About this episode: This week we have Davis Austerberry on as a guest. Davis has amazing insights into acquiring businesses. In this episode, we’ll talk about how he bought a pharmacy business, lost $50k on the deal, but still is earning a full-time income on it. We’ll also dive into why acquiring a SaaS business is one of the hottest trends in investing and private acquisition. There is so much knowledge here for anyone interested in buying a business, either a traditional business, real estate, or digital.
- Davis bought a pharmacy in his first private equity acquisition.
- His next business will be acquired using the search fund model.
- The Search Fund Model essentially allows young entrepreneurs the ability to buy businesses with the funds from other investors.
- The pharmacy he bought into wasn’t in the best condition and thus got it at 2.5-3x EBITA multiple.
- If you buy a deal through a broker then it’s probably already bad since they’ve shopped it around to all of the other buyers.
- The best way to find a deal is to find it directly, which means you must reach out to owners and ask them if they are willing to sell.
- In buying a business, if there is less money going out than in, there are no problems.
- Usually, when buying a business you’re paying a multiple of whatever the EBITA of the business is.
- Real estate is a tried and true method for building wealth.
- Davis says that the value-add real estate deals have the best cap rates in this type of market. That value add strategy is called BRRRR.
- Investing in tech requires much less capital compared with real estate.
- SaaS is still a space where there’s still room to buy and grow because there are so many good entrepreneurs in tech that simply get bored.
- His pharmacy is a semi-passive business. It doesn’t require work every day, but there is occasional work finding a new employee, dealing with doctors, pipes bursting, etc. He’s currently running it with less than 4 hours a month to it.
- The number of advice Davis as to get started on your indie journey is to find someone who’s done it before who isn’t too far away from where you are, and have them help you.
- Stop wasting your time on things you hate to do.
- How hard you work is the only thing you can control.
- The Search Fund Model: How To Become A 28-Year-Old CEO: https://www.forbes.com/sites/vanessaloder/2014/08/07/the-search-fund-model-how-to-become-a-twenty-six-year-old-ceo-if-youre-willing-to-kiss-frogs/#1b1f33701190
- The Investor’s Guide to the BRRRR Method: Buy, Rehab, Rent, Refinance, and Repeat: https://www.biggerpockets.com/blog/brrrr-strategy-real-estate-investing
- “The tech entrepreneurs are the real estate moguls of today.”
- “You make your money in concentration, you keep your money in diversification.”
Intro Song: Joakim Karud – Rock Angel