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.
Additional Videos From Freedom Factory
What is Entrepreneurial Freedom?
What is Your Stupid Human Trick?
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
Freedom Factory
5500 Greenwood Plaza Blvd., Ste 230
Greenwood Village, CO 80111 Phone: 844-MAX-VALUE (844-629-8258)
https://www.freedomfactory.com/
https://g.page/freedom-factory-denver
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