Buying and Growing an Unsexy Business: A Real-Life Account

Buying an existing business can be a 'cheat code' for entrepreneurship.

Instead of starting from scratch, acquiring a validated, profitable business with a history can reduce risk and provide immediate cash flow.

Why: It bypasses the need for a 'killer idea' and initial market validation, leveraging an already working model.

"It honestly seems like a little bit of a cheat code. As in, if you find a business, it's already working. You don't have to come up with a genius idea. It's already validated. It's already working. It's got years of profitable history. You could buy it at a fair price. Then if you're good at executing, you can grow it over time."

The reality of buying a business is often harder than the 'dream' sold online.

Expect the process to be challenging, time-consuming, and not as passive or easy as some gurus portray. It involves deep diligence and personal commitment.

Why: Social media narratives often simplify the complexities of financial scrutiny, negotiation, and operational challenges.

"But those are also people that are kind of selling you the dream."

Leverage your inherent personality traits and strengths.

Success in business acquisition often comes from aligning the venture with your natural inclination for detail, problem-solving, or entrepreneurial drive.

Why: Other people can often see your gifts more clearly than you can, and playing to your strengths increases your likelihood of engagement and success.

"Other people sometimes see your gifts easier than you can see them."

Conduct thorough and calculated due diligence.

Invest significant time and resources (accountants, lawyers) to scrutinize every aspect of the business, as personal assets are often on the line.

Why: To mitigate risk and ensure all potential issues are uncovered before making a 'gigantic gamble' on your life savings.

"I probably went a little more overboard when I think about the amount of time I spent in diligence, the amount of money I spent in diligence. I'm a risk taker for sure, but I'm a calculated risk taker. Before I make this gigantic gamble on the rest of my life, I want to make sure I've done everything humanly possible."

Embrace the 'Pit of Despair' during the search, and don't settle prematurely.

The search for the right business is long and can be frustrating, leading to feelings of hopelessness. Resist the urge to grab the first 'good enough' deal.

Why: Fatigue can lead to bad decisions; sticking to principles and waiting for the right fit prevents buying a problematic business.

"You enter into the pit of despair, which is low knowledge, low excitement, and then you learn more and you slowly get out of this pit."

Aim to buy an asset, not just a job.

Focus on businesses with substantial revenue and profit that offer growth potential, rather than smaller ventures that merely replace a salary but still demand all your time.

Why: A larger, more profitable business justifies the risk and effort, becoming a true asset rather than just another form of employment.

"Don't buy a job... you basically bought a job versus the thing you bought, which was like $11 million in revenue, doing a million dollars a year, almost a profit. Real dollars. Yeah, that's not a job anymore. Now that's like an asset. That's like a real business."

Prioritize buying from retiring 'Boomer' sellers.

Older, retiring owners are often more motivated to sell, less likely to be hiding issues, and may be more willing to offer favorable terms or assistance during transition.

Why: They typically want to exit gracefully, not because the business is failing, and their children often don't want to take over the 'unsexy' family business.

"He was retiring. He wanted out. And that's kind of what I loved about kind of this world... the baby boomers are retiring."

Utilize seller notes, especially forgivable ones, to mitigate risk.

A portion of the purchase price paid by the seller over time, with conditions for forgiveness if the business underperforms, can protect the buyer from major downturns.

Why: It aligns the seller's interest with the business's continued success post-acquisition and reduces the buyer's upfront capital risk.

"The other 1.4 came from the seller, which effectively we said, hey, we're not going to pay this up front. Over the next five years, assuming the business continues to do well, we'll pay the second part of the debt. So it's a forgivable seller note, which means effectively if the business doesn't do what it's supposed to do, that debt's forgiven on any given year. So that was part of what made me feel better about the deal."