the space, like the Y Combinator kind of situation. That's what's getting me juiced right now. Right. And that makes sense because for someone who's interested in buying a business, this is a very complicated process for a lot of people, especially if you're new and joining something like that will really fast track and accelerate your path to getting there, especially if you're really serious about this. You know, networking with other like-minded people is really

going to help you do that. And then obviously you get the education and everything else involved as well. So I think that's absolutely amazing. Yeah. The second one is what is your biggest fear when it comes to money? Andrew, that's pretty deep, bro. I think if I go into that, And I think I would say, like, it's not that I won't have enough. Like, I'm past that. It's more like, boy, this is dark. It's more like, will I crash my Tesla and, like, be disabled and not able to continue keeping the engine going, right?

I mean, it's things like that, I guess. But, like, I don't really have any fears about money. I guess sometimes my brain goes to, you know, is the Fed going to completely screw this up in our lifetime and it's like all Bitcoin? Or, you know, and then the government screws that up. And they're like, well, we're not doing Bitcoin. We're doing our own. And it's like, well, okay, we were all over here, but fine.

I don't know. So it's sort of like, I guess you can look at currencies. But I'm sorry. I'm going down to rabbit hole. No, yeah, it's all the uncontrollables basically are kind of the big piece of that too, which I think a lot of people think about. Yeah, the downward drops in the markets are pretty painful. And I've been through, frankly, I would say three of them now, right?

Because the tech bust, you know, I was laid off with 6,000 people. You think your corporate job is safe and you don't want to buy a business? I worked at one of the biggest. at one of the biggest banks in the world. I got laid off with 6,000 people in one day. I'd been there 11 and a half months. So, you know, good luck with that. But then the real estate bust and then it wasn't a market crash in 2022. What was it? It was just like a- Just like a correction basically. Yeah, like a 40% correction in a lot of the heavy stocks. Those are painful. Those are super painful. If your stock portfolio drops 50%, most people get this wrong. It has to double to get back to

just where it was. Yeah. Exactly. And at least historically, we kind of know it's a normal thing. We just have to kind of work through it and live through it, which is a big thing when we go through that. The third one is, how do you plan to level up your finances this year? I've been going directly at tax strategy. Nothing against the federal government, but I guess I'll say this. I make a lot of money. And the amount of cash that I pay to the U.S. government is insane, especially compared to the things that I can't do in my businesses because of the cash trade. Like, I need another house because, like, I have too many kids. now and now they're like getting old and like I have to like buy a house and I'm like,

well, my single greatest expense is like there's just this huge undercurrent of cash going out that is like, wait a minute. So I'm trying to figure out how do I keep more of what I'm already making? And I feel like eliminating the undercurrent is actually going to be the thing that will propel me to the next level. And that's one of the most valuable things that you can do is spend time on that. That's why we talk about on this podcast all the time about tax strategy and some of the stuff that you can do so you can reduce that liability because it is even an opportunity cost like

you're talking about there. It is millions and millions and millions of dollars even for the average person. So as your net worth starts to rise, it can really, really start to accelerate more there. So that's perfect. The fourth one is what is the best money advice you've ever received? My grandfather was a officer in the Navy and he flew planes off an aircraft carrier in World War II in the Pacific Ocean. And after the war, he came back and bought a company and would come home from work and pour a drink and say, boys, line up. And his three boys would line up, one of them being my dad. And he'd say, don't ever go in the retail business. That's all for tonight. Okay. You know, just like, you know, this kind of guy. And he taught me at a very young age,

Walker, the only way that you can make any real money is to own your own business. And then he added Andrew and don't start one by a going concern. Wow. Yeah. I'm talking. This was the 80s, you know, and he was telling me that. So if you look at Buy Them Build, it's actually dedicated to Bob Dybul, your grandfather's entrepreneur. That's incredible because you think about how many people's lives were impacted by him just telling you that and now you've sold so many different copies of this book and now you have so many people in your programs and all that kind of thing.

And I think it's just amazing how many people that can impact just from passing down that knowledge to you. So that is so cool. The last one is, and this is my favorite one, is what does wealth mean to you? Freedom. Freedom and impact. or freedom to have the impact that your light here on earth is here to do. If I hadn't gotten to a certain level of wealth,

I couldn't have sat around in my free time for four years writing by then built. I couldn't have sort of like lowered my income elsewhere and worked on the acquisition lab. And I just think that when you have financial freedom, that's when we're able to actually live at our highest and best use. Absolutely. I completely agree. I think that's absolutely amazing. Walker, this has been wonderful. I cannot wait for people to know this.

this interview in addition to read your book and go through some of your programs. So where can people learn more about you and what you have going on? Sure. Bythenbilt.com has tons of free resources. If you sign up for pretty much anything on there, you'll get added to our newsletter. I'm still not super active on social, but I am on LinkedIn. So you can find me on LinkedIn. Also, obviously, acquisition lab.com. Perfect. We will link all those up down below in the show notes so that you guys can check that out. Walker, thank you so much again. Thanks, Andrew. So fun. Rose in lasagna, medium power, 15 minutes. Sounds like Ojo time.

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