I’ve built two-billion-dollar businesses.
And during my time building both, I learned exactly what goes into buying a business.
But I also learned the mistakes most business owners make.
This is why I’ve put together 4 tips I wish I’d known about how to buy a business.
Starting with…
1. Always get the underlying documents, never trust a summary
The moment you’re the winning bidder, make sure you get full access to every contract. You should never let lawyers or the seller’s team hand you a summarized version.
Why?
Because you can’t properly weigh up a deal based on someone else’s summary of the paperwork.
They could hide behind confidentiality to keep a document tied to a check you’re about to write.
This is why you never underwrite what you haven’t personally read.
2. Walk every deal all the way to the end, including the ones that look absurd
Fully map out the deal before rejecting or accepting it:
What it costs to buy vs. what it actually costs to run
Who gets paid first if things go badly
What you’re actually inheriting (working assets) vs. what you’d have to rebuild from nothing
And for any distressed deal, ask yourself these 3 questions:
What would it cost to build this from scratch?
Is the business broken, or just the balance sheet?
Would fixing the brand actually fix the business?
If you can’t answer these, you prolly like the idea of the deal more than you understand it…
3. Follow the ladder: research, buy, build, syndicate.
You need to research all the costs to buy and build before you make an offer. And these costs could be:
Buying the asset
The cost to fix the business
Make sure you treat fixing the business up as its own separate cost/plan, and not something you add on after the purchase.
This makes sure you know the real cost of ownership, expected return, and what your negotiating position is in the deal.
And if you’re raising money from investors, pitch them on the improved version you’re going to build.
Because the reality is, investors want to put their money into solutions, not more problems.
4. Filter every deal through one question: can you build a platform on top of it?
Ask yourself if an asset can grow into something bigger, like:
Having content and audience: maybe it’s a YouTube channel, newsletter, or podcast built around the brand
A franchise or licensing model
Add-on acquisitions in the same niche
Or a software/tools layer that other operators would pay to use
Otherwise, it’s just an operating business. And operating businesses get operating multiples…
Small companies get small multiples. Big companies get big multiples.
And now for my business buying bonus tip I wish I knew sooner:
When you share deals with good people, they share good deals with you.
You don’t need to do any business deals alone. Sharing them with other people can take away the stress and make you more money in the long term.
Because now you’re not just doing a deal for a business… you’re investing in relationships.
And if you enjoyed this post, I talk about why I love doing deals with lazy entrepreneurs in this next one:
Sharan, I’m literally saving all of your articles at this point.
Does debt load matter? Does the amount of ficticious good will on a companies balance sheet matter? Does having a plan to get back debt free matter? Does having a global management team in place to step in on day one to manage a global entity matter? How do you just fake it until you make it at that level and is doing that wrong?