Gray Matter Musings

By

Zane Breeding

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Book Reflections: “Buy Then Build” from author Walker Deibel

The week starts with reflections on “Buy Then Build” by entrepreneur Walker Deibel, exploring acquisition entrepreneurship.

This week signifies the start of weekly reflections regarding (noted entrepreneur) Walker Deibel’s “Buy Then Build” book. To start, we examine the underlying themes of this book and what “acquisition entrepreneurship” really means!

Entrepreneurship is an exciting subject, with the promise of growing a successful business from scratch. Long hours spent laboring to navigate the start-up phase, eventually cultivating a successful and profitable business. However, what if there was another way, a way that is often overlooked by traditional entrepreneurs? Well, according to noted entrepreneur, Walker Deibel, that way is through acquisition entrepreneurship!

Despite having vast resources, Fortune 500 executives, and an in-demand product at his disposal, Walker shares the story of his early start-up failure to remind us that a mere 10% of start-ups actually succeed, while only a fraction of those will become sustainable and profitable businesses. Acquisition entrepreneurship offers a “hack”, where entrepreneurs purchase an existing business and utilize their entrepreneurial skillset to build additional value in the business. Thinking about this logically, existing businesses have already navigated the dreaded “start-up” phase risk. Even better, these businesses have an established infrastructure, brand, customers, and revenue! Needless to day, each of these resources are the very ingredients that start-up ventures lack! As Walker shares, “instead of having to raise money for months (or years) while also trying to build sales from scratch with a new product, the acquisition entrepreneur acquires a profitable infrastructure from which to begin” (Deibel, 2022).

Now, despite the aforementioned “hack”, this method isn’t as simple as it sounds and undoubtedly, plenty of you are resigning yourselves to the fact you simply can’t afford this method. Well, as Deibel explains, “banks regularly offer SBA backed loans of up to 90% of the purchase price, using the assets of the business as collateral” (Deibel, 2022). In comparison to traditional equity investments, this method allows entrepreneurs to take full and complete ownership of the business on day one. While this is certainly a simplified vision of the process, the takeaway is that entrepreneurs interested in this method must find themselves as in a hybrid entrepreneur/investor role, where the goal isn’t simply building, but providing sustainable returns.

Start-up life and culture can be exciting (I have experienced this personally), though we must remember that “existing companies with legacy systems and an outdated path to success has just as much need for innovation as a start-up does” (Deibel, 2022). That’s where the acquisition entrepreneur comes in, recognizing this opportunity and providing a unique skillset to help lead and grow the venture into the future. So, where do interested entrepreneurs get started? How do we know what businesses are attractive, or even what they might be worth? Be sure to come back next week, as our reflection of “Buy Then Build” discusses some of the tricks for evaluating and analyzing prospective businesses and understanding valuation!

References:

Deibel, W. (2022). Buy then build: How Acquisition Entrepreneurs Outsmart the Startup Game.

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Responses to “Book Reflections: “Buy Then Build” from author Walker Deibel”

  1. Coral Darby

    Zane,

    Your book sounds so exciting, and I can’t wait to read your next entry about valuation and what to look for in a potential acquisition. This phrase, ‘Acquisition Entrepreneur,’ is fantastic. I can’t believe I’ve not heard it used before. It certainly seems like a catchphrase that should have traction in the business community. Buying an established business makes so much sense, and the SBA does have great loan options for those who qualify.

    Your blog mentions how the author discusses buying the infrastructure and the profitability. I believe the business doesn’t necessarily need to be profitable to be a smart purchase. If the bones are good, and there is a customer base, it could be attractive to a potential buyer with the skill set to make the necessary adjustments. Break-even (or close to it) businesses might be available at a lower cost of entry. Then again, maybe SBA loans are only granted for purchasing a company with established profits on its books. Do you know?

    I haven’t gone through the process (yet) of selling my business, so I definitely have lots to learn. I’ll be following along. Thank you!

    Coral

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    1. Zane Breeding

      Coral,
      Thank you for stopping by! This book really is intriguing in terms of another path to business ownership. The transition of wealth that is happening from small business owners is quite amazing, as many are phasing out and looking to sell their life’s work, which means great opportunity for prospective entrepreneurs. You are spot on with the profitability, as its all about what skillset you can bring to the business to create a growth trajectory. With a customer base in place and infrastructure, perhaps its operations, marketing, or sales, but the entrepreneurs unique skillset is what can turn the business around!

      SBA loans can be utilized for almost any existing business, provided the loan officers and banks sign off and view the risk as manageable. Purchase price plays a big role there, along with the business plan. Perhaps the largest factor is hard assets the business has that can negate some of the risk. But to answer your question, the business doesn’t actually need to be profitable to secure an SBA loan. The best part of those loans is they can go up to 90% of the purchase price, which means an acquisition entrepreneur is only investing 10% of their own money, which is the single best way to boost ROI!

      Thanks again for stopping by!

      Cheers,
      Zane Breeding

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  2. Taelor Eyre

    Zane,

    I look forward to reading what you learn from your book selection, the title intrigued me when I saw it on the reading list. Here at Space Systems Command there is a big push for us to have a “Exploit, Buy, Build” approach (in that order) to Space Acquisitions. When new missions and weapon capability requirements arise, leadership is encouraging us to first look at the systems we already have and “exploit” them to fill new gaps or additional capability. If there is not an existing system in our arsenal to exploit, then we must investigate if a commercial solution exists to buy. The last option is to have a research and development program to build a system that meets the need. With how far space system technology has come and the drastic increase in commercial players able to enter the market, it’s becoming easier to exploit and buy rather than develop in house. I’m eager to see how we strategize and leverage smaller, cheaper systems in a proliferated fashion.

    The first time I heard the “Exploit, buy, build” message, I was surprised leadership was pushing it. I personally thought it was an obvious course of action and assumed it was the typical course of action. I didn’t realize how little cross-talk there is across the services within similar mission areas, and how there end up being duplicative efforts or systems developed when one system could solve multiple gaps. I’m very curious to see how well the Space Force moves forward and hopefully improves joint integration.

    Talk Soon,

    Taelor

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    1. Zane Breeding

      Taelor,

      Thank you for stopping by! The premise of acquiring any existing infrastructure, rather than build from scratch offers inherent advantages. The key is understanding what the market looks like, capabilities, and fit. As you reference, it is much simpler and more efficient to simply acquire existing technologies to leverage and exploit, if they can meet the needs. Much like your vertical, the private sector is similar in that starting from scratch is often considerably more difficult and time consuming. Despite our shared belief this would be somewhat of a common approach, folks tend to take the “build then sale” approach more often. Of course, neither is right or wrong, as it all comes down to fit and comfort level. The message I want to convey from this book is that acquisition entrepreneurship is a viable option for all of us!

      Cheers,
      Zane Breeding

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  3. Tonya Thomas

    Zane,

    Your book is very interesting. I always tend to pass over the idea of an “Acquisition Entrepreneur”. I bet that a lot of restaurant owners do this. Here in the city, you will see a restaurant in a location for a few months, and in the next few months, there is a new name on the building. As Coral mentioned, if the bones are good and have a customer base; you could purchase a very profitable business. I wasn’t aware that the SBA would give a loan to finance this kind of purchase up to 90%. Its something to consider if you want to skip through some of the legwork and jump into things quicker.

    I think a lot of people like the journey, and the sense of accomplishment from starting from scratch. However, the fact that only 10% of startups succeed and provide substantial income is a buzzkill for any bright-eyed entrepreneur with their eyes locked on their dreams. I’m very interested in reading your next reflection.

    Kind Regards,

    Tonya T. Thomas

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    1. Zane Breeding

      Tonya,

      Thank you for dropping in! Granted, the restaurant and F&B industries are a bit tougher when it comes to acquisition entrepreneurship. In fact, the author goes out of his way to call attention to the fact that restaurants can be a bit of the exception due to the market saturation and complexity. Thus, pursuing in F&B requires a great deal of research and market understanding. That said, if you look online at existing business listings (for sale), you will find a large portion are restaurants and F&B. The nice part about this for anyone considering the idea, is that you can often purchase the equipment and infrastructure needed to launch quickly, at a discounted price! At that point, it becomes similar to any entrepreneurial endeavor, where the skillset of the owner can either make or break success!

      Cheers,
      Zane Breeding

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  4. ivanhuffman

    Zane,

    My key takeaway from this was the 10% of start-ups actually succeed, but are not necessarily profitable and sustainable. I think this is key when thinking of our own brands and those of others. I feel that the startup world as been inundated with people entering with the belief that in just a few short years they are sitting on the beach sipping a rum and coke while their business runs itself.

    We all have to be sure that we are not rushing this and truly creating things that are needed and making them profitable and possible. The mere inventors itch may be great, but thoroughly researching and making plans is necessary.

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  5. The Professional Student

    Dear Zane

    Thank you for reflecting on Walker Deibel’s “Buy Then Build.” It captures the core of acquisition entrepreneurship, which is a route of entrepreneurship I haven’t seriously considered, so I appreciate the insight! Deibel’s approach seems like an alternative with less risk than traditional start-ups by leveraging established businesses with existing infrastructure, brand, and revenue.

    I appreciate talking about SBA-backed loans and showing how acquisition entrepreneurship is accessible to many people. Focus from a traditional high-risk start-up can shift to a calculated and steady growth model with far less risk.

    I’ve never thought about the hybrid roles of an entrepreneur and investor. Acquisition entrepreneurs excel by driving innovation forward within established companies.

    Thank you for sharing, and I am excited to read your next reflection post!

    Kindly, 

    Shawn 

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