Click here to Download Buy Then Build PDF Book by Walker Deibel Language English having PDF Size 4.6 MB and No of Pages 309.
They explained that they were there to film a promotional video for Corley Printing, Walker Deibel’s very first buy-then-build success story. I had no memory of agreeing to do any such thing (and still don’t), but that occasionally happens to me. Whenever I agree to do something far into the future, I just say yes and imagine the day will never come.
Buy Then Build PDF Book by Walker Deibel
|Name of Book||Buy Then Build|
|PDF Size||4.6 MB|
|No of Pages||309|
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But this time, the day had come and it was today. As a person worthy of being the star of a micro-budget promotional video, I had a hundred more important things to do that morning. I would have weaseled out of the shoot (or at least changed into a more stylish outfit), but I truly loved Corley Printing and their dynamic young CEO, so with a broad a smile, I said, “Mic me up, fellas!”
Just as most everyone under fifty years old was running from anything having to do with the printing industry, Walker had gone against the grain and actually acquired a book manufacturing company. I got a front row seat to watch as he made decisions that transformed the company.
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And quickly became a regional leader in digital book production—perhaps the only area that was growing under the changing printing landscape. Under Walker’s leadership, the company withstood the storm that hit the industry, became one of the largest 2 percent of printing companies in the United States, and experienced an exit.
Walker is more than just an author, and Buy Then Build is more than just some academic exercise. This book is an insider’s look into a proven system, masterfully told by a veteran entrepreneur. Walker has already found success several times buying and building businesses. Just as the practice of entrepreneurship through acquisition is taking hold in business schools.
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Walker—if you’ll forgive the obvious pun—is not just talking the talk; he has already walked the walk. John was the former director of product management for Microsoft Services and now acted as the CEO of our startup, View Point. He was referring to our company. “We’re out of cash, the product isn’t functional, and we don’t have any paying customers. It’s over.”
This wasn’t my first startup. Or even my first startup failure. I understood the risks—indeed, after having a previous startup fail, I thought I had learned the variables that lead to a successful launch. This time was going to be different. We not only had a great product in a fast-growing market, but an all-star team.
Our largest investor was a former Fortune 500 CEO. Our own CEO had been the SharePoint consulting executive at Microsoft and had worked with customers directly in our target market. Our team of proven, high-revenue generating developers had built successful enterprise software before, and one of our advisors was a CTO of a Fortune 500 company. Buy Then Build PDF Book
The equity raise was oversubscribed, and within months of graduating from one of the top-ten startup accelerator programs in the world we had beta trials inside many recognizable companies. We had all the hallmarks of success…but no actual success. Startups have an inherent flaw: they mostly fail. Even with overwhelming talent, outstanding early product trials, and an all-star team, success is still unlikely.
We’ve all heard the statistic that one out of ten startups make it. It’s not a secret. We all go in with two eyes open. It appeared that View Point was no exception. An existing company with legacy systems and an outdated path to success has just as much need for innovation as a startup does.
As a result, those who can recognize and execute this can capitalize on the benefit of an existing platform to build in the “new company” they wish to run. Consultant and bestselling author Jim Collins examines what causes companies to succeed or fail. His book, How the Mighty Fall, is a guide to understanding a company’s various stages of decline and becoming better equipped to reverse the tide. Buy Then Build PDF Book
As we’ve seen in established companies like Blockbuster and Borders, all established organizations are vulnerable to missing an innovative trend. Collins explains how existing businesses that are able to embrace the disruptive technologies attacking them actually have a better rate of dominating the newcomers.
In fact, it’s the old dogs with new tricks that have a higher probability of withstanding disruption within their markets. The old dogs have the benefit of existing revenue and earnings. They have infrastructure and invaluable industry insight. They have customers wanting to update to the trends.
It’s testament that the challenges startups face never really go away, and that having infrastructure generating profitable revenue is the best possible tool for innovating. It’s the combination of innovation and existing customers that wins in the war of disruptive technologies. Realizing that venture capital might not be the best resource for engineering a successful company. Buy Then Build PDF Book
And pairing that with an understanding that the strongest growth is actually more commonly found in established industries, lends itself to some of the advantages of starting with acquisition. What does all this mean for today’s would-be entrepreneurs? Luckily, there happens to be a once-in-history opportunity occurring right now.
Further, an astounding 91 percent of everyone having over $5 million in net worth owns their own company—a trend suggesting that the wealthier someone is, the more likely they are to own a business. Owning your own business is not only an opportunity to provide value through products and services, but it’s arguably the best way for most people to build real wealth.
In this chapter, we’ll look at acquisition entrepreneurship as an investment vehicle. To be clear, this does not mean that after you buy a business you are promised a high net-worth ranking. Nor does it mean that acquiring a company purely for financial gain is a good idea. Rather, it points to the fact that being the owner of a successful business can be a great investment vehicle. Buy Then Build PDF Book Download
And that those who make the most of it can finish big. We’ve seen that the acquisition entrepreneur needs to act as both entrepreneur and investor. After all, by utilizing the bank instead of private investors for the majority of financing, it puts the responsibility on the entrepreneur to invest their own money into the company.
At a minimum, you’ll want to understand the basic rules of investing before you start looking at potential acquisitions. When it comes to buying a company, size matters. Typically, the size of the target is identified by revenue but then valued on a multiple of SDE or cash flow. Now that you know which type of company profile you want to purchase.
You’ll need to identify the target SDE. As a result, defining what you are looking for by revenue is just the wrong metric. What if you find a software-as-a-service company with 70 percent net income to revenue? Or a metal-trading company with 1 percent net income? Defining by revenue doesn’t define your target by the thing you are buying in the first place: the cash flow. Buy Then Build PDF Book Download
Instead, define the target by the amount of SDE. To review, the Seller Discretionary Earnings (SDE), is a measure of how much total cash flow the seller of the firm has been enjoying. It is calculated by taking the pre-tax earnings of a company, then adding back any interest and non-cash expenses like amortization and depreciation (which will give you Earnings Before Interest, Taxes, Depreciation, and Amortization).
Finally, adding in any seller benefit such as salary, personal insurance and vehicles, and any one-time expenses the company had during that time. As listings move from Main Street to middle market, a definition largely defined by size, you’ll likely see Adjusted EBITDA as the metric used instead of SDE. They typically refer to the same thing.
The difference is often that Adjusted EBITDA is the term largely used for passive ownership, while SDE refers to active ownership. Despite all the complicated valuation calculations that can be done to calculate value, the typical transaction just comes down to identifying the SDE (or Adjusted EBITDA) number by a fair multiple. Buy Then Build PDF Book Download
The smaller the firm, the smaller the multiple. Typically, you’ll see good companies under $700,000 in SDE trading at two and a half to three and a half times SDE, and companies over $700,000 at north of that. After working with the numbers, Nancy decides that she is comfortable describing her target company as having an SDE of $300,000 to $350,000.
And will apply this knowledge when putting together her target statement. She calculates that if she is able to grow the company 10 percent every year, it will exceed $4 million in revenue, the debt will be paid off, and she could be making over $700,000 a year. She begins to see buying a business as a vehicle for driving creativity, utilizing her strengths, and building wealth.
Armed with the opportunity profile you are looking for, as well as a defined SDE range for that target, you’re well on your way to having your target statement put together. Finally, you need to define the core industry type. You need someone to walk through the valuation with them, to get them ready emotionally, and to negotiate on behalf of what’s best for “the deal,” and not just the buyer. Buy Then Build PDF Book Download
The seller has a lot to think about, and they might not understand all of those points immediately. It’s best to establish an intermediary right away in those discussions. I often reach out directly to companies I’d like to acquire. Everything from eCommerce and fulfillment to solar engineering.
From award winning software startups to 100-plus-year-old factories—they are all at different stages of management, and at some point they will be for sale. The owners are not as far along in the selling process as those who have listed with a broker, but setting up repeat meetings with the owner of a company you’d like to acquire will get you through the process.
The odds of it ending without an acquisition are much higher, but any company you would want to buy should receive communication from you or your team. Think about what company you know of that you would like to run. Although you know absolutely nothing about the company, the first thing is simply knowing that it’s attractive to you. Buy Then Build PDF Book Free
I asked myself this question one day, emailed the owner (who happened to be a friend of a friend), and he was in my office within hours. His company wasn’t listed for sale, but personal circumstances had him already considering selling. I got to him before an intermediary. I didn’t end up acquiring that company, but I’ve done this same outreach many times over with great results.
Every single prospect I’ve reached out to was willing to talk about it. My strategy is typically to reach out directly and start a conversation. If they want to explore, I simply tell them that there is a broker I’m working with who can work confidentially with them on putting together a valuation. If the potential seller likes the valuation, the broker can present it to me and we can go from there.
This is a great strategy for getting the ball rolling. When reviewing the financial performance in the OM, you’ll go through various steps. First, you’ll just want to get familiar with the business. Second, you’ll want to analyze, and third, if you get this far, you’ll want to project the future performance. Buy Then Build PDF Book Free
To get started, I want you to completely forget about the listing price of the company (if it has one, the larger the deal the more likely it’s listed without a price). Sure, it’s a benchmark that you can take into consideration later. For now, just know that it’s an estimate of value that may or may not be right for you. Privately held companies do not have one firm valuation.
There is a range of value determined by the growth of the company, the earnings of the company, current market conditions, level of competition, and a host of other variables. You’re going to reverse engineer what the business is worth to you, because that’s the only valuation that matters.
We’re going to walk you step-by-step through how to evaluate a business starting with the basics, then moving into the financial statements. Finally, we’ll look at the different ways to value a business. In the end, you’ll be paying for the past performance of the company, with the goal of growing it from there. As a result, you’ll be paying a price the company can afford so that you can make money as you build value. So, let’s dive in. Buy Then Build PDF Book Free