Buy or Build?
My upcoming book is a guide for first-time business buyers. As someone who has both purchased a company and started several, I provide my perspective on this debate in the first chapter.
Buy or Build?
I've acquired a company and founded several others, and there's a significant distinction between the two. Choosing the right business to buy can kickstart your journey as a business owner – yes, being a business owner is a career path.
Unfortunately, my initial purchase was driven by the wrong motives. Acquiring a company I had worked at for years, my intention was to take it in a new direction. However, the primary service wasn't aligned with my long-term interests. My strategy was to use the company's cash to shape it into what I envisioned.
Things were progressing as planned until the unforeseen challenges of COVID and global economic shifts hit. A price war initiated by the Russians and Saudis delivered a significant blow, followed by shutdowns that severely impacted our operations, despite working for essential businesses. Faced with debt from the acquisition and taxes owed, I made the decision to exit. Fortunately, it was a clean exit, providing some financial relief, although not life-changing.
This experience taught me a crucial lesson – I appreciate the financial gains from a business, but the intrinsic nature of the business itself matters. I had no desire to rebuild the company to its previous state, especially with the uncertainty surrounding that opportunity.
After selling, I ventured into starting new companies and am considering more acquisitions in the future. Acquiring a business is one path, but it's essential to choose one you're willing to invest effort in fixing when, not if, things go wrong.
If you believe you're buying a 'company' and not a 'job,' dispel that notion. Small businesses (SMB) are delicate; even minor setbacks can pose significant challenges. So, yes, acquiring one or more businesses is a fantastic idea – just ensure it's a venture you're passionate about building and, if needed, rebuilding.
One final note on this: The type of company you want to start or found can impact this decision. For instance, if you want to get into SaaS, then the multiples to buy one might be too high for you to feel confident you got a good deal, so it might be better to start a company. However, if you want to get into the trucking world, it might be easier to get financing to buy a company than to buy enough trucks and working capital to get the company running, so buying might be the better option here.