Entrepreneurship Through Acquisition: Why You Should Acquire a Startup | Webinar Replay

Foreign for joining. I truly, truly appreciate it. I think this is a really fun topic. When I talk to entrepreneurs, they, you know, typically have, you know, one view into starting a company, which is I'm going to start a business. I'm, I have an idea. I'm going to solve this really painful problem. I'm going to bring something new into the world. And so many don't understand. You can also buy a business, specifically a software company or a SaaS business. And I think that's such a great path. So I'm going to talk more about that today. Whether you're thinking about jumping into entrepreneurship, maybe you already own a company and you're looking to grow that through acquisitions. Maybe you're exploring either or buying a company or starting a company. This is a great topic because I'm obviously a little biased. We help startups get acquired. So I think, you know, buying is actually a great path for entrepreneurs and they should be considering that more than they do. So let's go ahead and let's get started here. Okay. And if you have questions during this, definitely, you know, feel free to put them in the chat. I'll answer them after this presentation. I have some other questions that we'll be going over as well. Without further ado, entrepreneurship through acquisition. Why buy rather than build? So as a quick agenda, we're going to be doing some brief introductions talking about the race for returns. What's the difference between when you build your own business from scratch or you know, when you start one or excuse me, when you, when you buy one, how to harness your passion when looking at acquisitions, turnkey entrepreneurship and then how to choose a business to acquire. Then at the end I also have some great case studies and stories from other entrepreneurs we've worked with at Acquire to acquire small businesses, large businesses or private equity firm. They're a holding company. They're just an individual looking to know escape the 9 to 5 and everything in between. So those are some really great stories. A little bit about myself. My name is Andrew Gazdecki. I am the CEO and founder of acquire.com I previously founded two different startups, well actually like probably 10 different startups. Been an entrepreneur as long as I can remember, you know, as a kid selling baseball cards and elementary school. But eventually I started a company called Business Apps. It was a drag and drop. Do yourself mobile app builder. Bootstrapped that business to about 10 million interocurring recurring revenue. Excuse me. And sold that to a private equity firm. And then I later started a company called Altcoin which was acquired by a strategic buyer. Bank to the future. And at my first company we were named to Inc. 500's fastest growing company two years in a row. And then I somehow made it on the Inc. Magazine 30 under 30, which made my mom really proud. And ad acquired dot com. We're building the world's most founder friendly startup acquisition marketplace and the world. And in terms of our impact, we've been in business about four years. We've helped a thousand plus businesses get acquired, we've transacted over half a billion in closed transactions, we have over half a million registered buyers on the platform. And today alone we have thousands of businesses listed totaling over 1 billion in combined revenue. And as you've probably seen from just the webinar group as well, uh, we're a truly global company. So we've served over a hundred different countries pretty much on every single continent. We've done acquisitions and as I like to say, we're, we're just getting started. So diving into, you know, why you're all here. So entrepreneurship through acquisition, what's, what's the difference? So one way I like to position this is, you know, when you're starting out, you know, both are going to be dramatically different. So when you're building a company, your goal is typically to innovate. You want to start at zero. You have a business idea, you have a startup idea, you want to bring something new to the market. So you're creating your own market, you're developing the business from scratch, you're growing through iteration and you're essentially, you know, bringing something new into the world. Not all the time, but generally most of the time. And these are really different types of entrepreneurs. So on the left you can kind of think of it as the zero to one entrepreneur where you know, the skill set is kind of this interesting creative mix of how do you get your first customers, how do you figure out what the product exactly looks look like, how do you position the business? What is it called? Like you're literally thinking of everything and it's a lot of fun. I've done both. But then on the right hand side, this is where you're, you know, growing a business, you're potentially buying one. This is where your goal is to accelerate. There's already a foundation, there's already some customers, there's a product in place, there's probably some feedback as well on how to make things better as well. So there's a lot to work with and you're looking to expand into existing Markets, you're looking to maximize the current assets, essentially scaling the business by looking at things that have already been proven, things that are working again. Customers are happy with the business. How do you get more of them? How do you expand the current market that you're in? So you can consider this like the 1 to 10 phase. You know, how there's, you know, builders and there's scalers. That's kind of how I like to think about these two groups. And so if you're a builder, then, you know, starting a business is probably the right path for you. You want to build your own startup, you want to bring something new into the world. Um, but if you're more focused on, you know, scaling businesses, maybe a background in sales or marketing, or maybe you just want to skip into something with, you know, existing momentum, existing customers, at least a foundation to build upon. This is where I think, you know, buying a business can, you know, really, really be a better fit for these types of entrepreneurs. So really just, you know, putting these into two buckets, I think is important. And then this is what I like to call the acquisition head start. So when you're buying a business, you know, you are, yes, you're buying a business, but what I like to think is you're really buying product market fit. So what that means is you're able to skip over essentially the hardest parts when you're building a startup. This is going to be at the very beginning. You're scratching and clawing for those first customers. You're trying to figure out, you know, a product or service that your customer is going to pay for, is going to renew. If it's a SaaS business, they aren't going to cancel. How can you essentially do that, you know, from nothing? And that process is very, very difficult. I've done it several times. It's also a lot of fun, but it's just, it's a different skill set and it's also, there's a lot of ambiguity. It's typically higher risk. This is where a lot of startups, you know, typically never escape is they launch, they experiment, they never really find product market fit and they end up, you know, closing of shop. And, you know, when you look at something like that, it's like, how can you skip over essentially the hardest part of building a company? And that's where entrepreneurship through acquisition comes into play, where you're essentially able to, you know, buy a business from another entrepreneur, where maybe they're great at the 0 to 1 phase, they're really good at building Products, they don't have any interest in scaling a business or optimizing a business. Or maybe it just gets boring once it becomes a quote unquote lifestyle business where know it's maybe going to generate couple hundred thousand revenue a year, a couple million. And maybe their goal was to build a multi billion dollar business. And once that becomes pretty obvious that's not going to happen. You can actually buy those businesses and scale them up or stabilize them or whatever you know your goals are. But again, you're able to start with this head start by, you know, buying a business, skipping over essentially the hardest years of, you know, building a company and acquire business with an existing, you know, market fit existing customer base, allowing you to really just start at the point where, you know, you can focus on scaling expansion, improving the business, making it more profitable, focusing on efficiencies, just so many different things that you're going to be focused on when you buy a business versus when you build a business from scratch. And really this allows you to harness your passions as well. Just thinking, you know, what gets you excited. This is where we look at those two buckets again versus building a company or acquiring company. So if you like, you know, full creative control, you like to learn through mistakes, minimal upfront costs, experiment and iterate being able to build unique solutions, flexible work structure, start at your own pace, take full ownership. This is building a company in a nutshell. This is where you get to decide essentially everything. You can be an extremely creative person. It doesn't require a lot of capital upfront. You're going to be experimenting quite a bit because again you're trying to figure out what is the product market fit, what is the solution that you're going to be offering to customers, how are you going to offer it to customers, where are you going to find those customers, how do you price it? Literally everything in between that. But then when you're acquiring a company, that's when you're able to obtain a proven business model. Revenue from day one, you can scale with existing resources. So this means there's revenue coming into the business which allows you to allocate those resources to further grow the business, which means you can improve the product, you could hire different people, you can invest into marketing, whatever it may be. You have resources from day one typically to reinvest that. You can skip the early risk. Like I was just outlining the period where you're, you're literally trying to figure out how do you make money. You're able to skip over that point because sometimes it takes one to three years, sometimes it takes 10 years, sometimes you never get past it. So you're able to skip that extremely risky stage. Um, so you can begin working with an established customer base. You can focus on growth. The team could already be built in and this allows you a, a faster time to market essentially. So instead of spending the first one to two, three years, again finding, you know, your revenue model, you jump straight to the point where things are starting to work or maybe they're completely working and you can begin to optimize at that critical point. So again, two different styles. It's 0 to 1 versus, you know, 1 to 10. Are you a builder or are you a scaler? Two different styles of entrepreneurship in my opinion. Some entrepreneurs can be good at both, some can be really good at starting and then also scaling. But typically, more often than not, you'll see entrepreneurs falling into two. Or at least you will be more excited either building a company as opposed to scaling a company, and then turnkey entrepreneurship. So what are you acquiring when you find a great business that is going to be a fit here? So number one, product market fit. This is where customers again are happy with the product. They're purchasing the product repeatedly, they're telling other people about the product. This is the hardest thing to build in a company. And you have the opportunity to acquire this where you can again build upon this to take the company farther than it was able to go in the past. Intellectual properties. So all of the, the items in the company that make it valuable already been built out. The software, the front end website, the marketing items, everything that's being used to acquire customers or service customers, all that's already been put in place and then customers as well, which is, you know, revenue. A team could also be put in place. You could have someone available to work on the product or answer customer support questions, or help you market the business partners and vendors as well, such as maybe the hosting company, maybe the email marketing platform that you're using, the CRM, everything needed to essentially run the business and then a competitive advantage as well. So what is it about this company that has customers choosing this company over the others in its space? There's already been a defined strategy of how do you win customers? Because if they didn't have that, they probably wouldn't be getting any customers at all. Maybe they're the cheapest, maybe they have the best brand, maybe the product is just exceptional. There's already an advantage in place that gives you a lot of just data points on how to make this business even better when you acquire it with all these things in place. Okay, so now what to look for when acquiring. So we've gone over, who does this kind of make sense for? Why should you be considering this? Quick recap on that is you like to start at a point where you know there's a good foundation in place. You have customers, you have a working product, and it's really a great opportunity to scale the business. So what do you look for when you're acquiring these types of businesses? So you're going to go through something called due diligence. This is where you're going to be reviewing the business to see if it's a great acquisition, if there's anything wrong with the business. What are the red flags? So right at the top we're going to be going over the finances, we're going to be looking how is revenue trending? Is there a net revenue retention number that shows you customers are repeating their purchases so they're not instantly canceling, they're not voting with their dollars that this is a low quality profit product? Is the business profitable? These are all great things to look at. There's a number of different things you can look at, especially for SaaS businesses. How is the how is the churn each month? What is the lifetime value of the customers? How much are you spending on marketing? What is the customer acquisition cost for different customers? By channel, but typically from a high level. When you're looking at SaaS businesses, is the reven growing? How is cancellations? What is the retention rate and is the business profitable? That alone will give you a pretty good.