10 Days To Your First Business Acquisition: Podcast

Day 2 – 10-Days To Buying Your First Business | “Your Buy Box”

March 13, 2023

In this podcast episode, Carl Allen introduces the concept of the “buy box,” which is crucial for those looking to buy their first business. He emphasizes that the current market offers a vast number of opportunities for buyers, particularly in regions like the United States, UK, Canada, and Australia, making it a buyer’s market. He advises aspiring business buyers to focus on acquiring businesses within their area of expertise, where they can add value through their skills, experience, and network, rather than just buying any available business.

Carl stresses the importance of understanding whether one wants to be an “owner-investor” or “owner-manager.” Owner-investors work on the business remotely without daily involvement, while owner-managers operate the business on a daily basis. Depending on the role chosen, buyers can decide whether to purchase a business locally or in another region. Carl himself owns multiple businesses that he manages remotely through key performance indicators (KPIs) and with the help of general managers.

A key criterion in the buy box is to ensure that the business being purchased has strong cash flow. Carl advises against buying businesses without cash flow, as this would lead to inheriting significant challenges and risks. He explains that while distressed businesses may be tempting, buyers should prioritize companies generating positive cash flow.

Another important factor is to find a highly motivated seller, particularly those selling for reasons like retirement, burnout, or personal health issues. Carl debunks the myth that businesses for sale are inherently bad, pointing out that many owners simply want to move on after years of running their business.

Carl concludes by summarizing the four key points to keep in mind when developing a buy box: buy within your expertise, decide between being an owner-investor or owner-manager, ensure the business has cash flow, and look for motivated sellers. He encourages listeners to join his ten-day business buying challenge for further training on the topic.

Full Transcript:

Hey, guys. Carl Allen. This is day two of ten days to buying your first business. Dealmakers, what’s up?

My vision is to completely and utterly disrupt the market of buying and selling small businesses all over the world. So today, we’re gonna be talking about your buy box. We’re gonna be talking about your dream deal or specification. So I’m in the car.

I’ve just dropped my son off at, an academy soccer trial over here in the UK. So, I thought I’d just drive around for a little bit and, and do this video for you. It’s really weird, like, as a parent, you wanna watch your son play soccer, especially in a in a trial game. But, they don’t let their parents watch the games, which is absolutely, bizarre.

But, anyway, you win because I get to do this really cool video for you. So just driving through the streets here, and I wanna talk to you about Buy Box. So what’s really interesting is there are literally millions and millions of businesses for sale right now in the United States, also in the UK, in Canada, out in Australia. So we’re in an unprecedented time where the, this really is a buyer’s market, so you can really be picky in terms of the sorts of deals that you wanna deal with.

You have to be picky because you really wanna buy a business, that’s in your lane. So what does that mean? So buying a business in your lane is critical because you want to be able to add value to the deal and to the business after you bought it. You know, buying a business is one thing, but if you buy a business that you know something about, you’re passionate about, you can add some value to it in terms of your skills, in terms of your experiences, in terms of your expertise, and you have a network that you can plug into that business to help it prosper.

That’s far better than buying a business just because it’s there. Right? Just because a business is there for you to buy. If you can’t add any values to that business at all, then I gotta ask ask yourself a question, you know, why why would you buy it?

You might have seen a deal and you might think, wow, this is really cool. It’s really interesting, but I know nothing about it. Then go partner with somebody. Go partner with somebody that’s got the chops in that space They can add a lot of value.

And it’s really, really important for two reasons. Really important because when you’re going through the deal, when you’re talking to primarily the seller, and if the deal needs any money at closing, you need to raise some capital. You’re gonna be talking to lenders as well, financiers. And if you have absolutely no idea what the business does or what’s going on in the market or how to make improvements to the business, how to scale it, how to make it more profitable, then people aren’t, you know, they’re not gonna back you.

They’re just not. So it’s really really important that you definitely definitely definitely, do deals in areas that you know and you understand. I think I got lost guys by the way, so, but don’t worry about it.

So that’s really really important.

If if you don’t know anything about the industry, you have to partner with somebody. That’s really really important. So I’m pretty sure you’ve got background in a particular industry, you’ve got some, some skills, some expertise that you can leverage, figure out what they are, and then that’s the business that that you want to be jumping into. Really, really important. The other thing you need to think about as part of your buy box is do you wanna be an owner investor versus a owner manager? Really, really important because you could be hired, and there’s no right or wrong answer.

There’s no problem you buying a business and you’re going in and you’re operating your day to day. A lot of my students have done that. Absolutely fine. You know, if you’re still kinda w two chain to a business that, you know, you don’t, you know, you don’t like or you’re tired of making your employers lots and lots of money, do you wanna go out and you wanna do your own thing?

You know the start of your business is crazy, that buying a business is really clever, really cool, this is why you watch this video, then there’s nothing to stop you going and running it. But obviously, if you’re gonna do that, you’ve gotta buy a business close to where you live or close to where you want to live. So if you live in Boston and you wanna live in LA, go buy a business in LA then you could breathe or you live in Boston and you wanna stay in Boston, buy a business in Boston. If you don’t make a beer every day.

The alternative to being an owner, investor sorry, being an investor, an owner investor is you work on the business, not in the business, and you could buy businesses pretty much anywhere in the world. So I own twenty businesses now, of three different poll tenants. I don’t work in any of them. I have general managers that run those businesses for me and I give them a little bit of equity for them to do that work for me.

And I I manage that business remotely through KPI’s, which we’ll talk about with heat in another video.

So stay delayed and figuring out am I an owner, manager, or an investor really, really equals. The second thing you gotta think about when you buy the business is you want to buy a business from a distressed other way around. So you want the business to be good, it’s gonna be generating cash flow, and it’s got assets even better, but do not under any circumstances buy a company that is generating cash flow. Because there’s no point.

There’s absolutely no point buying a business with no cash flow. Yeah. You can buy a business with no cash flow for a dollar, but then you’re just inheriting somebody else’s headache. And the amount of time you’re gonna have to spend driving that business forward to make it profitable, there’s there’s no point.

You’re better off buying a business that’s got some value, but it’s only got some value because it’s got cash flow humping through that business like blood through veins. You absolutely need cash flow in a business. But in terms of the seller, find a seller that’s highly highly motivated to wanna come out of business. So what are some of the reasons why people wanna sell businesses?

There’s a common myth on the Internet, and, you know, I get blown up on my Facebook post all the time. People say, oh, yeah. You know what? These businesses must be terrible if they’re for sale. Not at all.

Business owners want to sell for lots of different reasons. The number one reason is retirement. It’s ten thousand baby boomers every single day in the United States retiring.

And according to the Wall Street Journal, nearly a third of them own this whole business. So you’ve got over three thousand businesses every single day being listed for sale because they’ve owned those businesses for ten, twenty, thirty, even forty years, so they wanna retire. They’re tired. They’re burnt out. They’re frustrated.

They’re distressed.

They might be sick. They might be sadly dying in some cases, if not, just that could be a family member. And so you you’ve got to realize that people sell businesses all the time. You know, I I’ll I’ll walk in a similar portfolio.

Some of my businesses I absolutely love and adore, and there’s no way I would sell, but somebody rocks them with a ridiculously large jet. But a couple of my businesses, I actually actually hate them now.

I’ve actually just giving them away to my management team. I just can’t really bother with them. They’ve made me lots of money, and I was super passionate about them, once once a while ago, but said, now I’m just a bit bored.

So and sellers get like that. So let’s recap.

Four things you’re not thinking about. Point number one, buy a business in your lane. Point number two, figure out, do I wanna be an owner manager or an owner investor?

There’s there’s no right or wrong answer, but figure that out. That’s gonna tell you where you can sell money for businesses. If you wanna be an owner investor, you can look anywhere in the world, wanna be an owner manager, gotta stay locally, but that’s fine.

Third point is absolutely buy a business that’s got cash flow. If it’s got cash flow, you’re golden, and it’s got assets as well even better. It’s gotta have cash flow. Don’t buy a business without cash flow.

The more the cash flow, the better the business. And then number four, find a distressed seller. The seller that’s highly motivated to wanna exit. Retirement, bored of the straightened, burnt out, ran out of ideas, sick, dying, not just them could be a family member.

Hit those three marks, you are absolutely golden.

So that is your buy box. If you want a lot more training and a lot more detailed information on this, check out the link underneath and go into the ten day business buying challenge, where I give you a lot more training and a lot more tools for coaching to get me through this process. And I look forward to see you tomorrow, day three. We’re gonna be talking about deal origination.

So where are these businesses? Where can we find these businesses? And how do we leverage the four major major topics of ill origination? So I’ll see you guys tomorrow. Till then, live for now.