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I purchased two companies this year.
Lessons I Learned:
Many entrepreneurs are starry-eyed optimists. I've always leaned towards overly-optimistic. Over the years, I've learned to be more negative. Not negative in a bad way, but focus on what can go wrong.
THREAD ON BUYING:
Lessons I Learned:
Many entrepreneurs are starry-eyed optimists. I've always leaned towards overly-optimistic. Over the years, I've learned to be more negative. Not negative in a bad way, but focus on what can go wrong.
THREAD ON BUYING:
1/ Reading the book "What It Takes" by Stephen Schwarzman, CEO of Blackstone, I loved how he talked about this. Blackstone is the gold standard of PE
During their deal meetings, they require all the team members to talk MUCH more about what can go wrong vs what is good about it.
During their deal meetings, they require all the team members to talk MUCH more about what can go wrong vs what is good about it.
Buying companies is fun but can be dangerous. A good entrepreneur can see the upside of buying. A great entrepreneur can see the DOWNSIDE of buying as well.
I'm not claiming to be great but learning this is so important if you plan to do this. Be intentional about the negatives
I'm not claiming to be great but learning this is so important if you plan to do this. Be intentional about the negatives
In an effort to expand my company, we're growing naturally and also by buying great brands in our niche.
I looked at TONS of deals in this niche. I subscribe to every market place that lists businesses for sale.
Take your time with buying. Dont rush into a deal.
I looked at TONS of deals in this niche. I subscribe to every market place that lists businesses for sale.
Take your time with buying. Dont rush into a deal.
Some things I look for:
- MOAT. What's unique about this business?
In my case, both companies I bought have utility patents. These companies are more expensive but huge potential.
How can this MOAT fail? (It still can but it's less risk vs others)
- MOAT. What's unique about this business?
In my case, both companies I bought have utility patents. These companies are more expensive but huge potential.
How can this MOAT fail? (It still can but it's less risk vs others)
- OFF MARKET - One of the companies I purchased wasn't for sale. In fact, I've been trying to buy for years. The owner turned 70+ yrs old and finally decided it was time.
I was a customer of their product. Drop seeds even before you can afford to buy. These are best deals often
I was a customer of their product. Drop seeds even before you can afford to buy. These are best deals often
- WILL MY CURRENT CUSTOMERS WANT THIS - The other company I purchased is a perfect fit for my customers. Because it has a great utility patent, this also means it is a good fit for my competitors to wholesale. Get a piece of your competitor's action.
Poll your customers to know
Poll your customers to know
- MARKETING WEAKNESS - Both companies were not strong at marketing. That's my companies strength. One of them didn't even know what a FB pixel is. Jackpot.
Know your strengths. Finding those companies that you can add value. This reduces chances of decline post-sale.
Know your strengths. Finding those companies that you can add value. This reduces chances of decline post-sale.
- $$$ - Buying a company is always going to be more expensive than you think. Beyond the company price there are legal fees & OPEX.
Make sure you have plenty of OPEX $ on top of purchase price. We had to buy 6 figures of inventory right after close to keep in stock for example.
Make sure you have plenty of OPEX $ on top of purchase price. We had to buy 6 figures of inventory right after close to keep in stock for example.
- Some basics: Traffic, Age, Single Product.
Traffic - All from one source = High risk.
Age - Less than 3 yrs = Higher risk.
Single Product - Non-diversified = Higher risk.
Traffic - All from one source = High risk.
Age - Less than 3 yrs = Higher risk.
Single Product - Non-diversified = Higher risk.
In my cases, both companies were 7+ yrs old with steady and increasing revenues.
Both were single products but due to utility patent, they still got the green
Traffic was well split between distribution channels, wholesale accts, etc.
Both were single products but due to utility patent, they still got the green
Traffic was well split between distribution channels, wholesale accts, etc.
I'm super interested in buying and selling internet businesses. Hit me up if you wanna chat about it.
