Buy Then Build 2.0 with Walker Deibel

So guys, I think, you know, it's one of these where, you know, we talk a lot on this call about, you know, private market investing. And, you know, my introduction to private markets was through, you know, acquiring private businesses. And so it's been an evolution from buying, you know, small privately held companies and then expanding into in understanding really what that means and all the different levels that we can do it. And then expanding my portfolio into, you know, private businesses, private real estate, and private credit. I've had an opportunity to, you know, I've been investing in the private markets really since 2006 and then sort of at scale since 2013. And I'm going to share a little bit of that story today as well as how I view you know, buying businesses today and what that means for you and how I feel like most people should actually be thinking about approaching it, as well as how we can integrate doing this strategy along with, you know, investing in a lot of the things that, you know, the guys at Aspen and, you know, Justin are talking about today. So, you know, Buy Then Build 2.0 is really an evolution of what's been going on. But let me start just with the beginning. Okay. From 2002 to 2004, I sort of was getting my MBA and I was like, I was using it as like a resume shield, okay, to you know, start a business at that time. And so I had this wonderful 3D technology that today we all know is real 3D, but we had it in point-of-purchase advertising. Okay. We had displays for point-of-purchase advertising and in retail locations. And so we were, you know, finalists in the Olin Cup competition and we had investors ready to go and we had, you know, customers that wanted to roll it out nationwide. But we had this little problem, okay, which was They pulled the license from us and in a single day, okay, the entire business fell apart. Okay. And I kind of had this realization, which was, you know, these MBA programs are really built to supply, you know, middle management to large organizations and also to teach this sort of like swing for the fences entrepreneurship style. So I decided I was going to go all in and make it work. So I went ahead and tried it again. I heard a, you know, You know, we, we said we, we licensed this software. Well, well, they— in exchange for equity. So we didn't license it, but we got this proven software. We oversubscribed the capital raise. We had a Microsoft executive come in as our CEO. We were in a top 10 accelerator program in the world, had dozens of, of betas in Fortune 500 firms, of which you would know the names. Okay. And the problem was, was that 16 months later, we had no paying customers, no, no product-market fit, and we were completely outta cash. Okay guys, the thing is, is that we all wanna be in that like figurative or literal corner office. Okay? We wanna be able to, you know, as entrepreneurs, we wanna have the business, we wanna have the impact, we wanna be managing teams, we wanna be creating with our lives, right? And we all know that the way to do that is to start a business. But the problem and the reality Okay. Is that, you know, startups are horrible vehicles. Okay. Startups, you know, less than 10% of them actually make it. All right. So I had the second realization, which was that startups are punishment for people that didn't understand statistics, right? There's always this sort of like Han Solo, you know, inner Han Solo that we have. It's like, don't tell me the odds, you know, flying into the asteroid field. So, you know, here I was, I, you know, no startup, no startup idea that was really approachable. I had no job. And I kind of realized that, you know, entrepreneurship is really a condition. It's not a job. It's just something that we need to do. All right. And at that time, about 2004, I was walking around, you know, Wydown Boulevard here in St. Louis. It connects, you know, Washington University with downtown Clayton. It's neighboring one of the top 10 richest neighborhoods in the world. And I was trying to want to figure out how come, how come I'm walking, you know, walking up and down, looking at these Home Alone style houses. I'm like, how come? Like everyone in entrepreneurship land is trying to teach us how to be Silicon Valley when no one in St. Louis, Missouri, okay, is a tech entrepreneur. Okay. All these people that live in these houses, you know, in these, in these neighborhoods, like these people, they own, you know, paper mills, they own, you know, light fixture companies. It's, it's, you know, printing presses, things like this. Right. So I started to realize, like, I'm going to challenge you that, you know, the goal of the startup is to actually build an infrastructure that generates revenue beyond what it costs to operate. That's a sustainable business, right? And so I realized that if I could acquire existing small companies, it would, it would have established product-market fit, usually for decades. We'd have current customer relationships, existing infrastructure, and you have positive cash flow. So I coined this term acquisition entrepreneurship, which was sort of marrying, you know, these two things that Justin was just talking about are in opposition so frequently, which is entrepreneurship with investing. Right? And that's where, you know, acquisition entrepreneurship lives. And so the truth was, was I knew there was a way to do it. Okay. But this whole capital market, like, it was opaque, it was fragmented, like no one was doing it. My MBA professors were telling me it was a terrible idea, right? So I really just had to go out and, you know, take, like, build my own path and try to figure out this whole small business market. Right. And so ultimately, I ended up in 2006 acquiring an $8 million book printing company. Right. And I ran that company for about 7 years. And at the end of 7 years, I ended up selling it to an acquisition target, someone else that I was trying to acquire. And I realized that every time I started a business, it just didn't work. But like buying a business, what, you know, this was my path for getting, you know, getting my first, you know, 7-figure exit. So I took 100% of the proceeds from that company from that exit. And I went and I bought a distribution company, okay? And I bought a manufacturing company and I bought a finishing company and I bought an e-com company. Okay? So, you know, I'm not going to go into this, but the point is, is like I've been in every seat in a deal transaction. I've been the seller, I've been the buyer, you know, I've been inside over 100 deals. You know, I'm a founder of, you know, Acquisition Lab and Build Wealth. And so I've been in all of these different places. And you know what Ellis touched on was I wrote Buy Then Build. It was— it's been an Amazon bestseller every single day for 7 years, which is flattering. Wall Street Journal bestseller, USA Today bestseller. People like it. But here's the thing. When this came out, like when I started talking about this, people's minds were exploding. This was like changing how people thought about what it meant to be an entrepreneur. Right. But where are we today? Where are we today? Okay. Boring is the new black. Okay. The era of these glamor startups is over and cash flow is the new sexy. So if you've been paying attention, right? If it's unloved, okay, if it's underpriced, if it's unsexy, this is where we want to be because this is where typically where cash flow is, right? And so when you look at this trend of acquisition entrepreneurship and like, why is it becoming so popular, right? A big anchor, a huge tailwind that's happening right now is there's $10 trillion of baby boomer businesses that need to change hands, okay? And if you're a baby boomer business owner on this call, it's because you're trying to figure out, once I sell this business, where am I going to put all this money? Right. But if you are still in your career and you're trying to figure out what am I going to do, there are all these companies and boomers are retiring in droves. Okay. It's estimated that 43% of the United States economy needs to change hands by the end of the decade. Okay. Maybe that's why— no one said this, but maybe that's why the SBA came out in 2016 and started saying, Walker, you can buy all of these companies without collateral. You just have to sign this personal guarantee, which you're signing anyway. Okay. I bought 3 companies that year and really started, you know, writing Buy Then Build in earnest. So look at some of these companies you can buy. Look, propane distribution business, septic tank maintenance, battery recycling services, workforce development, niche funeral services, mobile veterinary clinics. Wait, what? What is this? What you want to buy? You want to go buy the Johnny-on-the-spot business and clean this up after the ballgame? Guys, you're thinking small, okay? You're thinking small. Social media, okay, has really grabbed onto this idea and started telling us that the path here is to go out and buy laundromats and hire a manager. Laundromats are real estate, by the way, not a business. That's okay. Hire a manager and go peace out on the beach while making passive cash flow. That's not true. Okay. I bought half a dozen small companies and I'm here to tell you it's actually the worst decision I ever made. What? Walker, what are you talking about? Let me give you an example. In 2018, I received a phone call. Okay. I owned a manufacturing company and I had hired a manager to run it for me. And it was, you know, and he called and he said, Walker, I'm leaving you. And I was like, okay. And I ended up bringing in my new manager, which was a former person that I worked with before who had a culture issue with the staff. And in a single day, in a single day, I lost 50% of my entire workforce. They pulled up in their pickup trucks. They all resigned in one day. If you go see the Netflix original movie Print the Legend, okay, it opens with like iconic investor Brad Feld saying, when you're a leader, when you're a CEO, every day something comes up and smacks you in the face. And that's because buying businesses and running businesses is active, guys. It's active. Okay. So we're going to skip through some of these pieces of the agenda today. And here's the point. Here's the point. Stop thinking small. Okay. If you are going out and buying a company, you did not get here by accident. Okay. And what I want you to do is think to yourself, what do I want the next 20 years to look like? When you buy a company, You're not taking responsibility just for yourself. You're taking responsibility for the employees and the families of these employees. Okay? You're not buying a business. You're a builder of legacy. Okay? Now there's all these strategies here we're talking about today. So what's the deal here? I'm going to break this down. If you want to make $1 to $5 million, go out and buy a business. Okay? I think it's the fastest way for most people to actually go out and start engineering real wealth into their life. Okay. If you want to go, you know, from $2 million in net worth to $20 million in net worth and bridge that gap after that first million bucks, guys, you've got to be investing in alternatives. That's what we're talking about here today. That's what, you know, Bob Fraser and Ben Johnson's book is about. And if you want to go out and define your legacy and level up your generational wealth, okay, that's where at this stage you're no longer playing for internal rate of return, you're playing for multiples of enterprise value. Okay. So in other words, I need you to understand what it is that you're actually trying to do when you get into this game and how it works with your overall strategy. Okay. So a lot of times we are introduced to a concept and we're like, wow, this is like really awesome. Let me get into it. But that's like first stage thinking. We start thinking about second stage thinking. I want you to understand you're going all in on this, right? What did Bob talk about earlier? Spending, you know, 10 years or 20 years of your life dedicated to making this work for you. Okay. Like his example was if you're a doctor, right? But if, but if you own a business, you're talking about being able to earn multiples of that EBITDA. And by the way, funneling a lot of that over into alternative investments. Okay. So that your money is working as hard as you do. So I'm going to challenge you and say, go get an institutional mindset. All right. Look for $5 to $25 million in revenue, $1 to $5 million in EBITDA. Okay, get a team in place or one that you can put in place with industry growth and fragmented enough for bolt-ons. This is the ideal profile that we're looking at. Okay, so let's, let's look at, you know, the different players in this space. What's an investor? Okay, usually I would work the crowd, but I'm just going to tell you the answer. An investor is someone who places their capital into an investment in hopes for, you know, a return. What's a family office? I'm just going to simplify it and say a family office is a bunch of money, okay, that's placing deals, that's placing investments to try to get a return in more of a much more formal structure. What's a private equity firm? It's a, it's a company, it's a fund or a company that pulls together a bunch of capital and then goes out and tries to buy a company to, to manage for and on behalf of those investors. Okay. What's an independent sponsor? An independent sponsor is someone who goes out and finds a deal even though they don't have any money, and then they try to pull money around it. Okay. So a lot of times we talk about, you know, acquisition entrepreneurship and it has both of these things. It's got this traditional I'm going to buy it and operate it. And then it has this sort of like next level, you know, platform, you know, capital raising method of independent sponsorship. And the best independent sponsors blend this operator and investor kind of mindset. And, you know, I don't want to run down this path here, but, you know, if you look at what Aspen Funds does and you really get into a lot of their core competency and how they were founded, you know, they really were anchored in this sort of open-ended, you know, private debt management. And so, you know, their credit fund that they've got right now is something that I'm heavily invested in because this is what they're doing. Right? They're looking at deals and they're raising capital and they're taking out, you know, the second position loans on, you know, overcollateralized asset-backed loans that are cash flowing with upside. Okay. So it's, it's, it's, it's analogous to what's going on here, but we're talking about businesses. So what you do, the strategy is you find the platform, then, okay, you structure the capital and then you build enterprise value from there. Okay. Where have we seen this before? It's the same recipe. It's just coming at it with a different point of view. All right. So I'm going to break down— got 20 minutes— I'm going to break down the 3-engine playbook, okay, for being able to next level the acquisitions that you're looking at jumping in and operating. This is— these are the 3 engines, right? You've got leadership, capital, and strategic expansion. And let me give you a perfect example of this with Hoffman Brothers right here in St. Louis. Chris and his brother bought out his dad, okay? And they went in and they didn't just go in and like buy a business and like, you know, milk the cash flow out of this thing. They went in with this whole recipe in place, right? So they hired a president, they focused on internal systemization, and they professionalized, you know, the whole structure of that. Then, okay, they deployed capital. They built a $6 million shared services facility right next to the wine shop. Don't ask me how I know that. Then they expanded operational support. Okay. And into Nashville as well and added 300 new jobs. All right. As they were expanding into Nashville, they diversified services not only from electricity, but also into plumbing, electrical, appliance repair. They came over after, after they bought— after the kids bought the business. We use them at my house. They came over and they're like, Walker, we need you to buy this membership plan. And my first thought was, oh man, they're trying to get recurring revenue for their business. Like, I'm not buying this thing. And I was like, man, I'm not like— I can't— like, my schedule is really tough. Like, you're going to try to call me and be like, look, you bought this filter replacement or whatever, and you're going to have to schedule it. I'm not going to— I'm not going to have time. And he looked at me and goes, Walker, I will stand in the rain at your door and make sure this filter gets in your house. Plus, you're going to get a discount on all of our services on plumbing, on electricity, on appliances. And all hardware that you buy from us. And my wife came home and I was like, hey, I bought this, um, subscription with Hoffman. She's like, you bought the plan? Now today, everything, like if our plumbing or electric or appliances go out, my wife calls Hoffman because we're members. Okay. It was very, very smart on their end. So how do I apply this today? Walker, look, there's 4 types of businesses worth owning if you want to go this direction. Okay, these are them. We're just going to give you a quick example of every single one. All right. The first is this category leader, right? So you're acquiring dominance, okay, in a niche market that's already there. So here's one with VDCI. Okay. This was North America's largest mosquito services firm, and two self-funded searchers, meaning acquisition entrepreneurs. Okay. They went in and they acquired it in 2011 and did 14 smaller acquisitions. And now they're totaling $47 million in revenue. Raise your hand if you want $47 million. This is how you buy businesses, guys. Just so you understand, they have all of the government contracts, which was the way that they were able to dominate this whole category leadership. Okay. Second is the growth marketplace. So these are going to be the industries with massive tailwinds. So every single day there's new customers who weren't buying it yesterday who need to buy that product or service. Today. Okay, a big one is pet services company MidAmerica Pet Food was acquired in 2014. Okay, and, uh, has expanded distribution. Okay, uh, um, uh, from 1,200 retail outlets to 8,000 and increased their earnings by 700% in 6 years before exiting the business. Raise your hand if you want to grow your earnings by 700,000. 700%. Next is going to be transformational assets. I, I love this example. This is where I've actually spent a lot of my time. So it's basically looking for old economy businesses and bringing them into the new economy. Okay. You're looking for these legacy built types of businesses. This is, this is Lucas Phillips. He's an Acquisition Lab member. And we helped him. We assisted him in helping him acquire. What they do is they do like the inside of classic cars, like carpets for you know, a Porsche 911 from, you know, 1967 or whatever. And all these, you know, pieces of paper hanging behind him were the old cutouts that they had just had marked down with markers. And now Lucas has brought in, you know, laser cutters that, you know, modernize this whole space. And now he actually dominates this whole entire space. It's like him and one other small player because he was— he now owns the library of all of the IP. So if you have a classic car, and need anything on the interior, this is where you buy it. Okay. And finally, we're going to talk about platform companies. And this is where you've got infrastructure, okay, to build multiple revenue streams. Okay. You've got acquire and bolt-on. And, you know, ultimately you're looking for this growth, growth industry that's also fragmented. And the perfect example of that is one that we already talked about. So Walker, I want to do this. What are some things that I should be asking myself to know how I'm going about it is right? Is this business big enough to make an impact worth your time? Okay. You don't want to jump in and, you know, micromanage or have something that like is too much of a stretch. If you're trying to build multiples of enterprise value, make sure it's big enough. Number 2, does it have room to growth both organically and through acquisition? That's going to be you know, the bullseye in terms of, you know, can we grow through acquisition and also just put sweat into it to make it grow alone and by itself? Okay. 3, can your leadership multiply this business, not just maintain it? In other words, what is it that you bring to the table? Many of us, as we look at businesses to acquire, we might look at it like an investment, like we're looking at Aspen or something like that. This is very different. You're spending your time and your life. And when you go in and buy a company, Many of us will spend a lot of time looking at the spreadsheets, looking at history, trying to figure out, you know, how do I get comfortable with this business and make sure it's the other way around? Guys, you are the CEO, you are the owner. Think about your skill set. What do you bring to the table and can you transform this business and take it where it needs to go? Fourth is, are there enough operational leadership already in place or, you know, can it be professionalized quickly? Right. And in other words, I'm about to get technical and talk about adjusted EBITDA. Let me not do that. You know, in other words, like, you know, you need to be building something that's bigger than yourself. And as a result, I wanted to either have a management team in place or have something that you can add value immediately by bringing that management team and cash flowing it with the earnings that are already there. All right. And finally, you know, will the market this business plays in still matter 10 years from now? And I think that You know, the, the, the best businesses today are ones that marry, you know, old economy legacy services and products with new economy, you know, infrastructure and value add. Right. So I'll let you decide what that means. But like, you know, my iPhone, you know, isn't a phone, it's a computer. My Tesla is not a car, it's a computer. You know, like all of these things. Unfortunately, Buy Then Build is— it's just a book. It's knowledge hasn't, hasn't changed except, of course, for AI. So anyway, the point is, is like, you know, you know, we've got a whole prep funnel in Buy Then Build that helps people find the business that is correct for them. And if you're already an entrepreneur and you're growing through acquisition, there's also a growth through acquisition funnel. And the point is, guys, is that if you are spending your time buying and managing a business, what I want you to do is figure out what you want to accomplish with your life over the next 20 years because you're spending your time in this company. And don't follow the masses that are moving into this space. Don't be a light bulb, okay? Be a laser. All right. Now, after I did Buy Then Build, you know, I was getting like 20 calls a week, like, hey, like, will you help me buy this business? I just want to, you know, so I ended up hiring a curriculum consultant and building Acquisition Lab. It's the elite program for helping people acquire businesses. And where we are today is— these numbers are slightly outdated. We now have over 1,000 members, I think 350 closed transactions. We're approaching half a billion dollars in member acquisitions. Okay. We take no fees, nothing like that. We are simply, you know, in support of buyers, lifetime access, whatever. But here's the point. After working with 1,000 people, okay, over 5 years who are you know, active, effective, vetted. Okay. And going out and buying businesses, all of their questions always like you could fizzle them down and freebase it into one question. Walker, how do I not make a mistake when I'm buying a business? Okay. And this is an important expansion in the private markets I'm going to get here. So please, please track me. Okay. Here's the deal. When you open the textbook, Okay. Of how do I, how do I manage risk best? Okay. The answer, the textbook answer is diversification. All right. And so I realized back in 2013, after my, my first exit, that every time I was thinking about buying a business, what I really was doing was I was buying the whole entire pizza and I was taking responsibility for it. Right. And I was taking all the downside risk and I was taking some upside reward. But like, ultimately, you know, you're signing these personal guarantees and you're spending your time, you know, with the downside risk and you're managing it. And I realized I could leverage other teams with other specialties with an edge in markets that I'm not playing in. And sometimes you just want a pizza by the slice. Okay. And ultimately what I did was I took an equal investment that I was making when I was buying small businesses. So like $100,000 or $200,000. Let's, let's give a big range, $50,000 to, you know, $250,000. And I started building a pizza by the slice portfolio with equal investments. And the thing is, is like when you start breaking down, you know, when I look at, you know, what's my compounded annual growth rate on all the companies that I've acquired, you know, like it's somewhere between like 35% and 55%, sometimes 56%, 57%. But like, you know, like that's, that's what you get. And so ultimately, like, you know, can I find passive investments that can work just as hard as I do so that, you know, I can get either cash flowing at, you know, 10 to 12% or, you know, internal rates of return, you know, between, you know, 20 and 35. And that's what I've been doing. Okay. With, with the pizza by the slice strategy. Okay. And the way that I started thinking about it, like, walk— like, how do I think about like, okay, do I want to invest in cash flow? you know, private credit, or do I want to put it in real estate, or do I want to invest in, you know, a business or, you know, like alternatives of all kinds of flavors? How do I think about it? And I realized when I buy a business, okay, when you go buy a business or a piece of real estate or whatever it is, there's always this capital stack. All right. And this capital stack is ultimately, you know, it flows from senior debt all the way up to common equity and, you know, debt in a secondary position. And I realized, okay, every single person in the capital stack on any kind of acquisition not only plays a role, but they're taking a certain position in that asset on purpose. The people that want the common equity are the entrepreneurs that want to push it. The people who want the senior debt are the people that want all the collateral, don't want any of the work, and they just want, you know, a good interest rate paying every single month. But they'll let everyone have the upside. Okay. And so on and so forth. And that— and everyone plays a part of it. Right. And so I realized that you could match this to the credit funds, the private real estate and the private equity in terms of what it is we're trying to get out of here. Right. So buy then build is really your active income. So we were raised saying, hey, go get a good job, work your butt off and, you know, take, you know, 10 or 20% of your salary every single month and like go put it in the stock market and bonds in the 60/40 portfolio that Bob Fraser talked about earlier. This is the same thing. It's just in the private markets. So go out and own a business, either buy it or start it or whatever. And that's your active income. That's how you're spending your time. Okay. Justin talked about, you know, rich people have a lot of money. Wealthy people have a lot of time. I think that a lot of people want to create things with their life. They want to have an impact, right? You want to live your highest and best use. You know, I've got a ton of money in, in, in, in credit funds and real estate, but it's like I still I want to go out and have impact and educate and teach and work on awesome projects with great people and just stack cash together. That's what I want to do. That's why I call this the Wealth Stack. Okay. So when you are investing, you know, you're, you're essentially, you know, uh, uh, building this passive portfolio around in support of, you know, what it is that you're doing. And so I did end up, um, launching, uh, Build Wealth about, uh, 14 months ago. And I partner with the best sponsors. I can find. We, you know, we're doing everything from IP. We've got a 007 video game that we've invested in. We've got a manufacturing facility in Dallas. I've partnered with Aspen Funds on both the energy fund and also the credit fund. You know, we're buying entire neighborhoods in St. Louis, Missouri, and revitalizing them. And so ultimately, you know, when I start to look at, you know, this isn't a complete list of, you know, all the things we've done, but like, you know, we're looking at these higher you know, internal rates of return that mirror acquiring businesses, but you don't have to work in them. Okay. So I currently have two newsletters that I send out every single week. One comes out on Sundays and it's, you know, the M&A Weekly where we talk about buying businesses. And the other is called Wealth Stack Weekly. It comes out on Tuesday. To my knowledge, it's the fastest growing alternative investing newsletter in the planet. Listen, when I went out and started researching how to build my own, you know, structure and I started working on a second book that has not come out yet and I started saying, how do I start to get my arms around investing in the private capital markets? This was what led me to Invest Like a Billionaire podcast. And so over the last couple of years, I've gotten a chance to know Bob and Ben personally. I've been to the office. I've been very impressed with them. I've personally invested my own money with them. I've partnered with them every chance that I can. And Bob's— Bob's and Ben's book that's coming out, Invest Like a Billionaire, is, is, is groundbreaking. I know what's in it. Okay. And I've been able to talk with, with Bob extensively about, about the components. And so, you know, I know they've got a campaign going today. I think it's 10 copies. I bought 30. Myself. Um, and so I just want to, you know, we've got, I've got a course that I sell for $100. It's called Acquisition Insights. Um, and you know, we cover all kinds of stuff in it. And ultimately what is kind of great about this course is that, um, it's got, you know, hours of content in it, but the way that we broke it down was no one wants to watch, you know, even like 20-minute, you know, mini sessions. What they really want to watch is like, I have a question. And I think there's over 60 questions across these 12 segments in there, and you just click on them and every single answer is recorded by me answering questions and it's like 2 to 3 minutes. And so it's a real easy digestible way to be like, I have a question right now. How do I jump in and sort of, you know, figure out, you know, what an answer around this would be? So, you know, the point is, is like it's such an honor, you know, to be here today with, with Aspen. And play a part in the launch of Invest Like a Billionaire, because what's happening right now is a movement, right? This is a movement. And, you know, I think that Bob and Ben Fraser and Ellis— not to belittle Ellis— is, is a member of the tip of the spear of the macro trend of how we are investing.