Mastering Acquisition Entrepreneurship: Insights from Walker Deibel

The Rise of Acquisition Entrepreneurship

In recent years, a new path to business ownership has emerged that allows entrepreneurs to skip the startup grind and acquire existing profitable companies. Known as acquisition entrepreneurship, this strategy involves buying and growing established small to medium-sized businesses.

Walker Deibel, bestselling author of "Buy Then Build" and founder of Acquisition Lab, is one of the leading voices in this space. In a recent interview, Deibel shared invaluable insights on how to successfully navigate the world of business acquisitions.

The Massive Opportunity in Business Acquisitions

According to Deibel, we're in the midst of an unprecedented transfer of business ownership:

"There's $10 trillion in business value that needs to change hands in the next 5 years. It's absolutely massive," he explains.

This is largely driven by baby boomer business owners retiring en masse - about 11,000 per day. Many of these businesses are profitable but lack a succession plan, creating opportunities for acquisition entrepreneurs.

Deibel notes that 96% of businesses never reach $1 million in annual revenue. By acquiring an established company that's already crossed that threshold, entrepreneurs can skip years of struggle and start with a proven business model.

Key Strategies for Successful Acquisitions

Based on his experience acquiring multiple companies, Deibel shared several key pieces of advice:

Focus on One Business at a Time

Deibel cautions against trying to build a diversified portfolio of unrelated businesses right away:

"The worst decision I ever made was to start a holding company," he admits. "I bought seven companies horizontally...I was getting smacked in the face in three different verticals every day."

Instead, he recommends focusing on acquiring and growing one solid business before considering additional acquisitions. This allows you to fully leverage your skills and attention to drive growth.

Don't Obsess Over Price

Many first-time buyers get hung up on negotiating the lowest possible price. But Deibel argues this is short-sighted:

"Mistake number one is caring about how much you're paying," he states. "The multiples on earnings are very very low...three to four times annual earnings."

He suggests being willing to pay a fair price for a good business, rather than potentially losing a deal over a relatively small difference in valuation.

Leverage SBA Financing

Deibel is a big proponent of using SBA loans to finance acquisitions, rather than relying on seller financing:

"I've never done seller financing once in my life," he notes. "I want to write the check. I don't want to owe that person money."

SBA loans allow buyers to finance up to 90% of the acquisition price, making deals more accessible. This also provides a clean break from the previous owner.

Focus on Operational Improvements

Once you acquire a business, Deibel recommends quickly identifying operational inefficiencies and implementing process improvements:

"There's a period of time that's usually like month three through six or seven...that's actually the most beautiful magical time to go in and just start laying down like new processes and systems," he explains.

This could involve mapping out existing processes, automating manual tasks, and optimizing workflows. The goal is to boost productivity and profitability.

Common Mistakes to Avoid

Deibel also highlighted some pitfalls that new acquisition entrepreneurs should be wary of:

Trying to Change Too Much Too Fast

While some changes are necessary, Deibel cautions against completely overhauling the business immediately:

"When you go in and start like changing material core things in businesses, like that's a way where you actually screw up a business because you're getting in front of your skis because you think you're too smart."

He recommends focusing initial changes on processes and people, rather than core products or suppliers.

Paying Yourself Too Much

It can be tempting to immediately boost your own salary as the new owner. But Deibel advises restraint:

"The number one mistake is you go in and you just increase your salary really high because like now you're the CEO and you just start burning all the cash that's coming in the door."

Instead, he suggests living frugally at first and reinvesting profits to build up cash reserves and fuel growth.

Ignoring Company Culture

When implementing changes, Deibel stresses the importance of fostering the right culture:

"Really focusing on that culture and trying to like give people a true north on you know your values and where you're going and like how you treat people is really really important."

This helps get employee buy-in for new initiatives and processes.

Getting Started in Acquisition Entrepreneurship

For those interested in pursuing this path, Deibel offers a few suggestions:

1. Educate yourself on the process through books, podcasts, and courses
2. Join communities of like-minded acquisition entrepreneurs
3. Build relationships with business brokers to access deal flow
4. Consider partnering with someone with complementary skills
5. Focus on businesses doing $1-5 million in annual revenue to start

"Acquisition entrepreneurship and small business ownership is really the only way. It's really the fastest way for most people to make any real real money," Deibel argues.

While it requires hard work and carries risks, buying an existing profitable business can be a powerful way to become a business owner and build wealth. By following proven frameworks and learning from experienced acquirers like Walker Deibel, aspiring entrepreneurs can set themselves up for acquisition success.

Key Takeaways

• A massive $10 trillion transfer of business ownership is creating opportunities for acquisition entrepreneurs
• Focus on acquiring one solid business to start rather than building a diversified portfolio
• Be willing to pay a fair price for a good business - don't lose deals over small valuation differences
• Use SBA loans to finance acquisitions when possible instead of seller financing
• Quickly identify and implement operational improvements after acquiring a business
• Avoid changing too much too fast or paying yourself an excessive salary as the new owner
• Foster the right company culture to get employee buy-in for changes
• Start by targeting businesses doing $1-5 million in annual revenue
• Educate yourself and build relationships in the acquisition entrepreneurship community

By following these principles and learning from experienced acquirers, aspiring entrepreneurs can successfully navigate the world of business acquisitions and build wealth through buying existing companies.

Article created from: https://www.youtube.com/watch?v=CM0LFZovS9E