If I Had to Start Over...
My 5 tips to get started...
“If you had to start it all over, where would you start?”
I’ve now had three separate consulting calls end with this question.
It’s daunting to start the process of buying a business and it can quickly become overwhelming.
So I’ve decided to boil down my response to a list of 5 questions/areas I would start if I were starting over today.
Plus, I’m going to give away 10 free 30 minute consultation calls at the end.
1. What Do You Really Want?
This is the first question I’d ask myself if I was starting over.
Why do you want to buy a business?
Is it to escape the reliance of the 9-to-5 job?
Is it to compliment what your business is already doing?
Is it to gain some sort of passive income? (Don’t fall for the catchy fads)
What do you really want?
Different answers would require me to go about this in a very different way.
If I’m willing to put my blood, sweat, and tears into a business then I’m looking for a business with a large upside, large margins, but requires hard work upfront.
If I want to put in 4-5 hours a week then I’m looking for something more self-service based like carwashes or laundromats.
Be honest with yourself and write down what you actually want.
2. Buy Profits, Not Promises
“The first rule of an investment is don’t lose [money]. And the second rule of an investment is don’t forget the first rule. And that’s all the rules there are.” Warren Buffet
Don’t buy a business because it COULD be good.
Only buy businesses that have a proven history of profitability.
“But Austin, I found a roofing company that only needs $30K down and has a really good reputation!”
Are you going to be able to consistently collect money throughout the first 90-120 days of taking over? Does the current owner have outstanding A/R that you can collect in the first 30 days?
“Well no, they don’t have any jobs in the pipeline and the owner hasn’t been currently working on it.”
Shut it down.
Learn from my mistakes and run the other way.
You would be better served to just start a business in this scenario.
3. Be Pessimistic on First Year Cash Flows
I’m a default optimist.
I see the blue skies and can quickly see how a deal could gain even more cash flow in the first year.
But one of the most beneficial questions I ask myself when I’m buying a business is this:
If I bought this business and it lost 25-30% of revenue in the first year, would I still buy the business?
This question will force you to take a deeper look into the business and it’s profitability.
It will also make you look at what threats exist in the business that could cause you to lose that 25-30% in revenue.
4. Don’t Stop When You Fall Down
“It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows the great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat” -Theodore Roosevelt
This journey will not be an easy one.
You are going to hit roadblocks, delays, downfalls, and dead ends.
Just don’t stop.
Deals are going to fall through and it is going to feel like a gut punch that you’ll never recover from.
I’ve had deals that we raised $70mm and the deal fell apart in the literal last hour.
I was hurt, felt broken, and didn’t know if I could do it anymore.
Keep pushing and pick yourself up.
5. Plan for the Long Term
“Time is the friend of the wonderful company, the enemy of the mediocre.” - Warren Buffett
Stay in the game long enough to get lucky.
I’ve recently been studying the late great Charlie Munger and one thing has stood out to me:
Charlie Munger and Warren Buffett planned for the long term with every single acquisition.
They bought great companies with the plan to hold them forever.
I’ve found that when I take the long term view on an acquisition, it changes my perspective.
Wrapping Up
Figure out what you are really looking for in a business and keep that the main thing.
Buy profits and cash flow. If a deal is bad then the deal is bad.
You are going to go through hard times, but push through and don’t quit.
Take the long term view when analyzing a company. It will force you to look at how to grow it over the next 10 years, not just the next 3.
Go out, take action, and build something amazing
Cheers,
Austin
My Free Gift
I’m working on multiple acquisitions that are currently in the legal process right now. I have free time from now until Christmas that I’m going to use to meet with 10 people that want to chat about acquisitions.
Click the button below if you want to schedule time.
The Acquisition System
A $150 crash course ($100 for the rest of the month) that has 6 hours worth of content dedicated to educating those that are just starting out.
Oh, and you will get a 75 question pdf that goes in-depth in my due diligence process.
Click the link and get access to The Acquisition System.