Robert Hirsch from Freedom Factory talks about whether you should 'Grow a Business or Buy a Business'.
Listen to the podcast, watch the video, or read the transcript below.
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Transcript of Podcast
Hi Robert Hirsch from Freedom Factory, and I want to talk to you about something that's pretty important for an entrepreneur. And frankly, I don't think most entrepreneurs consider, which is when they want to grow their company, do you want to build it or do you want to buy it or growth by acquisition.
Now, historically, a lot of entrepreneurs haven't really considered it, and the reason for that is that buying and selling small businesses has been a pretty inefficient asset class. It's hard to find the right one. It's hard to find a real one. It's hard to know what business you're in. Not a lot of brokers really disclose a lot of meaningful information and unless you're applying EBITDA of 5 million or more, you don't necessarily view it that way.
But I'm here to tell you that that's not necessarily the case anymore. Money is made on the buy and you want to, you want to find something at a fair valuation. Warren buffet said it, I think best. He said, I'd rather have a great business at a good price than a good business at a great price.
I think what he means by that is an exceptional business with this sustainable competitive advantage will always be worth more than an average business. Again, when you're looking at it, you're trying to think, okay, how do I find a great business at a fair price? So at Freedom Factory, we really specialize in selling great businesses. If you can find a great business at a good price, it can make a ton of sense. There's two other points of leverage that you might want to consider. One is if you have a complementary product set or a complimentary customer set. And what I mean by that, let's say you sell phones and you're looking at buying the headset company, or buying headsets to would plug right into your phones. Your existing customers would be interested in it. And if you could get a 10 20% take rate on that, you might be able to pay for your business in less than a year if you bought it at three, four or five times earnings.
The other thing which I talk about more in other videos is what I like to call your stupid human trick. Or really, that's the one thing that you do better than anyone else. And everyone's heard of the 80 20 principle, right? 20% of your work delivers 80% of your results. Well, when you get to an expert level at something, in my experience, it's really turned into 95 -five. So 5% of my work delivers 95% of my results.
Now, that can really multiply your efficiency and efficacy in your business. And what I mean by that is if I could do that 5% 20 times, I could deliver 20 times the business results that I could otherwise. So let's land the plane and talk about exactly what I'm saying. So let's say, for example, for me, my background is in sales and direct response marketing.
So if I can find an engineering company with a superior quality product that's extraordinary, that has a sales problem, I can probably dramatically shift the line by focusing on fixing the sales and marketing problem, which comes really naturally to me, and allows me to make huge differences in your company.
So for example, we've had clients that have bought companies at four times earnings, and they've paid for itself in less than nine months because you use that stupid human trick to really dramatically shift the line on your business. Going back to build versus buy. I know it's been an inefficient market class, but you don't always have to build organically.
Money's made on the buy. Look for great, great businesses. See if you can find businesses that are complimentary to yours. Maybe it's a luggage company and you have a travel site. See if you can plug it into your existing customer set, or you can plug your products into their customer set.
And finally, as entrepreneurs, we all do a lot of great work on figuring out our stupid human trick. And there are a lot of tools for that - Kolby, Meyers Briggs, figuring out your profile and what that looks like. A lot of people like the enneagram model, but whatever you can do to sharpen and hone that edge of figuring out what you're best at and making sure that you can leverage that in a business, can provide dramatic results and make buying a business really makes sense. If you have any questions on a great business for you or under stupid human trick, why don't you give us a call it freedom factory? Thank you so much for watching.
Please like and subscribe and we'll see you soon.
Contact Freedom Factory
At Freedom Factory®, we have experienced and witnessed the explosive results of entrepreneurs aligning passion and purpose to create extraordinary value. However, most entrepreneurs have no idea how to maximize the value of their business and move on to the next chapter of their lives. That’s where we can help.
Freedom Factory® has radically disrupted the way high-growth, lifestyle companies are bought and sold, which historically was a horribly inefficient market. When I sold my first company in the 1990s, I went to several investment banks and sold my business to one of less than five companies they called. Looking back, I see exactly how much money I left on the table and knew that there had to be a better way. The bottom line is that entrepreneurs don’t speak banker, and bankers sure don’t speak entrepreneur.
https://tylertysdal.academia.edu/
Contact Tyler Tysdal at Freedom Factory
Freedom Factory
5500 Greenwood Plaza Blvd., Ste 230
Greenwood Village, CO 80111
Phone: 844-MAX-VALUE (844-629-8258)
https://www.freedomfactory.com/
Freedom Factory Managing Partners
Tyler Tysdal https://www.linkedin.com/in/tyler-tysdal
Robert Hirsch https://freedomfactory.com/about-robert-hirsch
Who is Tyler Tysdal?
Tyler Tysdal is a lifelong entrepreneur who first discovered the joys and challenges of self-employment at the age of 14. Tyler Tysdal was a collector and trader of baseball cards and his budding entrepreneurial spirit spurred him to create Triple T’s Sports Collectibles, a national mail-order trading card and memorabilia business that found a wide audience through ads in trade magazines. While market inefficiencies were numerous in this pre-internet era, a young Tyler Tysdal experienced his first big business win with $14,000 a month of profit result. A lot of money for 14. It hit him during a ride with his mom to the post office to mail dozens of card shipments: He would likely be an entrepreneur and investor the rest of his career.
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