Buy Then Build: WSJ Bestselling Author on Buying Businesses

90% of all startups fail. Can we agree on that? Wow.

It's crazy to hear again.

It's 96% of the 10% that survive never exceed $1 million in revenue. Buying small businesses has become extremely popular on social media. When I wrote Buy Then Build and the manuscript was done and my editor was like, yeah, it's great. I'm like, okay, good, it's done. I actually sat on it for 9 months and wouldn't let them publish it because I was like, someone's going to read this and they're actually going to go out and buy a business and that's crazy. I think people extremely underestimate the difference between a corporate job and running a small business.

Hello, future billionaires. Welcome back to another episode of your favorite podcast, the Invest Like a Billionaire podcast. We've got a really fun episode. I know I say that a lot, but these are just some awesome people that we keep bringing on. And today is no disappointment. Brought on an awesome guy, Walker Deibel. He is the Wall Street Journal bestselling author of Buy Then Build. This is a book that I have loved for a long time. And then come to find out, we know each other through different mutual connections, was able to get on the podcast. It's super good conversation if you have any interest in entrepreneurship through acquisition. That's his whole model. So buying businesses, small businesses, growing them. And he has a whole mastermind coaching program called Acquisition Lab that helps people be able to do this. So if you have any interest in buying businesses or improving your skill set in that You've got to check this out. So enjoy this show. If you're enjoying the show, please, it really helps us if you just continue to help spread the word, you know, write a review for us on your favorite platform, let us know your feedback, and we're always looking for suggestions and other ideas. So thanks so much. Enjoy.

This is the Invest Like a Billionaire podcast where we uncover the alternative investments and strategies that billionaires use to grow wealth. The tools and tactics you'll learn from this podcast will make you a better investor and help you build legacy wealth. Join us as we dive into the world of alternative investments, uncover strategies of the ultra-wealthy, discuss economics, and interview successful investors.

Welcome back to another episode of the Invest Like a Billionaire podcast. Very excited for today's conversation. Brought on an awesome guest, Walker Deibel. He is the Wall Street Journal bestselling author of Buy Then Build. You've probably seen this book out there. It's pretty amazing. And he's also the founder of Acquisition Lab and all about entrepreneurship through acquisition. That's his whole model. And so, Walker, thanks for coming on the show, man. So excited to have this conversation and wanted to bring you on for a while. So.

Oh, thanks for the kind words. You know, like there's a few podcasts I listen to religiously and Invest Like a Billionaire is one of them because I fully plan on being a billionaire after I listen to 100 episodes.

There you go.

Yeah, I know. I'm a big fan of your podcast and Aspen Funds. And so really, really psyched to be here. Thanks.

Well, give us a little just background on you. How did you kind of get into this whole world? And, you know, for those that have listened to the show for a while, you understand, you know, business ownership, buying businesses, acquiring businesses. This is a proven model for wealth building. And if you— that's new to you, then, you know, you're about to be in for an awesome conversation. But walk us through kind of how did you get to this point when you started buying businesses and when did the light bulb kind of click? And then Talk about the book because the book's just pretty awesome of what the traction that's got and what it's really created for you with Acquisition Lab.

Yeah, thanks. Be careful, Ben, because I mean, I can talk for 40 minutes based on what you just asked me. So, you know, let me— let's go. Let's go. So, so basically, you know, I graduated college right there at the turn of the millennium. Right. And so you might remember, like, the late '90s was sort of like the tech boom. Right. And, and I was an English lit major and I became a stockbroker, which is just a natural progression, right? Yeah. Being like a book lover to, you know, But, you know, I mean, it's like everyone in my— everyone on my family owned businesses and like I knew that I was going into business and whatever. So I became a stockbroker and, you know, learned about asset allocation, all this other stuff. But I was really looking at all the big— like the internet was being invented at that time. It was huge, right? And then of course, it ended sort of with the same enthusiasm in which it started, which was, you know, a major crash, right? Which went into 9/11, all the rest of it. But so, so, you know, Silicon Valley was really pushing, right? Like what it meant to be an entrepreneur. And, you know, I actually moved out to the Bay Area and, you know, was, was, you know, really interested in entrepreneurship and startups and, and like how to get into business because we all know that, you know, owning a business is like what you need to do in order to build real wealth, right? I mean, that's like the thing plus impact and like having control over decisions and all the rest of it, like even my first job, I hated not being the one in the room, right? Deciding that, you know, 6,000 people should get laid off, of which I was one of them, right? I worked there for like 11 months. It was, it was obvious. But, but, you know, so the thing is, like, I did that. Then I, then I actually applied to one MBA program, which was the Olin School of Business here in St. Louis. And when I came here, they had just launched their entrepreneurship program, which today is like number one in the country, believe it or not. And cool.

Yeah.

And it's one of these where, you know, there was this business plan competition and like we had licensed this, you know, great technology and we were like doing point of purchase advertising and we were finalists in the business plan competition and we were raising money and it was like everything was going so awesome, right? And what happened was the fate of 90% of all startups, which is it just completely failed in like one day. It was like, you know, just like, you know, fell on our faces. Like, but the, but, you know, the point was, was like I was sort of graduating right then and I was walking up and down Wydown Boulevard here in St. Louis. We only have one boulevard in St. Louis, unlike Kansas City, right? There's one, it's Wydown. And you walk up and down Wydown, there's all these like, you know, 4,000 or 5,000, 6,000 square foot homes, right? You drive around Ladue, Missouri, which is one of the top 10 richest neighborhoods in like the country, if not the world or whatever. And it's like, you— I would just drive around, I'd walk around, I'd look at all these people here that had sort of made it and be like— and I was just— I remember thinking to myself, not a single person here, okay, that's like one of the top 10 richest people in the world made it as an internet startup entrepreneur. Like, how come all of the attention is being given on, you know, Apple, right? And Microsoft when like, when like there's this whole industry going on And so I kind of had this moment where there was this confluence occurring of, you know, you kind of need to— you kind of need to leverage like what, what, I don't know, assets and geography and economy is happening where you are, right? Rather than try to become Silicon Valley in St. Louis, maybe just look at St. Louis and see what's happening. Right. And so that's when I started to realize like, hey, like everything here it's not sexy, right? It's not sexy at all. But like, they all cash flow and they're all like 100 years old. And I was like, I know there's a way to go out and buy a small business because like, I can get a bank loan, right? And so I decided to go out and try to figure out how to buy one. And boy, was I in for a surprise. Yeah. And that would have been in 2004. I started my first search, right?

Okay. So talk about that a little bit and maybe, you know, do the kind of SparkNotes version of Yeah, you know what the first acquisition looked like to— yeah, what you're doing now and like what are some of the things you've learned along the way or some of that? Yeah, it's a learning. Copy that.

So it's basically what's one of these things where, you know, no one then was doing what we're doing now, like, like buying small businesses is sort of like popular now, right? And I mean, this is going to sound egotistical, but I got to tell you, when I wrote Buy Then Build, I sat on it for 9 months when it was done. Because I was like, someone's going to read this and like, look at all my faulty logic. And like, no one— like, no one's talking about that, right? Like, I was like— and I wrote it because all the entrepreneurs that I was hanging with, they like didn't even understand what I was doing. They'd be like, Walker like buys and sells businesses. And I'm like, well, that sounds really dope, but you don't understand. Like, I'm in the Coliseum just like you, you know, with like blood on my hands and dust on my face or whatever. Yeah, however it goes. And so, and so it's like— and so it's like I wrote it for other— all entrepreneurs to understand, you know, what was going on. And so The first company that I bought ended up in 2006, which was a book printing company. Okay. And, you know, I ran that company for 7 years. Happy to go into that as much as you want. I ended up selling it to an acquisition target when I was trying to grow through acquisition. Right. And then I turned around and I bought 6 more companies, just put all the chips back in, you know, leveraging SBA loans and all the other thing and just signing personal guarantees because I realized Okay. I realized when I started reading Verne Harnish's work, I started to realize that 4% of companies in the world ever exceed $1 million in revenue. Right? There it is, scaling up. So it's one of these, right? So it's like, I'm like, okay, we all know that like 10% of startups make it. But what we don't talk about is that 96% of the ones that make it never exceed $1 million in revenue. So I was like, oh my God, okay, say that again.

That's a— that's That's crazy. That's a crazy stat.

Right, exactly. So, so 90% of all startups fail. Can we agree on that?

Wow.

So come on, you know this, like that's, I didn't make that up.

No, I, I know, but it's, it's crazy to hear again.

And, but then it's 90%, it's 96% of the 10% that survive never exceed $1 million in revenue. Okay. Holy cow. So the aha moment I had, like the first company I bought was like $8 million in revenue, right? I'm trying to buy as big as I can. Like I'm coming out with an MBA, I'm like, million bucks, that's like nothing. Like I need like size, right? And I, and you know, and I, and I was able to get a loan on that because there was all kinds of big equipment, which was one of the 3 reasons I bought that company, right? But, but it's one of these where, you know, because the SBA started getting more and more aggressive, they started lending up to 90% Okay, of business acquisitions, even with no collateral. Okay. No collateral from the buyer, no collateral in the business. Okay. And so up to $5 million of transaction size. So I was like, okay, wait a minute, I can, I can buy one of loan size, right? Because that's right. That's right. So I can buy one of the largest 4% of companies in the world with 10% cash infusion and a 90% loan. Right? So I was like, okay, where do I do that? And you know, I mean, Ben, like, you know, when you're like in your late 20s, early 30s, mid-30s, you know, you haven't yet built, you know, your wealth yet and you're just like, okay, so you're gonna gimme 90% of this business acquisition price. I just need to sign a personal guarantee. Like, good luck. I got nothing. Right? You know? So, so you just, you just are so much more aggressive, right? When, when you're that age and you're just like, just put me in, put me in the game. Coach, you know, and so, so, you know, you jump in and kind of learn how— learn small business acquisition.

So I want to pause there for a minute because I think this is like such an important thing to just marinate in a little bit because we all just established that one of the most impactful ways to build wealth is through business ownership. I mean, look at anyone on the billionaire list of Forbes. Not any of them were employees. Not any of them you know, just went to, you know, 9-to-5 jobs.

And it's 100% of ultra-high-net-worth people. Yeah.

And it was interesting too, is even a lot of people like, oh, well, that's just inherited money. I forget the exact percentage, but it's something like 70% plus is first-generation wealth, right? So people that became billionaires in their lifetime starting from nothing, and that's powerful to understand. So we all understand that's, that's the idea, that's the goal, right, is to build wealth. And the other side of that is have control over your schedule, over your decision-making, over your, your destiny to a certain degree. But you have a 90% chance that you're not going to make it if you start from scratch. And if you do make it, you have a 96% chance you're never going to make more than $1 million top line, top line revenue. This top line. And I mean, I never actually read the book that Peter Thiel wrote called Zero to One, but I think I understand the concept of to get from zero to one, right? To get from $0 revenue to $1 of revenue. That is a huge deal, right? Because, yeah, you get to $1 revenue means you actually have proof of concept. You have a paying customer for your product in a target market fit and blah, blah, blah. Although you're in business school, but it's very, very hard to do that. And I've always said, you know, in the business I'm in and what I— in my career, it's— I would way rather go from 1 to 100 than go from 0 to 1, right? Because it's— that's right, it's so much harder. And so you had the light bulb moment 20 years ago and you look like a genius now because everyone is, is like, oh, this is a great, great model, but let me go buy existing revenue because they have existing clients, they have recurring revenue, they have a product that works, and I can go buy it on a multiple of their earnings and then I can go grow it and I can— That's right. —find ways to do that. So I just want to sit on that for a minute because I think it's so important for people to understand, like, this is like if you're into life hacks at all, I mean, I can't think of a better life hack, right, of a wealth hack of entrepreneurship.

So Ben, if I may, let me put it in perspective this way, right? Like at Aspen Funds, you guys do a lot of real estate, like you're a real estate background. A lot of people listening to this are, you know, they're in alternatives, like they're usually the gateway drug is real estate. A lot of people get it, right? So, you know, it's sort of like if real estate was defined for like 20 to 50 years as only ground-up construction, And value-add opportunities never existed before. And then I wrote the book on value-add opportunities and everyone's going, oh my God, this is like mind-blowing, right? You know, right? And, but here's the other thing. Here's the other thing. When you are looking at buying an existing, say, multifamily, okay, you know, you might have a, what, 6% cap rate, 8% cap rate, 4 to 8% cap rate, maybe a 10, right? If you got a real good one, you know? Yeah. When you are buying these small companies and, and like I'm going Main Street here in this conversation, right? So, so like if you're buying between $1 and $5 $1 million, right? Like just over that, like, point of diminishing returns that we talked about at the beginning of this call.

Of net or gross?

Of gross income, of gross revenue. And just like assuming, you know, like a 1x revenue purchase price for this conversation. Okay. Like, so, so I'm going to do a transaction between $1 and $5 million inclusive of working capital and whatever. Okay. You're, you're going to be able to buy these companies between 2.5 and 4 times, okay, discretionary earnings, which is sort of like a version of EBITDA or net income. Let's just call it earnings for this conversation. Okay, that translates to about, if it were in real estate terminology, you're talking about like a 34% cap rate. Okay. Like that's the purchase price in which these things are occurring. Right. And, and the, and the thing is, is it's because the market is so thin, right? Like I've done 300 transactions now, consulted on or done them myself or whatever. When I sold my distribution company in Springfield, Missouri, Okay. I was looking for, you know, someone who wanted to buy, you know, a $2 to $3 million company, you know, who knew about buying businesses, who had the cash to put down and like, you know, wanted to buy my company. Like, that's like, that's like a Swiss cheese kind of like all the holes need to line up to get through it, right? So every single person that walked through that company, I knew about it on that day. I knew exactly what was going on. Right. And so, you know, you get some people trickling in, And then ultimately, you know, you get under contract with someone and I have no recollection when I sold that, what I bought it for or what I sold it for. But let's just assume it was about 3 times. And that's accurate, right? Yeah. So you buy it, you take on debt, you get the equity buildup, you grow the business. And then, you know, in that particular case, I owned it for about 4 and a half years and then, you know, sold it to somebody else behind me for the same sort of, you know, multiple on earnings.

Yeah, no, it's, it's so such a powerful concept. So talk about what's the process of finding these businesses, right? Because, okay, now we've got people convinced, hey, this is the best thing since sliced bread. And now I understand, you know, not only development real estate, but value-add real estate. And I want to go do this myself. Totally. But what do you do? Like, what are the, what are the things you learn along the way? And there's a lot of business brokers. And I mean, I don't know if you knew, actually used to be a commercial lender and did SBA loans for acquisitions. So that's right. Actually have seen a ton of these types of transactions and there were certain brokers were like, we won't touch their deals because their discretionary, you know, earnings is— they're add backs.

Yeah, yeah, yeah, yeah, yeah. For sure.

Fake. Like, yeah, I remember there's literally one— this had to be a typo, but it was a recurring joke for years was they added back we called it EBITDAR. So EBITDA, they added back revenue. So yeah, literally their net income was higher than their, than their top line. And I was like, that's, that's definitely not a—

so, so I, so I started Acquisition Lab right in 2019 to sort of be the thing that I needed at the beginning. Right. And the reason I bring that up is because, you know, we sort of anchored in world-class education and just sort of helping people understand, you know, what the hell they're looking at. Right. If nothing else like that, like, you know, and all the rest of it. And the thing is, is that we've got, you know, it's, it's, it's— I won't say it's hard to get into, but like, you know, anyone listening to your podcast is going to be a great fit. You know, it's— but like, we really only extend an offer to enroll to about 25 or 30% of applicants. Right. Like, we sort of keep a lot of the riffraff out. And as a result, we have a really, really highly engaged, you know, high-level group that is actually closing a lot of deals, about $100 million a year in transactions. Wow. What's the point? The point is the following. About 35% of our members buy a business. Okay, well, first of all, that's a huge number for any kind of, you know, like, I don't know what you call it, accelerator, you know, coaching program, whatever, whatever resonates with you. But the point is, is what happens to other people? Right? And we have a huge contingency because the whole like, like SMB, lower middle market, Main Street is completely unregulated. Okay? It's complete— there's no training, there's no licensing needed to do asset transactions. Okay? Everyone is doing things like adding back EBITDA, you know, or like they don't even— like, like I looked at a deal the other day where like the broker didn't even have 2023 income statements in there. It was like 2020, '21, '22, and then year to date. And I'm just like, Where's the, like, where's the middle part? Like, where is it? So the point is, is like, people who go through the lab, they end up looking for a business to buy. And like, probably 5 to 10% of them realize like, oh my God, like, I know way more than the brokers in this space. And so like, like, we have a, we have a, you know, a curriculum designer. And she was like, Walker, you need to make like a certification program for brokers. Like, you know, it's, you know, Well, look, there's really great ones out there. I don't mean to be like dogging an entire industry, but it's tough, right? It's tough. So, so you look, I think the thing is, is like as I was going through, you know, looking for a business, I found a number of things that were wrong. Okay, let me start with this, with this sort of, you know, higher level frame for you, Ben. Like Jim Collins is my favorite author. Okay, so here I am like, you know, post-MBA for like 10 years, like buying companies, just putting multiples of my entire net worth in. Running around getting every private market certification I can find, like just trying to like, what do I not know? Like unknown unknowns, all the rest of it. And I'm like, someone needs to write the book on like this. There's a whole entire capital market here that there's no information on. Like it's opaque, it's fragmented. Like, like we need data, we need best practices, all this stuff. So I was like, I'm going to write the Jim Collins book, right, for this space. And I ran out and, you know, I just was like, I'm going to start by interviewing a statistically significant amount of people. 35. So I found 35 people who had bought businesses and I interviewed all of them first thing. Okay. I learned two things real quick. Number one, Jim Collins has like two dozen PhDs that do nothing but research data every single day. There's nothing that I was going to do that could, that could, that could write that level of book in this space. Number two, I came to the conclusion like, so every time I would talk to someone, when someone who bought a business, they'd say like, Walker, look, I'd be like, what were you looking for? They'd be like, I was looking for the same thing everyone else was looking for. I was looking for— and then they'd say something completely different from everybody else. And that's when it dawned on me. I was like, there's no best practices. Instead, we need frameworks to understand how to navigate and do this right. And so in the book, you know, in Buy Then Build, you know, a big part of it is every single broker always asked me the wrong question. First thing, right? It was sort of like, okay, you know what, what, you know, they'd sit down and be like, all right, what did you do before? Because they were trying to make it— they were trying to make the target relevant to where I came from, right? And instead, you know what I, what I talk about is you got to reverse it. Because when you're looking at a business, a lot of, a lot of first-time buyers are trying to de-risk the acquisition. And I actually feel like that's not where the magic is, okay? The magic is understanding that you are going to be the CEO of this company the minute after the transaction. And everything you're looking at is only directionally accurate in terms of like what's going to happen after, right? So you're cutting off the head of this animal and you are becoming the head. So what you need to do is think first about, you know, do I have the right attitude to, you know, be the leader in this business? You know, what is my aptitude? What is it that I bring to the table? And what do I want my daily activities to look like? Like if you, if you like riding bicycles, then don't buy a bike shop because you're never going to actually ride a bicycle. You're going to be like a mechanic, you know, or retail and whatever. Right. So, so these types of things, right? So, and then you need to understand the kind of opportunity you're looking at, right? So you reverse it by putting yourself first and then you look at the opportunity that the business is providing. And you buy the opportunity. For example, Ben, just to land it, if you're really good at like business-to-business sales team development, okay, I don't care at all what if it's relevant to what you did before, right? Because you're good at B2B sales team development, right? Like, I don't care if it was in the medical industry and now this one's in, you know, I don't know, energy. Like, you know, I don't know what it is. You know, so the thing is, is like you need to transfer those skills unless you are one of the like 1% that actually is able to provide value with your old existing network and skill set. Right. Interesting.

I mean, that's a very big kind of reverse of what I experienced in my time there, where these brokers are like, well, this person comes from this industry and so there's some transferable skills. But I think I said on the show before in another episode, but I remember there was a deal and I'm not going to give any specifics because, yeah, I mean, it's not a happy ending, but there was an individual that was a C-suite executive of like large company. They had a big exit package. They'd made a lot of money, and they went to go buy a rock quarry. So it was, you know, going mining for rocks and, you know, selling them to distributors and other things. And no, you know, correlation to that industry. You know, I think it was in like, uh, telecom or something. So, okay, yeah, he doesn't have any similar overlapping skill sets. But to your point, that isn't necessarily a requirement. But what he did lack was he'd never been an entrepreneur. He'd never been the guy that all the decisions have to, you know, they end with you and you have to go figure out how to make this work. And it was so sad because he actually ended up coming to the bank and handing the keys back and said it was a $5 million purchase and he put all his net worth in this thing and Ouch. And so it was sad, but it was also really illuminating because it isn't for everyone, right? Just, just because you're now buying this, you know, this business that is existing as a client base. What you just said is so accurate. You're literally, you're cutting the head off of the business, right? And now you're becoming that head and you need to be confident that you can go run this and, you know, also potentially take it to the next level to create value. But what are some of the skill sets? What are some of the things that you find? Because to hear in your Acquisition Lab, 35% have bought a business. Is that what you're saying? So that's a, that's a huge number, right? Because I agree, people are entrepreneurs that are successful is much, much, much lower than that across the US. So you're finding people that already have a leg up. They already have an advantage, probably with some soft skills, with their mentality, with, you know, what are the things that you see are like the magic that you can't quantify on a resume that, oh yeah, they worked at, you know, XYZ big Fortune 500 company, they know how to look at a P&L, but that doesn't always translate to be an entrepreneur, right? So what are the things that you see are so critical to being a successful business owner and—

yeah, yeah. Okay. There's a lot to unpack here. I think that it's a great question. I think that— let me start by saying this. Buying small businesses has become extremely popular on social media. Right. And I like to think that I sparked that because frankly, I was there and I did. If I may just be so bold as to say that. But the thing is, is like, In my mind, this was never, ever, ever supposed to be like a top-of-funnel social media fad, right? When I wrote Buy Then Build and the manuscript was done and my editor was like, yeah, it's great. I'm like, okay, good, it's done. I actually sat on it for 9 months and wouldn't let him publish it because I was like, because I was like, someone's gonna read this and they're actually gonna go out and buy a business, and that's crazy. Like, you— like, that's risky, you know? Like, like, that's crazy. And so, you know, I think that the thing is, is, um, you know, part of— but I think you nailed it when you said this guy had never been an entrepreneur and he was— was he in big corporate jobs? Is that it? Okay, so, so big corporate. Yeah. So, so the thing is, I think people extremely underestimate the difference between a corporate job and a small— and running a small business, right? Like, like, a corporate job is in silos and there's teams and, you know, running a small business is, you know, you're literally the janitor and you're the one like getting— in this particular example, maybe it was like getting the rock out of the wall and then like hustling over and like selling it to that guy. And like, and like if you outsource it, you're going to go broke because you're now you're, you know, your, your, your expenses, your operating expenses are too high or whatever it is. You know, he couldn't go, you know, I don't know what he was doing at his old job, but it clearly didn't translate to him buying the right business. Right. So there's a couple of things. One, and I'll just point to the Lab and, you know, I don't mean to be, you know, selling it. It's just that we engineered this deliberately. Like, you spend— we spend a lot of time unpacking what people are really good at so that we can identify the type of business that they should buy and help them see that for themselves. Right. And so the thing is, is, is that's, that's probably 80% of it. And then the other 20% is like, I don't tell people you know, if they should buy a specific business or not, because I don't know what they're going to do, Ben. Right. However. Right. There are certain things that you're like, that's not good right there. Right. So like just last night we had a search forum and this woman was looking at a business and I could kind of quickly figure out that their— that their customer acquisition cost was just skyrocketing. Right. And so I was like, their marketing is not working. Right. And I was like, that's where I'm not going to tell you that that's a bad business or whatever. It's just that that's where the secret lies. If this is a good, stable business or not, you need confidence around that. About a year ago, a guy came to me in the search forum and he wanted to buy like a local sandwich shop, right? Like a Subway or a Jimmy John's. But it was like local. It was like, you know, Ben's Sandwich Shop, you know, or whatever. And I looked at it and I was like, look, man, I can't tell you to buy this or not, but I need you to look at, look at the net income. Like, this is like 2% of revenue. You have like zero room. And like, he was taking like a 90%, you know, SBA loan on it. It was one of the few times where I'm like, you do not buy this company. And he did, and it didn't work out. And it's not surprising because all you need is like, you know, for it to rain on a Monday and like your month is shot, right? Like, so, I mean, you know, there's certain fundamentals that you kind of need to be looking for. But, you know, I do think that, I do think that ultimately you need to understand that when you're buying a small business, it really is kind of a burning the boat situation. If especially if you're taking, you know, SBA personally guaranteed debt, which is the way— look, number one, get over it. If you're buying these businesses, that's what you need. That's what you're going to be doing. Okay. If you're buying them and you're going to own it 100%, that's what you're doing. Okay. And so, and that's and you're able to do it because that's how that whole capital market is set up. When you do that, you need to understand that you are spending that money yourself right now. You're signing off on it and you are committing to paying the bank back and you're getting all the preferred stock and all the common stock, right? All of the upside, right? Coming back to a real estate analogy, if I buy a multifamily in Kansas City, okay, it might in a bad year, it might go down a couple of percent. In a great year, it might go up a couple of percent. Like that's kind of what you're dealing with. At the end of the day, you've got a bunch of bricks mortared together with people inside paying rent at a certain intersection that everyone knows. Like you can really screw that up and still have some kind of downside protection. In a business, you can literally go straight to zero, right? Right. But the upside the upside is equally blue sky, right? So it's like, you know, when you look at a business, you need to just understand, you know, the book's called Buy Then Build because it doesn't end when you buy it. You got to build the business, right? And that takes hustle and you can't outsource it in small business. It's you.

So what you're saying is 80% of the determination of what business someone should buy actually starts with them. What are the skill sets? What are they naturally good at? Um, phrase I like to use is, what's your unique genius, right? What is something that you're so good at that, um, no one can compete with you at, right? Yes. And yes, but how do people discover that, right? Especially if they're newer to this model of, and they've run a business before, you know, I've had some different things I've done, or I've, you know, started, you know, Lemonade stand was a kid and did something. Yeah. How does someone discover that? What, how do you— what's that process look like in the Acquisition Lab and how do you help people?

Yeah, interesting. Well, at the lab it's a big multi-step process, so let's not, let's not get into that. And you're meeting with multiple people and there's personality assessments and all the rest of it. But, but, you know, I think what I would say is I would just tell people to look at sort of— I think people know what they're good at, right? So if you look at the sort of core business functions, okay, you've got sales, you've got marketing, you've got operations, you know, maybe you've got some kind of like financial engineering or accounting, right? And, you know, something else I'm forgetting, you know, whatever, production management, whatever it is. So, so like, so the thing is, is like, you know, like I can, I can run an entire blue-collar manufacturing facility. I can do it well, but I can do it well for about 7 days and then I completely lose interest and I could care less about the schedule. Like, I just don't care. Right? It's just not where— it's just not where I thrive, right? So I could buy a company with a full sales team and like great marketing and like the operations are, you know, soft. And I think I'm going to jump in there and increase throughput or whatever I'm going to do. But that doesn't align with what I bring to the table, right? I know, I know that in my career where I've thrived right, is by selling ideas. I like to sell ideas, Ben. And so it's one of these things where I can get really excited about ideas and I like really like implementing them. And so when, when I buy a business, what I'm looking for, I mean, I used B2B sales as an example earlier. That's literally what I'm looking for. I'm looking for something with strong operations, like good foundation. You know, it doesn't have to be recurring revenue, but obviously repeat customers to some level, right? And I'm just looking for like, where's that opportunity where the business is pretty good? It just like it needs some— all these small businesses, Ben, need leadership. They all need leadership, right? And so like, you got it. You got to bring that to the table and you really have to lead by example. And that's the other thing that, you know, I'm not going to say your corporate friend got wrong, but that's typical for a corporate guy to go buy a small business and then like they're not really leading by example. They're like, just like just hiding behind their computer. That's not— that's not what's going on. Yeah. Yeah, that's not what's going on. So you got to get out there, right, and grow the business. And I've been kind of successful with that. And then I look for— I look for also just like tech innovations that I can bring to the table and not necessarily to, you know, increase throughput and production. I think that that has sort of limited material improvements that people overestimate. I think it's more like what, you know, like at the distribution company, we built a proprietary e-commerce storefront that we rolled out into businesses with multiple locations that allowed like multiple locations to order goods that we were then sourcing, moving through our warehouse and fulfilling to those locations. In addition to fulfilling to their customers, it completely changed and expanded what we were doing. And people loved it because we were making an Amazon-like experience for them to run their own internal supply chain. So just this kind of stuff, right? Yeah. Entrepreneurship inside existing businesses, right?

Yeah. I love that mentality. And I mean, it sounds like you're saying a simple, simplified way is understand what you're good at and then go find businesses that complement maybe areas you're not good at but lack the areas that you are good at. So like, you may be not a strong operations guy, but you can sell. You had to build sales teams. You know how to grow top line. You know how to get new partnerships and— but you need someone, you want a business that has strong operations focus to be able to scale with that growth and you don't have to play in your weakness zones. Is that a simplified way kind of what you're saying? No, no.

Yeah, that's it. And, you know, I think, I think where people kind of go wrong, like, like the Alliance of M&A Advisors had me come in and teach them what search funds were like. They're like, what are searchers? Like, they're like, what is this thing? Like this? Like this? People are like crazy. And the thing is, is that I want to relate is, you know, when I was first looking for a business, there was no term searcher, right? The word people used for me was unemployed, right? You know, I'm like, yeah, I'm looking for a business to buy. They're like, oh, you must be rich. I'm like, no, I don't have any money. And they're like, you are dumb and unemployed, you know, especially the woman who became— yeah, especially the woman who became my mother-in-law. She would just look at me puzzled, like, don't you need a job? And I'm like, I'm working on it, you know. But, uh, But, you know, I think the thing that people get wrong is, is that like whenever it's a first-time searcher, first-time business buyer, they're like, okay, here's my list of criteria. And they just sort of like describe the most absolutely perfect business that could ever exist. And then they're like, and I'm not going to pay anything for it. And I heard about this thing called seller financing, and so I'm not going to put any money in it. I'm going to have no skin in the game and I'm going to force the seller to finance. The most, the most valuable asset they have to just sign it over to me and I'll do a, you know, whatever. Like, it's just like they have completely unrealistic expectations, right? Like, you need to understand that every one of these small businesses, it pretty much looks like this. Some, you know, gray-haired guy put his kids through college, is driving around in a Lexus, has very little debt and, you know, has no interest in taking on any risk of any kind. And he's making, you know, hundreds of thousands of dollars a year working part-time. Like, that's what's going on. And as a result, everyone has been there. All the employees have been there for 20 years. You know, they do things a certain way, right? You know what I'm saying? And like, if you really dove into, you know, and so it's like, and so it's like all these things like They're ugly. Like, I don't need something with operations that are perfect. In fact, if I find that, it's going to be really expensive, right? Even the traditional search fund investors tell their searchers, find the perfect business and be prepared to pay a lot for it. Like, that's their, that's their strategy, right? So, so like the way to do it is you find something where it's like, okay, these operations are, they can be improved. But like I can do it in like 90 days. That's what I want. Like, I want to run a special project and lift it, right? And then through leadership, bring the right team in and processes and systems to sort of upgrade that. And then I can sort of move on to the thing that I'm great at, right? And then lead that for the longer period of time. Love that. Okay.

I want to shift kind of the last part of the conversation here to sell side. So sure. You bought a lot of businesses. Yeah. You've created this amazing kind of acquisition lab to help people learn the ropes of how to do this. Yeah. And you've also advised— I think you told me over 100 different transactions. Yeah. So a lot of our listeners are business owners already. Yes. Oh, this is their own businesses. And but they're all maybe the tail end of it, like, okay, how do I now exit, get a liquidity event and have, you know, actually sell a business and make money and do it the right way. And how do I make my business look attractive to a buyer? So talk a little bit about the frameworks you use and what you kind of see over the 100 transactions you looked at.

Yeah, no problem. So it's actually a fairly simple recipe, right? Like number one, the foundation of business valuation is going to be in growth and earnings. Okay. So like earnings are literally what are the earnings? Like, are you earning— is— are your bottom line earnings like half a million, a million, 5 million, 50 million? Like these are completely different ballparks. So looking at what your earnings are will tell you what ballpark you're in. Okay. Now when I say earnings, I mean like depending where you are, it could be SDE, it could be adjusted EBITDA, it could be EBITDA. There's a number of different ways to calculate it. It's got to be somewhat customized to the size of the business. Second is growth. So, you know, if you made $1 million this year, that's great. What was it last year? If you're like, it's $500,000, I'm like, great, we're going to— you're going to sell for the most in this ballpark. But if it was $2 million last year and it's $1 million this year, you're probably going to sell at the bottom because I'm going to make money every single day. I don't buy your company, right? Like, like, like it's like, it's like, whereas if it's, if it's growing, people can't buy it fast enough because they feel like they're missing out on the money coming in. Whereas it's going the other, you know, So, so, you know, growth and growth and, you know, growth in earnings, historical growth in earnings. And then it comes down to, you know, just documentation, you know, like do the internal financial statements match the tax returns? You know, like, like just all the basic stuff. Do you have standard operating procedures? You know, just all the documentation. Is it good? Is it tight? What's the quality level of it? You know, or are you just like, you know, running on an Excel sheet, you know, that has like no, you know, whatever you've seen it, Ben, I know, you know, Then you've got what I call transferability. Okay. And what I mean by that is, you know, at one point I had a guy who was talking to me. He wanted to sell his solar company and he did like, he did like corporate solar installations. And, you know, I was like, okay, well, how do you, how do you like design these? And he goes, oh, well, I'm a, you know, I have a master's degree in solar engineering. There's two schools in the world that do it. And I'm like, great. So you design all of them? He's like, yeah. And I'm like, okay, how do you attract customers? And he's like, well, I'm in sales. And I'm like, okay, so you find all the people? And he's like, yeah. I'm like, all right, how do you convert those prospects into, you know, buyers? And he's like, well, I sell them on the stuff. And I'm like, so you find the people, you sell them, and then you design it? And he's like, yeah, but after that, I don't do anything, man. Like, it's all like, you know. And I'm like, okay, like, I can't, like, you know, like, imagine this Venn diagram of like people with master's degree in solar engineering that also want I want to like buy a company for X, you know, it's very small because it's all this specialized knowledge, right? It's specialized knowledge. You have to get all of that out, right? If you're trying to maximize the valuation, okay, you've got to get all that specialized knowledge out, and you kind of have to be— you kind of have to get to the point where you're kind of the glue that keeps everything together, but you're not necessarily active. It's very different from the build portion, right? Um, and so from there, it's sort of like, what are the growth opportunities? Like, a lot of buyers know when all the meat's been eaten off the bone. I mean, we can see it, right? Like, buyers aren't dumb, right? I mean, you know, like, like a lot of sellers, like, oh, they won't even notice. Like, you know, it's like, no, we can— we all see, you know, that it's, you know, and then after that it's business risks. Okay. So you need to eliminate the obvious sort of, you know, textbook risks that exist. So for example, if you have one customer that's like 30% of your revenue, you know, your valuation is going to be low unless you can go get new customers and get that person under 10%. I'm just picking a random one, like, you know, sure, customer concentration, right? You know, so it's like, you know, and, you know, the more that you can move to recurring revenue instead of repeat revenue, I mean, you know, the valuation goes up and so on and so forth. But, but, you know, those are, those are really at the end of the day when I'm talking to a business owner who's looking to sell, those are the things I'm kind of trying to engineer for. And then, and then other than that, here's, here's the big thing you need to talk with. Like, look, we all sit in our business and we run our business and we all know it's valuable because we're putting our blood, sweat, tears, and life into it and it's generating money, right? Hopefully. And 96% probably aren't generating that much. We talked about that earlier. But anyway, so, so we know it's valuable of some kind and, you know, to us it's worth, you know, a billion dollars, right? So it's like But the thing is, is like there's no scoreboard. There's no like liquid public market that has— that is, you know, determining the stock price on a daily basis of my business sitting out here in St. Louis. Right. Right. So the thing is, is like you need to understand what the market is doing and like where you are in that sort of like, you know, growth pattern. And so I think that like if you're really trying to maximize exiting, the external market is actually the biggest driver of what the value of your company is. And most business owners don't even understand that. Man, those are some great, great nuggets.

That's amazing. Well, one of the little, little sub-questions on that, on the transferability, I feel like that's a huge one, right? Of a lot of entrepreneurs, they started the business, they've built the business to be them-centric. Like, it's— it runs because they're in it, and they may not realize that. So in something like that, how does someone start to create the SOPs and to remove themselves? And how do they— what's that process like in, um, trying to, uh, make the business be able to run without them, right? If that can be a hard transition for a lot of entrepreneurs.

Are you trying to exit Aspen Funds? No, no, no. I got a long time left. Are we going to engineer your exit right now?

Yeah, no, actually, I'm the buyer. That's one of my investors that I'm thinking about because he's going to be exiting in 2 years. And so these are questions I know. Got it, got it, got it, got it.

Yeah, I'm obviously joking. You know, it's like I'm asking for a friend, you know? How do I exit? You know, I think it's really I mean, I think it's really sort of like understanding that your business is valuable when you are absentee. Yeah, right. And like, the thing is, is like, how do I say this? I know I said earlier, like 2.5 to 4 times, you know, kind of like this earnings number. And that's not, that's not wrong for, you know, the majority of these businesses that are transacting, you know, under $5 million. Right. But, you know, like, I'm a minority owner in— can I say? I'll just keep it confidential. But like, it's one of these where, you know, we received an offer of 2.5 times revenue and we're not selling. I mean, it was a huge multiple of earnings. It was, you know, it was 10, right? 10x. So it's like, it's like there's all these different components that go into it. So like, don't, don't, listen to what I just said and translate that to your certain specific situation because I don't know it, right? So let me just start there, right? Like you need to, you need to get realistic about what the valuation of your company is. But, but I think the point here is that when you become an absentee owner, then that's the point where your business really becomes turnkey and is nothing but an asset, a cash-flowing, appreciating asset sitting on your balance sheet. Just like your most recent Aspen Funds investment, right? Got it. Yeah. And it's the thing that, you know, is the most valuable to anyone who owns it, right? So if you can turn that thing into a black box that generates cash, that's what's going to drive. So I mean, to answer your question very specifically, it's like, okay, what am I doing? Am I selling? Okay, can I replace myself with that? Am I, you know, like, you know, like once you're working towards an exit again, what I'm trying to say is you have to figure out where you are and what ballpark you're in and which one you're trying to get to. And then once you're at that ballpark, then you start to say, okay, now I need to reverse myself out and just own this thing as a slower growing asset with more staff. And instead of, you know, selling for, you know, 3 times SDE, you know, maybe it's now going to sell for, you know, 7.25 times adjusted EBITDA, right? Or whatever that might be. Wow.

Walker. Oh man, this is so fun. So what's the best way for people to learn more about what you're doing on the buy side with Acquisition Lab. And then even if someone is wanting to talk with you about selling a business, you know, give us some ways to— Yeah, no, that's great.

Let's see. I mean, the easiest is probably if you go to WalkerDiebel.com, it's D-E-I-B-E-L, by the way, you can sign up for my newsletter. It's free. It goes out every Sunday. We've really been beefing that up. You can, you know, obviously pick up a copy of Buy Then Build if you have $17 or whatever you can. I've got over 100 videos on YouTube and LinkedIn is actually the best place to— if you want to hit me up, like jump over on LinkedIn and find me there. And then the last thing I'm thinking about is I've got about 11,000 people in a free Buy Then Build Facebook group and like deals are happening. Like people are just— I mean, I'm not even in there doing anything. It's just like a whole community of of hustlers in there making, making stuff happen. Awesome. Awesome. Ben, thank you so much. It's, it's, it's rare that I actually get to talk to another Missouri boy.

I know how we got to hold down the fort here. Let people know the good news. So, well, this is awesome and I'm sure a lot of our listeners got a lot of value out of this. So thanks so much for coming on, Walker.

It was really fun, man. Thanks, Ben.

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