Welcome to The Business Buying Academy with Sieva Kozinsky. Here's what we have in store for you today:

1. How he bought a $2.8 million business
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2. Want to reach the Business Buying Academy audience?
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3. Learn to do roll-ups from a pro

This made our lives so much easier...

If you run a holding company like I do, then you know how difficult it can be to stay organized.

One of the biggest challenges: Managing dozens of different bank accounts across our portfolio of companies.

Our Director of Finance, Nick, used to spend hours logging into different bank portals just to keep track of our cash balances.

Then we found Vesto. It pulls in every account-across every bank-into one dashboard. Real-time balances, cash flow, transactions. No more jumping between logins.

Now Nick handles it all in under 5 minutes. That means more time spent on cash strategy, less on admin.

👉  Check out Vesto here​

(Thanks to Vesto for sponsoring this newsletter.)

🔑 I talked with a guy who bought a $2.8 million business...Here's what he told me

Last week I chatted with Dave Gilbert, a guy who started a holding company a couple years ago.

He's already acquired two multi-million dollar businesses in a little more than two years.

First, he bought an accounting business.

And then he bought an engineering firm last year.

I dove deep into his acquisition of the first business to figure out how he found the deal, how he structured it, and what lessons he learned.

Let's dive in:

How he found the business

Dave emailed hundreds, maybe even thousands, of accounting firm owners.

Many of them replied.

And he met with five or so a week for an entire year (that's about 150 meetings with business owners).

This helped Dave in two ways:

• Created a pipeline of business owners who wanted to sell. Not every business owner wanted to sell right then- and he wasn't interested in every business after the meetings. But several of them were great candidates to buy. Dave built himself an intriguing menu of options.
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• He learned the ins-and-outs of the accounting business. Now Dave had hundreds of reference points for how accounting businesses operated. Some were struggling, while others were crushing it. Dave started to learn the nuances of how these businesses operated as he met with more owners.

Cold email tip: Make sure to personalize the email - and include information about yourself. Dave included details about himself, such as his professional background, family, and hobbies. He found that having something personal to connect over made it easier to get meetings with these business owners.

How he structured the deal

Dave bought the business for $2.8 million (but he didn't pay that much upfront).

The deal included:

• Down payment from Dave and his partner
• Equity contributed by outside investors
• SBA loan
• Seller note

This is a pretty typical structure for an SBA acquisition.

It's common for the SBA loan to make up a majority of the capital stack in a transaction this size, with the operator/buyer and their investors owning all the equity.

Dave says that it wasn't difficult to raise money from investors.

He said that if you find the right deal, capital is easy to come by.

How he grew the business

Dave and his partner ran into several problems in that first year, including:

• Lost 50% of their employees in the first year
• Two of their biggest clients spent less money with them
• Several hiring mistakes

If you know anything about buying SMBs, you'll know that those problems are pretty typical.

It's all part of the J Curve

The J curve effect in the context of buying a business refers to the pattern of initial decline followed by a significant improvement in the performance of a business after its acquisition

Despite the hiccups, Dave and his partner grew the business by about 10% in the first year.

And they're on track to grow even more in the second year.

How?

They made the painful decisions quickly.

Dave restructured many of the employees' roles to make the company more efficient. Many employees decided to leave because they didn't like their new roles, which Dave accepted as a necessary loss for making the company more efficient.

Those are only a small portion of the lessons Dave dropped in our interview.

If you're interested in hearing the full conversation, watch it on YouTube or listen to it on Spotify or Apple Podcasts.

You're about to hire an elite executive who will take your company to the next level...

But you have one question.

How should you structure their compensation?

This is one of the trickiest parts of running a great business.

Incentives drive behavior...and if you don't have the right incentives in place, even the most talented employees won't produce great results.

In a couple weeks, Nick Huber and I are going to give our best tips for creating compensation plans, setting growth targets, and retaining your best employees for the long-term.

We'll also answer audience questions at the end. Make sure to reserve your spot below.

​Register Here​

🔑 Market your business to Sieva's Business Buying Academy audience

We began testing with our first advertisers this year, and it turns out this community is incredibly engaged. With 70,000 operators, investors, and "acquisition curious" reading this letter each week, we were able to drive real business for everything from Vesto (treasury management platform) to Mainshares (sourcing investors for SMB acquisitions).

We are looking for a couple new advertisers to partner with in the 2nd half of the year, as we launch a few new products.

Interested in marketing your business to this audience? Just respond to this newsletter and say hi.

🔑 Learn to Buy Businesses (this is a masterclass on M&A, Rollups, and Negotiating)

I chatted with Brian Wolfe, an expert on M&A from all levels: he worked as a partner at a big law firm for 17 years, helping to close huge deals.

Now he's buying businesses himself - including a rollup of 3 software businesses that he sold to private equity. He even bought one of them for 100% seller financing with some clever negotiating tactics.

This interview is a masterclass on buying businesses.

​Watch on YouTube​​

​Listen on Spotify​​​

​Listen on Apple Podcasts​​

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Have a great day,

Sieva

P.S. - Are you hiring? Get started with top global talent from Somewhere (I'm a customer and investor)

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Disclaimer: nothing here is investment advice. Please do your own research. The information above is just for information and learning.

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