Business Buying Process with Walker Deibel - a podcast by Michael Veazey

On this podcast, Walker Deibel of Quiet Light Brokerage will be talking about startups and the business buying process.



“Buy then Build”Part of the business buying process is “Buy then Build” has been adopted by two universities as a required textbook

But Walker spends 40 hours a week at Quiet Light BrokerageAnd there’s a reason why he wants to help “acquisition entrepreneurs”.
Walker BackgroundWalker is the author of Buy then Build - how acquisition entrepreneurs outsmart the startup game and a business broker at Quiet Light Brokerage
Was an SEC-registered, stockbrokerAlso M&A person - familiar with private middle marketsAlso works as a business broker

⁃ Has bought ½ dozen companies himself - only one was a straight-up e-commerceAlso done a couple of startups and had a couple of exits himself

⁃ Had a fulfillment center⁃ Now works for Quiet Light Brokerage

The other is “buy than build” which is also a bookWhat brought you to Quiet Light Brokerage?
Pre 2010 the first company he bought was a book printing company.He was charged with the mission of getting a brick and mortar entity online

They called it “print is dead”.Walker had some strategic business issues to address and grow through acquisition.
Searching for a business to acquireLooked at 100s of companies from lists and 27 in real life

Quiet Light has a team made up of entrepreneurs that have done this means they make a better prospectus.In the end, Walker was given a chance to sell him a brokerage.

Walker ended up buying a company from QLB and it came up organically.He just asked Mark.
ProspectusMost entrepreneurs don’t even think about buying business until they’ve sold.

Then 60-90“Gosh that startup period is so hard, I’d rather buy and cashflow immediately”
Zero to One startup- Peter Thiel - creating a whole new marketplace.

That is a true venture capital marketMost people are trying to do an N+1 thing - you’re not creating a whole new market.
What is the purpose of a startup?But most people are aiming for creativity, autonomy, financial independence.

Part of the business buying process is to give away stock in your company for equityaim: “build infrastructure such that the output of the infrastructure is bigger than the cost”

The startup phase is defined by not having a bigger outputOnly 4% of companies in the USA ever exceed $1M

(“Scaling up” Verne Harnish)SBA lends up to 90% of the transaction value of businesses.

Downpayment close to that of a home in AmericaThe minute you can stop focussing on cash flow, you can start focussing on how you Moneyball

There is an analysis on SABRE metrics - batters who get on base, rather than home runs, they cost less money and they can win at baseball.The Red Sox adopted this.

IF you acquire a business generating $1M in annual revenue, you’re alreadyIt’s somewhat affordable, it’s a margin of safety,

Lower multiples than the middle-market so cheaper.Startup success rates vs SBA acquisition
People put in capital, sweat, 2 years trying to get it off the ground.90% of them fail - they go to ZERO!

Businesses that have been acquired using loans from the SBA - 3 years⁃ Default rate has been as 2%

So if you define EntrepreneurshipDespite the necessity and importance of entrepreneurship, it’s still a crude and error-prone process
Investment perspectivePretend you’re going to buy a business with

Metrics$1.4M in revenue

$200K in earningsBuy for 3X profit

SBA loan plus 10% down paymentSo invest $94,120Future
You’ll hold it for 10 years

Grow at 10% a yearThen at the end $3.9M rev,

$600K earningsSell for $2.5M

After interest etc. discretionary earnings are $5M approx. including exit cash27X ROI on the 94K
“We’re going to 10X this sucker”Entrepreneurs in a startup often say this. But you just 27x your capital.

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