🔑 Want to build an empire? Here's why you should start small
Welcome to The Business Buying Academy with Sieva Kozinsky. Here's what we have in store for you today:
- A $900 acquisition is now a $5 billion empire
- Don't make this mistake
- A masterclass on buying businesses
🔑 Why buying a small business is a wealth hack
One of my favorite stories about buying businesses:
My friend paid $100k down to buy a business a few years ago.
He pulled out $300k in the first 3 months alone.
Of course, this isn't the norm.
But it's also not unique.
I know dozens of people who have achieved similar outcomes buying small businesses.
While you might be paying 20x earnings to buy stock in a public company, you can buy a small business for 1x to 3x annual earnings - or even lower.
These aren't perfect businesses (no one is selling an amazing business for $100k).
But a $100k business can be a perfect place to start to build up cash flow as you work your way up to buying larger businesses.
I want to show you an example of a business acquisition that started small, but is now a massive cash cow:
75 years ago, two brothers borrowed $900 to buy a pizza shop in Ypsilanti, Michigan.
The shop, called Dominick's, was struggling.
One of the brothers, Tom, focused on simplify the pizza making process and speeding up deliveries.
A few years later, the business was doing so well that others wanted to franchise the concept.
Today, it's known as Domino's.
Today, the company does nearly $5 billion in annual revenue with over 21,000 stores.
Fun side note: Domino's is more innovative than many tech companies. They invented several staples of the pizza business, including the modern pizza box, the car-top sign, a pizza bag that plugs into an outlet to stay warm, and many others. They even have a lengthy innovations page on their website.
My point is that deals don't have to be huge to be life-changing.
A few months ago, I sat down with a business buyer named Chris to talk about how he bought, grew, and sold a local flooring business.
It was a relatively small deal ($1.7 million) - and he only put in around $100k himself.
But the deal changed his life.
He grew the business, doubling EBITDA over 3 years, and sold it.
Chris 24x'd his initial capital.
If you want to listen to my full conversation with Chris, you can watch it on YouTube or listen to it on Spotify.
Lesson: You can build an empire by starting small. Find a business or asset that could be run more efficiently, buy it cheap, and then get your hands dirty improving it.
🔑 Don't make this mistake when buying a business
Buying a business without getting a quality of earnings report is like buying a house without a home inspection. You’re taking a big bet without knowing what you’re buying, and it could be a disaster.
Even if the seller gives you all their financial statements, they often have very bad bookkeeping.
So, what should be in your QOE and financial due diligence package? Here's what today's sponsor Appletree says about their QOE reports:
✅ Proof of Cash
Are revenues real? We rebuild the last 1-2 years using bank statements to verify that reported earnings arrived in the bank account.
✅ Addbacks That Actually Make Sense
We normalize SDE or EBITDA with logic, not wishful thinking. The hand-waving. No “adjusting away” real costs just to make numbers look better.
✅ Working Capital Analysis
Avoid the “Post-Close Surprise” where you’re suddenly short $150k in working capital. We calculate what the business needs to operate smoothly.
✅ Forward Looking Projections
We model post close cash flow and debt service coverage under flat, growth, and decline scenarios – so you know how risky the deal really is.
If you’re sending out LOI’s or nearing a deal, don’t go in blind. Talk to Appletree for a pragmatic, thorough Quality of Earnings report – built by people who’ve bought businesses themselves.
🔑 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.
Have a great day,
Sieva
P.S. - Are you hiring? Get started with top global talent from Somewhere (I'm a customer and investor)
Disclaimer: nothing here is investment advice. Please do your own research. The information above is just for information and learning.
