Business Entrepreneurship Finance

Buy Then Build: How to Outsmart the Startup Game (Summary)

by Walker Deibel

Silicon Valley idolizes the ramen-noodle-eating founder who builds the next unicorn from a garage. But what if that's a sucker's game? Over 90% of startups fail, yet acquisitions of small, profitable companies succeed over 90% of the time. The most reliable path to wealth and freedom isn't creating something new, it's buying something that already works.

Entrepreneurship is a Search, Not a Creation

The traditional founder's journey is a high-risk gamble: create a product, then desperately search for a market. Deibel flips this, arguing that true entrepreneurship is the search for an existing, proven business model that you can acquire and optimize.

Instead of spending two years and a life's savings building a new software-as-a-service (SaaS) product and hoping customers show up, an entrepreneur can buy an existing SaaS company with a stable customer base and recurring revenue, immediately stepping into a CEO role with cash flow from day one.

You Don't Need to Be Rich to Buy a Business

The biggest myth preventing people from buying businesses is the belief they need millions in the bank. In reality, profitable companies can be acquired with little to no money down by using the asset's own cash flow to secure financing.

An entrepreneur finds a company for sale for $1 million that generates $300,000 in annual profit. They can secure an SBA 7(a) loan for 80% ($800k), convince the seller to finance 10% ($100k), and only need to come up with a 10% down payment ($100k). They are essentially using the business's future profits to pay for its own acquisition.

Your Job Is to Be an Investor, Not an Operator

A common trap for new owners is to get bogged down in the day-to-day operations. The goal is to elevate your role to that of an investor who works on the businessā€”improving systems, strategy, and talentā€”rather than in it.

A new owner of a plumbing company could spend his days on service calls, managing the schedule. Instead, following Deibel's advice, he hires a general manager to run operations, while he focuses on acquiring two smaller competitors and implementing a new marketing system, tripling the company's value in two years.

Develop a Thesis and Create Deal Flow

You can't buy a great business if you don't know what you're looking for. The key is to develop a specific investment thesis (e.g., "I will buy B2B service businesses with retiring owners") and then build a pipeline of potential deals that fit that criteria.

An aspiring owner with a background in digital marketing decides her thesis is to acquire e-commerce businesses with poor social media presence. She systematically contacts business brokers, sets up alerts on sites like BizBuySell, and networks in her industry, ignoring everything that doesn't fit her narrow criteria. This focus allows her to quickly spot an undervalued asset that others overlook.

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