Making Billions: The Private Equity Podcast for Fund Managers, Alternative Asset Managers, and Venture Capital Investors
Thanks for listening to another episode of Making Billions with Ryan Miller: The Private Equity Podcast for Fund Managers, Startup Founders, and Venture Capital Investors. This show covers topics connecting you to some of the best investment funds that won in their industry—from making money and motivation to alternative investments, fund managers, entrepreneurs, investors, innovators, capital raisers, money mavericks, and industry titans. If you want to start a business, understand investment funds that won the game, and how the top 0.01% made it, then this show will give you the answers!
Making Billions: The Private Equity Podcast for Fund Managers, Alternative Asset Managers, and Venture Capital Investors
Buy Then Build Your Way to $400M: Walker Deibel's Private Equity Playbook
"RAISE CAPITAL LIKE A LEGEND: https://offer.fundraisecapital.co/free-ebook/"
Hey, welcome to another episode of Making Billions, I'm your host Ryan Miller and today I have my dear friend Walker Deibel.
Walker is the Wall Street Journal USA Today, best selling, author of, Buy Then Build, and the founder of Acquisition Lab. He also leads the Elite Acquisition Accelerator, who has helped entrepreneurs acquire over get this $400 million in private equity acquisitions. He's entrepreneur and an investor who has co founded three startups, acquired eight companies outright, and has consulted inside over 100 business transactions. His work has been featured in Forbes, Entrepreneur, Inc., Fast Company, and the Harvard Business Review.
So what does this mean? Well, it means that Walker understands how to buy and build companies, and he's about to teach you a master class on how to do the same.
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My name is Ryan Miller, and for the past 15 years, I've helped hundreds of people to raise millions of dollars for their funds and for their startups. If you're serious about raising money, launching your business or taking your life to the next level, this show will give you the answers so that you too can enjoy your pursuit of Making Billions. Let's get into it.
What if I told you there's a hidden gold mine most entrepreneurs never see. You see, 96% of companies never hit a million in revenue, but what if you could skip all of that, including that startup grind and buy a business that's already making. See, in the next five years, 10 trillion in business value is about to change hands, most people have no idea. So in this episode, we're talking about a strategy that can turn ordinary people into business owners, seemingly overnight, no venture capital, no endless fundraising, just pure strategy around private equity acquisition. You see, this isn't about luck, it's about a proven system that has the potential to transform your financial future in a matter of months, not decades. One conversation, millions in potential. Are you ready to learn how most people think they need millions to start and I'm about to show you how long they are. Let's dive in. Discover a roadmap to entrepreneurial success from the master himself. Here we go.
Hey, welcome to another episode of Making Billions, I'm your host, Ryan Miller and today I have my dear friend Walker Deibel. Walker is the Wall Street Journal USA Today, best selling author of, Buy Then Build, and the founder of Acquisition Lab. He also leads the Elite Acquisition Accelerator who has helped entrepreneurs acquire over get this $400 million in private equity acquisitions. He's entrepreneur and an investor who has co-founded three startups, acquired eight companies outright, and has consulted inside over 100 business transactions. His work has been featured in Forbes, Entrepreneur, Inc., Fast Company, and the Harvard Business Review. So what does this mean? Well, it means that Walker understands how to buy and build companies, and he's about to teach you a master class on how to do the same. So Walker, welcome to the show man.
Walker Deibel
Ryan, it is such a pleasure to finally be here with you. I like right before we went live here today, I actually looked back on Instagram. I'm following 39 people on Instagram, I'm not super active, but it was listening to this podcast that I was like, I need to find Ryan Miller. And so when I found you on Instagram, we actually met on Instagram, and it was all because of this podcast. So to be here on Making Billions is just, you know, it's a dream come true. And you know, just getting to know you along the way has been nothing short of a pleasure. And for any listener out there who's like, I wonder if Ryan is really this cool, he is just so, you know, this cool, and he's this talented, and he's this hungry for information. It's great. Thanks for having me at the point, yeah.
Yeah, you're welcome man, we were so fortunate and the feelings mutual man. Your book, Buy Then Build, and everything you've done, I know you're known for that, but you're known for a lot of other stuff too. You've helped hundreds of entrepreneurs, you're buying companies, you're transacting in hundreds of millions. So that number keeps going higher, and you're getting after it like I am, man, and you just want to add value. So I think the compliment goes to you. But that being said, we're going to talk a lot about buying and building companies. So as I like to say, entrepreneurship through acquisition. So there's a lot that goes into it, but I'm just curious, like, how did you get into this industry? Maybe walk me through a little bit of of how that got started, and we can go from there.
Walker Deibel
You know, my origin story is, actually, it's not something that I lead with, like, ever okay? And the deal is, look, it went like this. I was trying to be a startup entrepreneur, right and I was starting businesses, and they kept failing. And, you know, I lived out in the bay area for a while, and, you know, I did the whole thing. And, you know, when I was at Olin, we were in a business plan competition all the things, right? And it just failed and failed and failed and it's like, it's okay, because we know when we're trying to start a business that like it, you know, statistically, it's going to zero anyway, right and it's just very few actually make it. And it was one of these, Ryan, where my most recent startup had failed. I live in St Louis, Missouri, I was getting my MBA at Olin School of Business here and I was walking up and down White On Boulevard, which is, like, you know, sort of the only Boulevard in St Louis. And I'm walking around where the neighborhood over from, like, the top 10 richest neighborhood in the country. And I'm looking at all these, like, home alone style houses. And I'm just thinking myself, you know what, none of these people are like an E comm entrepreneur or like a, you know, a software Silicon Valley, and they're just doing, like, light fixtures and paper and like, you know, just unsexy things that cash flow. And I was like, you know, I know there's going to be a way to acquire one of these, and I think I can just get the money from the bank and so I set out to do that. Two years later, you know, I still had not been able to pull a deal together for a number of reasons that were subsequently solved. But what happened was my dad owned a book printing company, and he sat me down, said, Walker, I want you to leave your high paying job and come to work for me. And I was like, why? And he stood up and he said, well, let's just see if you show up for work first and he left.
Walker Deibel
I ultimately bought his company and it sort of went like this, we got a third party valuation. I took a personally guaranteed loan that was multiples of my net worth. I put skin in the game in terms of, like, a huge portion of my all the cash I had in the world, and I gave it to him, and then he left. Like, that's what went down, right? But I was in this small group of people that had a situation where, like, their father owned a small business. And that's when all of my entrepreneurial friends were like, hey, you know, it took a couple years. This is Walker, he buys and sells companies and I just remember thinking, like, you guys don't get it, like, I'm in the Coliseum with you. What I'm doing is entrepreneurship. It's just that my revenue is so much bigger than yours, you know what I mean. And so, like, I was like, How do I get this message out and try to explain to people that entrepreneur is not just, you know, a ground up zero to one practice. It's also, you know, the buy then build model, buying existing companies and growing them.
Wow, that I did not know that. So there's this constant battle between going vertical versus horizontal.
Walker Deibel
Yeah, yeah.
And I remember you telling me a little bit of story in the early days, when you started out that you chose one direction, and you kind of figured it out soon that maybe there was a better way. Can you walk me through a little bit?
Walker Deibel
I know where you're going, I was a keynote last week at a conference where everyone is jumping in being like, I read Buy Then Build. I want to buy all these companies. I'm going to close on 17 this quarter, and I'm just like, oh my God, like, here's the deal, Ryan. Like, the worst decision I ever made was to start a holding company, right? Like, I bought seven companies hori, I went horizontal. I was like, I'm gonna be the Warren Buffett of small business. I'm going to acquire that you've you know, that you've never heard of, I'm gonna acquire all these little businesses, and I'm gonna own 80 to 100% of them outright. And I'm just going to take as much debt as I can, and I'm going to buy in all these different verticals and have this, you know, diversified portfolio of all of this stuff. And what I realized was, even though my companies were acquiring other companies and all the rest of it, at the end of the day, you know, look, I like, I always like to quote, you know, if you go, if you go watch, like, Print the Legend, it was the second ever Netflix Original, you know, it starts with Brad Feld, like, this iconoclastic startup entrepreneur. And he says right at the beginning, when you're a leader, when you're a CEO, every day, something comes up and smacks you in the face. Ryan, when I talk to entrepreneurs, and I'm like, hey, like, how much do you work on your business? They're like, 80 hours. And I'm like, great. Do you want another 12 businesses and they just laugh. It's like, No, dude, like, even Steve Jobs needed one. Like, he didn't need a bunch.
Walker Deibel
What I learned was, you know, I was getting smacked in the face in three different verticals every day. Like it was like, different management teams, different customer profiles, you know, different cash flow cycles, different value propositions, different culture, different all the things. And so it's like, you know what happened? What happened was, I realized it's not really diversified at all. It's you're actually stacking risk, and things that aren't actually correlated become correlated to each other in terms of of things that could hang you up, right? So for example, when I had a big customer, like my number one customer at my distribution company, needed me over there because, like, shits going down over here, so I'm over there, meanwhile, in New York, you know, whatever, right? So it's like you've got to deal with, like, the drama and the supply chain and the cash and the stuff, and you got to be pushing everything forward all the time. And what I realized was, you know, what's the saying, he who chases two rabbits catches none?
Catches none, yeah.
Walker Deibel
It was a lot of that. It was a lot of that and I learned a lot of lessons from it. And I do think that there are proper ways to sort of engineer success in that model. The thing that I really preach when people want to get into acquisition entrepreneurship is like, dude, guys buy one, focus on one. I ran that printing company for seven years. I sold it to an acquisition target who decided he wanted to buy me in the thing, in the deal. And I was like, great. I took the proceeds and I went out and I bought six more companies, and that's when I got in trouble, right? It was all about it was all about one at a time.
Man, what a story. So I've got so many questions, but we'll throttle it down a little bit.
Walker Deibel
Well, think about, well, hold on, think about, what if I had bought all eight companies in one vertical, like, you would have gotten the multiple expansion, like, like the value, you would have turned the flywheel. The culture would have been the same. Everything falls in line, and then size begins to really matter, because you're talking about the multiples of higher cash flowing businesses are higher multiples, right, and so, you know, I could have gone public. I you know what I'm saying, yeah, sorry to interrupt.
No, you're great. And there, there is a saying from a good friend, Ben Reinberg. He was just on the show a few weeks back, and he manages Alliance CGC, about 500 million Real Estate Fund, and he always says it, and I've adopted it. He's living rent free in my head. So if you're listening, Ben, thank you for this but he said, but he said, in business, in especially in investing, like the sector we're in, in alternative assets, you get rewarded for focus. And I think what you're saying is that fractured my focus, my one of my most valuable assets, is someone at the helm of the whole Co. I'm assuming you're saying the whole Co. wasn't the problem. It's how, it's what I filled it with. They were so the correlation between these, they didn't, they didn't work. And so I had 10 targets and three arrows, maybe and I needed the opposite. I needed three targets and 10 arrows that I could just slice through all of them. I can move, shoot one arrow and go through 10 targets. And so I think what you're saying, and what Ben's saying, and what I'm saying, all of us are saying, is like, if you really want to reap the rewards in this sector, think in terms of focus, right? Just like Confucius, right, you chase two rabbits, you catch none. We get rewarded for focus. Is that what you're saying?
Walker Deibel
Yeah, exactly. Nailed it.
Awesome. So how do you get into this industry then? So there's people listening to the show. I know I got students. We're in 100 countries. Some people are in grad school. Some are in high school, if you could believe it, everybody wants to know, PE is hot, you're one of the legends in the space. How do people even start like, how do you get started in PE?
Walker Deibel
Yeah. I mean, I think that, you know, first, first trying to like, I think what I would offer is, you know, if you go to, you know, Harvard Business School right now, and you talk to the graduate students, and you say, what do you want to do? Okay, the number one desired, you know, job at this moment at Harvard Business School is an independent sponsor, okay, meaning, I want to start a private equity firm with no money and leverage other people's money and buy multiple businesses, okay. I want to be very clear that, you know, this concept is kind of really popular, because it's awesome. It's what you and I do, okay, it's awesome, but, but, and I don't, and I don't, and I guess this is going to sound egotistical now, I put myself in a corner, but it's one of these, like, that's like, saying my career plan is to move to Hollywood and become an A list actor, right? Like, like, you can't just do like, that's not out in your control. So there's sort of two paths that I think about. And the first one is like, look, you're at Harvard, like, you know, go to New York, you know, go to Wall Street, you know, get into private equity, go the financial route, get that, you know, job at Goldman, and do whatever you need to do for a decade, and just grind out your 20s. And opportunities happen like, build a resume, go the right direction.
Walker Deibel
The other way is, you know, I think acquisition, entrepreneurship and small business ownership is really the only way. It's really the fastest way for most people to make any real, real money. And I don't mean that to sound that it's fast. It's just it's faster than anything else, and it's also very approachable, right? So in other words, when you buy an appreciating thing that cash flows, that you can put your time, effort and money in, guess what? It goes up, usually, unless you mess it up, right? So you can go out and, you know, acquire one of the largest companies in the world for like, $100,000 out of pocket, it's not a lot of money. And you know, when I was with Entrepreneurs Organization, and I read a lot of Verne Harnish his work, that's when I realized 4% of companies reach a million dollars in revenue, revenue, top line revenue. 96% of those, all those startup companies, never hit a million in revenue. Who would start a company if they knew that really right? So it's such a low bar to be so exceptional, right? And it's very much approachable to, you know, get a bank loan, put a little bit of cash in, and just start to grind in your own business. And when you're buying a small business as an operator, you're learning how to operate businesses. You learn all the BS, right, your actual boots on the ground, you're going to learn leadership. You learn all the things that actually make business function, and not only that, but when you're buying small businesses. Guess what? We call that private equity, that's what it is, okay, it's just, it just is a different asset class than what we think of when we think of like what the boys on Wall Street are doing.
Brilliant. Yeah. So, you know, you've been accredited for from a lot of people. I won't say any names, but some people who have beards and big muscles, another certain bright lady who buys laundromats and all that, and they're very well known in the industry. But I was pleasantly surprised, but I don't know why I was surprised when I found out that the one thing they had in common was you and your work inspired people who are now inspiring other people. So you're the Papa of private equity, so.
Walker Deibel
All roads lead to Buy Then Build, Ryan.
There you go. Yeah, I'm finding that, yeah, agreed and I even have your book on my bookcase behind me. And so when it really comes down to it, right? So I would love to just open up some of stuff that very influential people today in private equity are kind of putting their own spin on, but I want to go back to the source material. So when it comes down to going into private equity, so let's say you're the syndicator, right? Well, actually, the guy who goes Pro, same thing, either way, you got to get your start. So where do you start when it comes to you want to buy your first company or your 10th what's a good place to start?
Walker Deibel
I, you know, I think that what you really need to understand, this is so funny. Yesterday, I was talking with the CEO of a the best performing coding Academy in history of the world, like, it's like, you know, they gage themselves on, you know, graduates employed after 30 days and average starting salary, and it's the best program that's ever existed. And I was talking to him, and he's been running it for about nine years. He said, Walker, you know what's funny? I said, What? He said, I got into coding because I felt like it was the little thing that helped people expand into, you know, expand their careers and reach new heights and make real money. And over the last nine years, that sort of shifted into AI. So now we're running cohorts on helping, you know, engineers develop AI. But I'm noticing this trend, and that's that a lot of my developers are now at a point where they're sort of bored of writing software, and they're actually going out and they're buying these old economy, you know, unsexy businesses. And I was like, well, come on, man and he was like, I know you've been talking about the whole time, but I'm just figuring it out. And then he went on to talk about the silver tsunami. And I'm like, why are you telling me about silver tsunami? The point is, is that baby boomers own more businesses than any generation in the history of mankind, okay? And now they're just retiring in droves. It's like 11,000 a day are retiring, okay, here's the thing, we'll get into this, I'm sure. But like the SB, like changes in the SBA, have also made this very, very approachable and in terms of being able to access debt in ways that I couldn't 20 years ago, right? And so it's what's happening is no one has has said, you know, why the Federal Government is providing massive amounts of debt loans to Americans that just want to acquire small businesses.
Walker Deibel
I think it's because when you look at the numbers, it's like 46% of the entire US economy is in these baby boomer owned businesses that wouldn't otherwise transfer, right? So it's like, we think of, you know, private equity as this, like, you know, like, whatever, you know, 100 million and up kind of deals, right? That's like the smallest little tip of the pyramid. And then you have like, 96% of companies that are, like, under a million bucks, right? So, you know, so you really have, you know, whatever the number is, it's like 3.5% of companies are, like, between, like 1 million and like 25 million, right? You've got a huge volume of businesses that have, you know, the kids don't want it, you know, the owners, you know, they're driving around in their Lexus, they're just making money. There's no more debt, they don't really want to invest in it. And so you have to understand the fact that there's ten trillion in business value that needs to change hands in the next five years. It's absolutely massive, right? And so just to pull it around, the CEO of this coding Academy had figured out, you know, this sort of trend, or the opportunity that's happening right now. And he was like, hey, I really want to talk to you about talking with our AI developers, because I think that if we plug in AI to a lot of these old economy businesses, this is an even greater sort of lever that these guys can use to, like, build exceptional wealth and impact for themselves because he understood the opportunity. Does that make sense?
Yeah, absolutely. So, you know, sounds like then that step one really is just appreciate the opportunity that's at your feet right now.
Walker Deibel
That's it. It's right now.
It's right now. And once you really appreciate that, and you mentioned earlier that I can't remember the percentage in the 90s that make it a million or less. What was that percent in revenue?
Walker Deibel
It's 96% of companies never achieve $1 million in revenue.
Okay, so that's perfect for people who are starting out, because it's like, you said this to me before offline, but you're like, the bar feels high because all you see is like, these mega deals, like Oracle bought this, or Apple or meta bought that, and you're like, oh my gosh, oh. How could I be that? I'm just Ryan or Walker or Sally or whatever? And what you're saying is, look, 98% of the businesses out there are, like, a million or less, man, so it's super possible, even if you're starting out, you don't need to, you don't need to be a zillionaire. You can actually start out and find one of these small companies, I mean, obviously, do your homework, talk to your lawyers and all that. We're not giving any advice, but what we're saying is the the shield's ripe, ready to harvest, like it's there.
Walker Deibel
And Ryan, if you don't mind me jumping in, I just, just for clarity, like, the way that I think about it, and this isn't right for everybody, but the way I think about it is, don't buy a business that's less than a million in revenue. Buy one that already has achieved that, don't, you see, because it's like, they've are, they're one that has found that product market fit. So like, if you buy a company that's, you know, 600,000 in revenue, like, there's not gonna be enough money to pay yourself, like it's gonna be that's, that's hard. But like, you know, I mean, like, I know people that have bought a company for like, 650,000 in revenue and taken it to 25 million in 24 months, it happens. People also win the lottery. People also get struck by lightning. Like, all these things happen. You know what I mean. But it's like, you know, I think that if you look at a business that's, you know, between like, one and $5 million like, that's something that you can get in very, very easily, and it's already got that product market fit. And it's sort of like the money ball of entrepreneurship, it's like, I'm already getting on first base, right? I'm not swinging at the ball trying to get home run, I'm just getting on base, and then I'll take it from there, right?
Yeah. And you bring up a good point, because I was that way, because you kind of get pumped with case studies in grad school and all these big things, and so you think big,
Walker Deibel
Totally.
from school and that's okay, there's a place for that. There's a place to play big, but what I had to learn outside of school is to when to think small. And by small, it doesn't mean not ambitious, it means intelligent and so it's like, sure. And so I felt stuck, because I was like, yeah, put me on $100 billion deal, I will make a spreadsheet that is like, work of art. Price out this $2 million deal is like, I don't know where do I even start?
Walker Deibel
Exactly.
You know what I mean? And so and so I think what you've done for the economy and everybody that follows you. And there's a lot, I think you've shown people a really good, real world approach that says, look, maybe you know how to analyze and build spreadsheets at that level, but there is a even bigger market, some would say, below that level, at very reasonable places where you can start and, and that's because of what you mentioned, and that friend that talked to you about the silver tsunami, anything to add to that?
So I think that, you know, ultimately, look, when I started writing, buy them, build, okay, it was one of these where my initial idea, Ryan was to go out and sort of write like the Good to Great of this area, right? Like I wanted it, like I was like, no, like, I've been buying businesses at this point for like, 15 years, no one was talking about it. No one understood what I was doing. And it was like, okay, I'm gonna start by getting a statistically significant amount of interviews and just get started. So I lined up 35 people that had bought companies and started talking to them, and I figured I learned, you know, two things. One, Jim Collins has like, 27 PhDs on staff and a ton of data. Two, I lucked out, because what I realized was that this space is has nothing to do with best practices. And no matter how much, by the way, that people say it is like, they're selling you something like, it has more to do with frameworks. Like, you just need to understand, what is it that I'm looking at, right and like, what's the opportunity that I'm looking at? And so, you know, when you read Buy Then Build it, I ended up with this, like, four quadrant matrix, because matrix. Because I have an MBA, I needed to have a four quadrant matrix. I'm just kidding. But, like, it's really sort of like value and growth, right? Is really what it is. And so, you know, you've got this eternally profitable option, you've got this turnaround option, you have this high growth option, you have a platform option, okay? And the thing is, is that, like, when I talk about platform, I don't really talk about it in terms of, like, you know, a roll up strategy that, you know, a firm might have, like, hey, I'm gonna buy the first one, and that's gonna be my platform instead, I want it to be a platform for the buyer, for you, okay? And the reason why is because a lot of people will sit there, and, as you say, like, they look at their spreadsheet, and they really spend a lot of time trying to de risk the the acquisition, because it's risky. It's like, I'm buying one concentrated thing, right, with, like, a lot of money and a lot of debt and PGS and all the rest of it. And it's like, I can't mess this up and they freak out. Well, the truth is, is that the minute you buy that company, there's one thing that's different. You just cut the head off of the business and inserted your own head.
Yeah.
Walker Deibel
So, you know, when we think about raising capital as, like, a startup entrepreneur, it's like, hey, where can I get smart money? Like, where can I get that investment? Investor that can also just, like, roll me into Walmart, or whatever, you know, like, because that's, that's, that's the magic, right? And it's the same here, how are you smart money? What do you bring to the table? That business needs to be a platform for you and your own, you know, magic sauce, you know what I'm saying. Like, like, whatever it is you bring to the table. And so as long as people can start to think about like, Hey, do I have the right attitude for sort of, like, being driven in vague circumstances, you know, you know, what do I want my life to look like? And ultimately, what am I good at, and what do I love to do? It has nothing that, you know, people always make this mistake where it's like, oh, I'm looking for, you know, a manufacturing business, right? Or whatever, you know, brokers will talk to you and be like, what do you like, what do you like, what is your background? Like they're trying to line it up, like, it's a career, and it's, it's not, it's the soft skill. It's like, yeah, I was in manufacturing, but really, I was the sales guy that ran the, you know, the sales team, or whatever. And, like, I know how to build sales teams and drive it, great. You need a small business with tight operations and, like, good accounting, so that you can go out and, just like, grow it and scale it with your efforts, right? The opposite is also true. Hey, I'm good in operations and in squeezing out profits, you know, get just building lean operations. Great. You need something where there's a not a sales problem, and it provides an opportunity for you to go in there and, just like, squeeze all the pennies out of the dollar, right? I mean, all these types of things come into consideration. I think a lot of times people think to themselves, hey, I'm in this industry, and so this is going to transfer. And I just like to challenge them and say, let's really get into it. What is it that you have right? And ultimately, you know, what do you say? Reputation, relationships, right? Relationships and results. If you provided results for people you worked with, then maybe those relationships will matter, especially if they're distributors or, you know, customer relationships, or people that can move the needle on the business that you're ultimately going to acquire.
And it also pumps your reputation with them as well. So they're all connected like you screw up one, you screw up all you nail it on one, you're going to help all of it. So you're a guy who produces results, people are going to want to hang out with you. They're going to trust you they're going to trust you with a good reputation, or or whatever it is. And so those three things, I think that's the stuff you don't learn in grad school. That's the stuff you learn just doing deals. If you're a deals guy like Walker and I eventually, you kind of be like, you know what, this is not as complicated. Doesn't mean it's easy, but it's not as complicated as I thought it once was. So now, if you're emphasizing reputation, relationships and results, relationships and results, I take those three as a Venn diagram. I too have frameworks Walker. So with that, then you surround those three with a Fourth R, which is rituals.
Walker Deibel
Whoa.
So what? What are, yeah there you go. So mind blowing.
Walker Deibel
Discipline.
There you go. So what are your rituals or habits around those and those will reinforce or collapse your reputation, your relationships and your results if you got the wrong rituals. And so rituals are that reinforcement mechanism to say, are you doing this on purpose? Are you just trying to stumble into the office of somebody that manages $15 billion or do you have rituals where you're constantly maybe going to the right events or making the certain phone call, whatever it is, I'm not telling you do this and don't do that. What I'm telling you is to think about it. What are your habits? Some of them may not be great, not you Walker, but maybe sure you in general, what are the habits? And I've thought about this, you can do an audit and figuring out those habits or those rituals, and how do they contribute to my reputation? Right? Maybe you have a habit of lying, okay, not a great ritual for a reputation, if you want to be known as having integrity. So whatever those are, figure out your rituals and reinforce your reputation, relationships and results. And then just eventually, you're going to find investors and deals they're going to come to you and be like, just like they do for you. Walker is just say, You know what? This guy is, super legit, like, he's written books, he's an honest guy, so on and so on. And it's like, I'd love to do a deal with him.
Walker Deibel
I love that. Can I piggyback on that and sort of flipping another version of what I was describing? Because I think that.
Absolutely, I'm here to hear, we're here to hear from you, brother.
Walker Deibel
Look, I mean, you know, like, like your audience is a very, you know, sophisticated, driven, active group of people, and a lot of them have a lot of money, and a lot of them are just very ambitious, yeah. But then what I would say to that is, you know, look like I have a good friend of mine is in a family office that, you know, he's of the family and all the rest of it, he went out and bought a small company with the family office money, and ultimately, he runs it in exactly the way that I just described and so he's wanting to go through as an operator. There's other options, there's other flavors of this same game, you know. And I think you know when it look when it comes into going back to that concept of the independent sponsor at the end of the day. I mean, if you're the person that can raise capital for the people wanting to buy companies, my recommendation would be like, just make sure you start with a good deal and like, what is that good deal? It's simply identifying who that operator is with that business, right? And then basically putting skin in the game yourself, in my opinion. I mean, I wouldn't invest in anyone, you know, and then, and then ultimately, that company, now you're marrying those two things together. And now all of a sudden, you're sort of the deal guy, the capital guy, the syndicator, and you're beginning to build, you know, that resume towards, you know, becoming that independent sponsor, or that deal guy in private equity, just another, another flavor that someone out there might say, like, yeah, that's what I want to do.
Yeah, absolutely. I love that. Man, this is great, chopping it up. I'm curious, have you seen people when they enter in this industry? Is it a good idea to go alone? Is it a bad idea? Is it possible to do it? I mean, where do you stand on that? What would you recommend.
Walker Deibel
Sure? Well, okay, there's, there's a couple of ways to answer this. I mean, the first thing I would say is, the reason I built Acquisition Lab is because everyone is trying to do this, like, isolated in their kitchen, and they're trying to make one of the most important, critical financial decisions of their life. And I was like, okay, how do we build world class education? How do we vet a community, you know? How do we give people the tools and, you know, mentors that they need to actually succeed? And that's what has made Acquisition Lab have such elite results. Okay, so, and it's, you know, it's like the, it's less than, like, two months of a buy side advisor. It's very affordable. There's no hidden, you know, we don't make money over here or over there or anything like that. It's just clean, okay? It's an education company at its core, community at its core. So I'm bringing that up because I built it and I'm sorry if that sounds like a pitch. It's just, I have to mention, because I did so on the one hand, if you're, if you're looking to do this, like, get around people that have done it before, right period, like, that's you're, you are going to spend so much time recreating this, this wheel. And it's a different animal than anything you've ever seen, if you're not familiar with it. Even, like, we have people in the lab that, you know, they've acquired multiple $50 million companies, and they come to the lab because they're like, I don't understand this small business thing, you know, like, sub $25 million space, great. So I got a guy who took three companies public in the lab, you know what I'm saying? Like, it's like, Great, let's go. So one example, the other is, you might be talking about, should I buy by myself or buy with a partner? Right? And statistically, I can tell you that, you know, there's a bunch of information that comes out of Stanford that actually suggests, the empirical evidence suggests that if you go in with a partner, you're actually more likely to succeed, okay? And that's, you know, that's interesting to think about. Now, I was also an EO for like, five years, and I will tell you that EO is really just a group of entrepreneurs with business partners that need counseling, right? So it goes both ways. So if you're gonna have a partner, make sure you have a partner that you know has a different skill set, right? In my opinion, someone's got to own 51% or more it can. It should not be 50/50, that is rookie mistake 101.
Yeah.
Walker Deibel
Someone's got to have that, that lever to be like, we're not talking about this anymore. And then different skill sets, obviously, good working relationship, someone has to have that end control tiebreaker. And the big secret is that you get to buy a bigger business. Because what's happening is both of you now can get access to capital.
Well, sure.
Walker Deibel
$5 million limit with the SBA, for example. So now if there's two of you, you can go in and pick up a business doing 2 million and, you know, adjusted EBITDA, and now you got two people in there pushing right? So I think that that's sort of, that was sort of a big surprise that I've learned over the last four years, was the data that came out around having a partner. You know, look, I mean, I've done the whole thing by myself. And when I say that, I mean, you know, yes, with my sweat and drive and cash and, you know, risk and all the rest of it. But obviously, I'm also talking about the hundreds of employees that I've had as well, that we all come to work and we all do it together. It's just that, you know, at the end of the day, most people don't own the company and own the equity.
Got it, so do it with a partner is better and if they need guidance, Acquisition Lab,
Walker Deibel
Statistically, yeah, sorry.
Yeah, no, you're good. So do it with a partner, that's what you're saying. And statistically, if you if you do it, you have a higher probability of success and as I joke, I'm like, finance is more statistics than it is calculus, right? We deal with probabilities and risks, there's not a lot of absolutes there are. But I always joke that, hey, if you're good at calculus, going to account, if you're good at statistics, going to finance. So we deal with less than 100% a lot of the time and so the statistics add up that a partner does better, or at least get some guidance or Acquisition Lab, whatever that is. But just don't, don't wing it. I think it was Vince Lombardi that said the man at the top of the mountain didn't fall there, there's some intention that needs to go into this. Don't try to be lucky and fall on the mountain of cash, it's like you're gonna need to surround yourself with a lot of smart people. Back to the relationship and so whether that's official mentoring or you just, you have an experienced guy that's willing to spend a lot of their next five years.
Walker Deibel
Yeah, can I just give you an example?
Yeah.
Walker Deibel
Right. Like, I've got a couple of people who bought companies, like, they looked at the lab, were like, I can do it on my own. And they bought companies, and, you know, one, one of them, she's a advisor at the lab. Now, she's gone on and done other things, and she's like, if I, if I had just joined the lab, I wouldn't have made a mistake, right? Like, a lot of people are like, oh yeah, I'm gonna buy a quality of earnings. And then, like, then I know for sure everything's good. But it's one of these things where, like, you know, Lucas Phillips, I just got back from New York, where I shot a video with him. He's, he's in the lab, he's one of my star members, because he crushed. He came in every day. Was posting in Slack, like, all of his metrics. He buys this company, and, you know, he bought the quality of earnings. He did, like, all the diligence things and, like, whatever and he gets in there and he realizes that the small business owner, that the seller, was a small business owner, and he was just sort of like, and he was holding the whole thing up, and no one was coming to work, and the only guy that had all the IP in his brain, was drunk and wouldn't show up. And, I mean, Lucas called me, like, in fetal position on the floor. And I was like, bro, like, this was a tough love kind of situation, I'm like, the only way is through. You can do this, you know, one foot in front of the other. What's the point? The point is, is that the answer to everything he needed to know was literally right in the middle of the entire building was all of the time cards on the wall. If anyone had, if he had looked at the time cards, if anyone had looked at the time cards, he would have seen no one was actually working 40 hours a week. Everyone was rolling in, working half days. And the seller was the one that was like, well, it's my company. I'll just like, you know, do all the work and make it happen, right, and it's so it's like, these little lessons add up, and they're all, they're all in one place, in certain places, right?
Yeah, you know that that's a really great story. It reminds me this is something, it's a cautionary tale that I learned. So in a former life, I was brought in as a CFO of an insurance company, and they were getting ready to sell and so we call it window dressing. Just get it ready, clean up the books, get the numbers, get process maps, and so it was, it was a lot it was a lot of fun. It was a lot of work, but it was a lot of fun. And one of the things, and I would say, just from my experience, if there are people who want to do entrepreneurship through acquisition, time cards, and also, if I can add to that, I call it phantom costs, right? So these are the things that are really costing the company a lot of money, but they don't show up on the income statement or the balance sheet. But you know, if you're an accountant, you're like, what everything needs to be in the income statement. Well, you could argue, indirectly, they may show up in like, lack of revenue or bloat and labor costs, sure. And they did. And so one of the things to to think about is just those phantom costs, right? So the time cards, how much are people working another phantom costs are, are people taking two to three or four hour lunch breaks? Right? That costs the company money, and it doesn't show up on the income statement, but it kind of does. And so this is where the now that might be good for you, if you're buying companies like that, because you're like this, company should be worth a lot more. It's not where very well led, often you will find some brilliance through a lot of those phantom costs, right? Poor productivity doesn't show up. Turnover doesn't show up. And, of course, time cards. So you're saying, and typically, the outcome and productivity of people on those phantom costs, it just shows up in a bloated labor budget. So you're like, wow, 60% of your OPEX is labor. What if we were more productive, that might put it down to 45 I don't know. And so I think that's a brilliant story and tip of the hat to your friend Lucas for making it through after the fetal position.
Walker Deibel
Yeah, he bought three more companies, tucked them all in. I mean, he's crushing he has all the IP of the whole industry now. I mean, it's just like, I'm like, yes.
Yeah. So those phantom costs, man, and once you understand that, now you've got an edge, as I would say, just from my opinion, you've got an edge as someone who's buying companies. Because now you kind of say, oh, I can see things that most people can't see. Therefore I see potential that I could turn this around. If phantom costs are like, easy to turn around. It's just leadership, it's policies, it's just. Getting your house in order. But when you do that, watch your valuation soar, there's things start clicking into place. It's not the silver bullet, but it's pretty damn close.
Walker Deibel
I, you know, one, one trend I'm seeing right now and I'm not saying that this is a massive amount, but I'm seeing it, which is, I see a lot of multi family real estate syndicators moving into the buying businesses space.
Ooh, yeah, let's talk about that.
Walker Deibel
Well, well, it's one of these where, you know, raising for multifamily right now is like, the hardest time ever. It's like, harder than the great recession or whatever, it's hard time. And buying businesses is, like, what the people want now, right? So it's like, it's like everyone ran out and read by then build, right? You know, but, but, but, you know, I mean, but the point is, is, like, it's, it's, it's sort of like that, it's sort of like that stock picker that's supposed to, like, keep it, stay in their lane, and then, like, their lane isn't performing. So they walk across the hall while the guy's at lunch and, like, do some high growth stocks to, like, boost their like. It's like, there's a little that going on. What's the point Walker? The point is is, like, yes, running a real estate business is a business, but the way that you grow it is you buy an asset and then you buy another asset, and then you buy another asset, and then you buy another asset, and it's a hard asset made of bricks and people paying rent. And what I'm seeing is that I don't know that there's a complete connection, that people understand that the value of business is actually in the intangible assets. Everything you just described is intangible. It's a search of people coming to work and like doing processes and systems, and sometimes a product comes out of it, or sometimes it's a service that's delivered, right? But, like, at the end of the day, it's just like a melding of intangibles that, like there's money going around it somehow.
Yeah.
Walker Deibel
We'll see what happens, you know, but, but, but, you know, getting just understanding that the value of businesses is in the intangibles, I think, is all I'm trying to underscore.
That's a great perspective, man, because again, we like, arguably, you get some intangibles on your balance sheet and but not all of it, man. And I think that's the point is to say, Yeah, okay, sure, look at your financials. Absolutely, do your due diligence, get your accounts, your lawyers, all those people to do that. What we're saying is what we're talking about, I think, keep me honest here, is we're talking about, there's certain things that experience, or listening to the show or listening to people, or, as we said earlier, don't do it alone. Do it with someone who's experienced, they could say, hey, have you seen the things that don't show up on the balance sheet? And you're going to say what they say, yeah, there's a lot of stuff that can affect how much we pay or don't pay based on the intangible stuff. And that's what you're saying, is like you got to look at that and really give it the respect it deserves when you're buying or selling. So, you know, when it comes to buying and selling, there's money involved. So I'm very curious, from your perspective, financing the deal. I mean, what have you seen? What are some real high level advice, something you and I have talked about before, which is doing a deal with too sharp of a pencil, as I like to call it, maybe, maybe walk me through a little bit of what you're thinking there.
Walker Deibel
Mistake number one,
Yeah.
Walker Deibel
Like, okay, this is like, like, look like, I don't want to sound flippant or dumb, but like, like, mistake number one is caring about how much you're paying. And I know that sounds like the dumbest thing. We talked about real estate movie, I make money when I buy, not when I sell. That's a real estate adage, and I don't believe that that actually translates to businesses. Real estate is a, I appreciate it, 2% a year and have equity buildup model businesses is like, how far can you push this thing? It's intangibles, what's the total addressable market, and how much of it can you go get right? Like, it's like, it's that. And so the thing is, is like, people are like, okay, Walker, hey, I got this business. But like, you know they're asking for in the point here is that the multiples on earnings are very, very low, right? So it's like three to four times annual earnings, okay, annual cash flow. And so it's like, you know, you compare that to, you know, if you say that to a real estate guy, by the way, what they hear is, what, I get, 35% cap rate. But it's like, it's a different asset, whatever, I'm not going there, but I did.
Yeah.
Walker Deibel
Anyway. The point is, is, like, it's such a low valuation anyway, right? Like, what's Nvidia trading at right now? I mean, it's a crazy example, 59 you know, I don't know if you know whatever. You know these tech stock at the stock market average price to earnings ratio is like, 19, okay? Like, historically, we're talking like three and a half. So people come in and they're like, Okay, it's three and a half Walker. But, like, I don't know. I feel like I really just don't want to pay more than, like, you know, 3.2 times or whatever and I'm like, whatever. And I'm like, Okay, so that's 90 days of earnings. You're going to own it for 10 years or whatever. You know, are you sure you want to, like, lose the deal over, you know, I'll pay 3.8 times. I don't care. You know, it doesn't matter because, because whatever that difference is, you know, it's a 10 year loan that it's going to get paid out over. Okay, yes, if you get into higher multiples, look Ryan in 2002 to 2004 when I was really trying to figure out how to do this in grad school, the top three searches on Google around this space, okay, how to buy a laundrey mat was number one, how to buy a car wash was number two, and how to buy a business with seller financing was number three. If you want to create a influencer business on buying businesses, those are your three. Congratulations, go do it, okay.
Walker Deibel
Now here's the point, everyone wants to figure out how to do it on seller financing, but seller financing in the knots was the only way we were able to do things. Okay, there there, was three reasons I bought the book, printing company, yes, my dad invited me. But two, it's because I couldn't get a deal closed, and when I brought the bank in to look at the big pieces of equipment, they loved it. They're like, there's collateral Walker, you don't have any money, you don't have any collateral. You want to buy this other manufacturing company that just has aluminum extrusion moving through with some welder guys in it. Like, there's no collateral, these machines are beautiful and they gave me a loan. And I was like, great, okay, that was the only way that went down that other hypothetical example of the aluminum extrusion welding. That's a business I actually own right now, which is why I use it, I couldn't have bought it pre 2016 here's what happened. I would go to her, the seller, and say, like, look, this is small business transactions. I'm gonna buy it at three times earnings or whatever, but I don't really have any money. Like, you know, I can't get anything from a bank, like, there's no collateral anywhere, but I'm a willing buyer. Let's go. I just need, like, you know, we need to work out a seller financing deal, and then they would go, wait a minute. So I'm the bank, and I'm gonna give you my business, and then you're gonna go run it, and then you're just gonna give me the earnings that I would make anyway, if I just own the business. That doesn't make any sense and so deals weren't getting done anyone that had a decent business wouldn't sell it because it was just like, it didn't make any sense, right?
Walker Deibel
And so ultimately, what the SBA did in 2016 was they solved the seller financing problem. This was actually the year I bought three or four different companies in 2016 and that was actually the year where I was like, I have to get Buy Then Build done. It took me four and a half years to write that book, but I was like, I was like, I was like, no one understands what just happened. And this was the federal government coming in and saying, if you don't have any money or collateral, and the business doesn't have any collateral, we will give you up to $5 million for up to 90% of the total acquisition price, all you need to do is send this personal guarantee. I was like, give me all of it. So what you know, what's the point, the point is, I believe that social media has really pushed seller financing. I believe that people wanting to sound smart in the space have been borrowing middle market terminology and deal structure and trying to insert it. No one was talking about working capital pegs and sub $5 million transactions 24 months ago, I promise you, except for the private equity firms that were coming in that I was then having, getting my sellers off the phone and educating the private equity firm saying, like, look, I know what you're doing. I know the middle market,let me explain how you're working. And like, in any situation, in any situation, in any deal, textbook, no matter what, the seller is still getting 3.5 times cash at closing period, okay, don't get hung up in multiple things.
Walker Deibel
If I Ryan, people are surprised to hear this. I've never done seller financing once in my life, not once. I want to write the check. I don't want to owe that person money. I want to download their brain and I want to get them out. I don't want to give them if you owe someone, you know, 10% of their entire exit of the most valuable thing they own. Okay, if I'm that seller and you're the buyer and I still I, you owe me money. I'm I'm going to come up there and I'm going to sniff around the business. I want to know how business is going, I'm going to talk to my old employees. You might catch us whispering, you know, like it's just like, I'm in your I'm literally in your business. I like it clean, I want them out of my business, right? And I think that a lot of people think I'm crazy, but especially lenders. But if you really, really look at it, lenders really like seller financing, because they can increase their debt service coverage ratio by pushing the seller out, and you wreck your reputation. That's what happens. And now the bank doesn't have to deal with you coming to them being like, hey, things are a little rocky. Can we, like, work with this out? And they're like, no, screw the seller, that's what happens. That's why the banks start talking about it. And ultimately, there's just a lot of hot terminology working itself into this space that, you know, I think it's fine to consider, but it's like, don't get hung up on the price, just pay it. Find a good business. Search funds, like traditional search fund investors will say, find a great business and be prepared to pay a lot for it. They do not care what they're paying, like they'll pay whatever to get the great business that's an extreme find a good business, pay a fair price, get SBA debt and get the seller out of there. That's my advice. It's not gonna be right for every deal. It's just how I like to do things.
Yeah, that's a great opinion for those who don't know, because you said, you know, working capital pegs, no one was really talking about that. Maybe walk through a little bit of what, what? What is a working capital peg, for those that may not know, and how does that relate to what you just said.
Walker Deibel
Right, well, if you're making the argument for a working capital peg, you're saying, well, you're not going to buy, you know, an automobile without gas in the tank, right? But the way, the way that, you know, the main street market works is it's like you bring extra cash to put in, because that's the seller's cash, it's a cashless, debtless transaction. It's an asset sale. That's how they stay out of the the rules of the Securities and Exchange Commission. It all runs on asset sales, right? So you you start an entity, they have an entity, and you buy the assets out and put them into your entity. That's the structure, but, but what happens is, you know, when you're doing a, you know, $75 million deal at, you know, 7x or whatever, yes, the working capital stays in there. This is a middle market business, there's going to be some amount of cash in inventory, in receivables, in payables and in a minimum cash balance that needs to get balanced out so that, you know that there's enough gas in the engine so that. Enough cash, enough working capital, staying in the machine. And the concept is that if you buy it and you're at a low part of the cycle, then you've got to come up with a bunch of cash that is going to increase your purchase price.
Walker Deibel
The Main Street Market has always worked as a debtless, cashless transaction and now, now people are coming in and saying, hey, don't worry. Here's my letter of intent and, you know, we're gonna go ahead and calculate a working capital peg over time, and it's very vague what that's gonna be, and then you will just owe me some money. And it's like, hey, man, you want to lose your deal, do it like that, you know, do it like that. You know, I also, I also think that, you know, a lot of people really like off market deals. It's like, off market deals, off market deals, sure, but you know, the truth is, is like this, this. This is the Wild West. In other words, you know, no one's really dialed in and brokers business. If a business seller is just gonna, like, sell it to you, because you call them like that, you know, what do we say? People get hit by lightning, people, whatever, win the lottery. It's like, sure it happens like, good luck, but it's very, very, very inefficient. And what I say is, if you're not in this game, the odds that you're going to get an off market deal are, like, approaching zero. It's when you're in the game, and people know you're in the game, that all of a sudden you get deals that are off market. So you got to get the flywheel going and brokers have more deal flow than you ever will, right? I'm not talking to you, Ryan. I mean, you're the maestro, you, you literally run the podcast anyway. You know, you know, like making, you know, Making Billions is like, just code for deal flow. But anyway, like, the point is, it's like, is, like, don't try to advance your career in a game that you're not in yet. Like, just get in the game, right and so go to the brokers. By the way, the brokers more often than not, have terrible Sims. And so like, if you actually do the work to learn about the business, then you now are the only one that can actually see the business anyway, so you just got deal flow at the seller's expense, okay? And now, because you're spending the time to go in and do the work to figure out what's actually in the business, you're the only one that can see it. Even though it's an on market deal. It looks terrible to most people, because most people in the space are fair weather buyers.
Yeah, true. So the brilliant breakdown of that man as always. Now, when it comes to now, we financed the deal. We got the company. We've done all these things, guess what? We're at the starting line, all that work just to start. Yeah, that's exactly right. So now we're at, we're, you know, on your marks, get set, and before the race pistol goes off and we dash out that very moment, okay, so we funded the deal, got the deal. It's now our baby, this asset, whether we did a carve out or we bought the, okay, either way, you got what you got, and now you're on the starting line. Let's take a different approach what's some conventional wisdom that's wrong at the start line now?
Walker Deibel
Yeah, so I think that the first time I bought a company, I didn't change anything for a year, because that's it's like, don't change anything. You know, was always the sort of like, buy a business and get a feel for it, like you don't know what you're doing. Well, what I found was people were just doing dumb, inefficient shit, and like, I wasn't fixing it because I was waiting my year. And now I've done this, you know, eight times over. And what I'm going to tell you is, there's a little bit of a sweet spot where, you know, when you try to change people's behavior, you know, 12, 14, 18 months later, it's like, I've been, I've been doing this right in front of you for the whole time. Why are you trying to do this right now? And it's like, well, because your process is terrible. You're literally, like, writing specs on a piece of paper and handing it to Theresa or whatever. It's like, it's like, we don't need any of that, that's not what's happening here anymore. You know, there's this sweet spot where, when you buy a company, everybody, like we are nervous as buyers, that like people, like everyone's just gonna be like, what? And leave, right? And what I would tell you is that almost 100% of time, everyone stays, unless they know the business is for sale beforehand. Okay, but when you walk in, you're like, guess what? The business all they hear, all they want to know is, is my salary the same? Like, are my benefits the same? They don't care about your speech, okay? What, like, really? Like, that's what they that's what they're thinking about, is like, what's going on with my salary right now? Because everyone that has a job is addicted to their paycheck, like crack cocaine, and they need to get off the junk, everybody does that's listening to this pro tip, get off the junk. Like, that's how you do it, okay? But so you have all these paycheck addicts, sorry, employees, and that's all they want to know, right? So you got to tell them that right away, right? But, but, but the thing is, is there's a period of time that's usually like month month three through six or seven, everyone just, they really, just want you to know that, like, they're on your team and that you can count on them, and they're a good employee, and, oh yeah, by the way, they probably deserve a raise. Everyone will hit show up for a raise. So there's, there's all of that kind of stuff and that's actually the most beautiful, magical time to go in and just start laying down like, new processes and systems, right? So, Ryan, will you share, like, I mean, you went in and did like, process mapping and stuff, right? Like, that's a perfect example. What remind us of that story?
Sure? Yeah, you can tell Walker and I've been exchanging war stories before. Yeah, so, so when I was brought in, it was fascinating. So my first clue, as I alluded to before, was, there's phantom costs, right? So labor costs, I felt was quite high. You know, I did a gut check. With the owners. And I was like, Does this feel a little bloated to your labor budget, or is this normal for your sector? Because, holy crap, it seems like we're spending a lot and typically is any CFO, or anybody that runs, you don't have to be a CFO, but anybody that kind of understands basic accounting says, why is labor so high? Like some industries really, are really high, about 50, 60% labor costs. This was not one of them and so you're saying, well, you keep hiring more people because the ones you got aren't doing the job in the first place. So you got three people trying to do the job of one and so we've got a productivity problem, likely some phantom costs. And so my first thing that I did when I came in to do that, and I would say, just for my opinion, this is a great thing to do when you first come into a company, is be like, all right, kind of pencils down. I need to understand, walk me through step by step, like I'm a five year old with crayons, and I need to draw out every single step called the process map or flow chart, I need to understand how we're doing it. Don't worry if it's any good or any bad. Well, we'll get to that, but what I want to understand is, how do you do it? And when I found out, it was like, oh, we have to copy, take a screenshot on this, and then paste it in that, and then move the file into Adobe and turn it into a PDF, so then it uploads into the system and I was like, okay, stop what?
Walker Deibel
Yes, yes.
What is happening right now? And I'm like, wait and everybody did it. They were doing this stuff at scale and I'm not saying it's right or wrong, but it was what I am saying. It was wildly inefficient and very expensive, and it was hammering the bottom line of the business. And as you, as the owner, you don't like to do that. So we built the process maps, and then we took a look at this thing, and I swear it was like a wallpaper that wrapped the walls of the boardroom this whole process and I was like, Holy Mother. So we looked at it, and I was like, okay, how do we automate and so the thing, the context that I did that in, and I don't think I shared this with you. So I follow something that I call SOS. I don't share this a lot of people, but today I am. It's called stable, stabilize, optimize, and then standardize, right? SOS and so the first step is, I need to find out where the bleeding is so we can at least stabilize the patient, otherwise known as the company, stabilization is step one. And to your point, Walker, yeah, you're gonna have to change some stuff,
Walker Deibel
Yeah.
and, and it may not be pretty and it may not be efficient, that's okay. You'll get to efficiency right now. We just the goal is stability, and then once we realize that we're like, okay, maybe, maybe current state is stable. And in the story that specifically it was stable, it was working, it was just wildly inefficient. So that's where you go to phase two, is to say, okay, we're not bleeding, right? There's not stuff that's horrible and existential risks and all that we're okay, like we're barely making it by on a profit margin, if my memory is correct, but the issue is, is it's wildly inefficient. So we moved from stabilized to optimize really fast, and then when we went to optimization that is now saying, okay, how do we do this faster, cheaper and with less people. And boy, did that team come together right under that guidance, and under that direction to say, great, I think you guys are doing an okay job. It's stable, but it's far from optimal, and that is showing up in productivity, which is ultimately bloating labor costs. So then we optimized, and then standardized is just saying, okay, this is how things are done around here. This is it and so we needed technology, we needed tools, we needed better process. So I cross section like, let me keep talking about your matrices from SOS. We did people process and technology. So between SOS, cross reference with people, process, technology, we were able to really clean up a lot of those phantom costs and really just process out just dumb things that people were doing. Smart people were doing things in a very dumb way, it wasn't mean that they were dumb. Just no one ever sat down and be like, all right, we're locking the door, we're eating a lot of Skittles, and we're not leaving until we have this process mapped out. Which we did, and I think they were Slurpees, but either way, we really burned the midnight oil, and we figured it out. And this is the kind of stuff they have now, I was there as an executive, so it's a little bit different concept, but the exercise is absolutely the same, that when you're owning a business, you got to explore that, and a big part is just saying, okay, where's the bleeding, if any. Let's figure out the process. Walk me through Customer Service, how you walk me through procure to pay or order to cash. Finance department, walk me through onboarding of a new client, sales department or brokers, and you build out this entire process map, and then you sit back, not just as an executive, but you sit back with all the leaders, even Team Lead everybody, and just be like, I think your job sucks. Would you say your job sucks? And they're like, yeah, my job sucks. Nobody would want to do it like this. Of course, your job sucks, and then you start cleaning it up, and you give people a voice, and people feel engaged. They feel that they have their fingerprints on the business, they're more apt to lean in and be part of the solution. And so I think really just figuring out what the heck is going on, filtering it through SOS using people process technology as potential sources of solutions to inefficiencies. Now you're cooking with gas, right? So, like you said, you're like, it's, yeah, there's some financial stuff, but a lot of this is just frameworks. So thanks, thanks for listening to my frameworks.
Walker Deibel
Well, no, I love that, I took extensive notes just now, and I think I'd be interested. Like, the hardest part of all of that, in my experience, is. When you go into these companies and you start having people write down exactly, step by step, what's happening. They're feeling their brain being exported, like the value that I'm bringing is now being exported, and so that they're feeling like you're trying to take something, right? Yeah, and ultimately, it takes a while, and the little thing that I try to instill is actually the underlying culture. And what I try to go with is sort of like, I mean, I didn't make this up, I wish I could claim it, but it's like, we're not placing, you know, blame. We're just trying to find the root cause of, like, why this thing went wrong, right? Like, they're like, I don't care, like, it's man, method, machine, material, or whatever, right? It's like, we're just trying to figure it out. Like, it's like, it's like, you know, and trying to help people understand that investing in, you know, efficiencies and quality assurance, or whatever you want to call it, actually pays money, is like, the little thing that makes the big difference. And so, you know, if we're talking about what to do, you know, in the first 90 days, or whatever, I mean, really focusing on that culture and trying to, like, give people a true north on you know, your values and where you're going and, like, how you treat people is really, really important.
Walker Deibel
One of the companies I eventually sold, the guy came in and on day two, day two, he's on the phone with my former because I sold the company, number one supplier, and he's like, I'm not buying any of that shit. And the guy was like, whoa, I mean, I mean, and he was like, listen, the only person I listen to is God, and God isn't very happy with me right now. And I was just like, whoa, that's when I knew. I was like, I need to get out of here, because he's changing things beyond and treating people in a way that I don't like. Let's just say his management style is very different from mine, right? You know? And it's like, so get in there and do some changes, but it's my theory that he should not have changed that order. Now, look, maybe he's smart and I'm dumb, but you know, when you go in and start like, changing material, core things in businesses, like, that's a way where you actually screw up a business because you're getting in front of your skis, because you think you're because you think you're too smart. So, you know, you get you got it. I love what you're doing, focus on the processes and the people, because that's where you're going to find the wins, right? That's you're going to be able to, one other thing, one other thing, like 101, buying business for the first time. The number one mistake is you go in and you just increase your salary really high, because, like, now you're the CEO, and you just start burning all the cash that's coming in the door in terms of your salary. So what I like to say is, there is an equity buildup happening, your growth look does look like this? It just is inside the thing, the capital stack, right? Give it time. Give it time. Build safety, right, eat ramen noodles. If you can for a little while, like, just you want cash, you're gonna want cash in your business, because if you run out of cash, the game's over and music stops.
Yeah, that's right. So thank you for that. So all of the conventional wisdom that you find to be wrong, and I agree with that. So before we wrap things up, this was, as always, it's absolute blast. Hilarious, those of you can't see you half the time. Walker's talking, I'm dying laughing, and I had to mute my mic but we have a good time. We have a good time, as I hope you can feel, and you've joined us on such a great conversation, brother, as always, it's always good to talk to you. But before we wrap things up, man, you got so much stuff to do, and you got a lot of stuff going on. The final thoughts, any ways people can reach out to you. Maybe get involved in some of the stuff you got going on. Give us, give us a shout out, man. How do we get more Walker in our lives?
Walker Deibel
Yeah, well, I mean, what I would say is, you know, free, I'm very active on LinkedIn. You know, feel free to reach out to me there as well. I've got a newsletter that I sent out to 50,000 people every Sunday. It's, you know, it's basically a book chapter, it's like 2500 words every single week. Think you can get there through buy, then build, calm. You can definitely get there at walkerdeibel.com if you can spell my last name, but so that's free stuff. You know, Buy Then Build is like six bucks for an ebook. It's, I'm not gonna give it to you, you have to buy it, but it's $6 I think it's worth it. And, you know, Acquisition Lab is, you know, the elite, you know, Acquisition Accelerator, Acquisitionlab.com. Feel free to apply if this is something you want to do. We truly are a vetted community, about 70 to 75% of applicants are actually not invited to enroll. So just want to kind of set that up for people's expectations. And you know, if you're an accredited investor, go to buildwealth.com because we are bringing deals out all the time right now, we're actually rolling up 700 oil wells and doing a, we're doing a 14 acre rehab in downtown St Louis. So some, some various menu of private assets there. So that's kind of the suite from from free to give me a million bucks.
Yeah, everything in between, yeah, yeah. Well, I appreciate that, man. So just to summarize everything that Walker and I spoke about, be careful of going horizontal. Maybe think about acquisition. If you're building a portfolio, think about vertical and how things are. Remember, we're rewarded for focus. The other thing that we talked about is just appreciate the opportunity of generations, not just yours, but many, a lot of these businesses are coming online, and they're up for grabs. And appreciate the frameworks, don't do your first deal alone. Be careful of those phantom costs. Do SBA instead of seller financing. Don't do a deal too sharp of a pencil, a three, two and a 3.5x it's silly, just pay the thing. If it's a great company and you want it, don't lose a deal over 90 days' earnings. And finally, just really dial in on operations. You can try SOS, or any of those frameworks. You do these things, you too will be well on your way in your pursuit of Making Billions.
Wow, what a show, I hope you enjoyed this episode as much as I did. Now, if you haven't done so already, be sure to leave a comment and review on new ideas and guests you want me to bring on for future episodes. Plus, why don't you head over to YouTube and see extra takes while you get to know our guests even better. And make sure to come back for our next episode where we dive even deeper into the people, the process and the perspectives of both investors and founders. Until then, my friends, stay hungry, focus on your goals and keep grinding towards your dream of Making Billions.
