A common question I get in the Acquisition Lab is, “Walker, I’ve found a business I like, but it needs skills I don’t have. Should I go for it?”

If this is your first time buying a business, you might look at a business and wonder if you have the skills to run or grow it. 

Do you buy it and learn as you go, or do you skip it because you don’t have adequate experience? 

To answer that, I’m going to share my philosophy, personal experiences, and some frameworks. I’ll talk about the roles that were worth me taking on and which ones weren’t, so you can start to delineate what challenges are worth taking on for yourself. 

 

Tale of Two Cyclists

 

But first, let me start by sharing a story. 

When I was in my 30s, I was an avid cyclist and competed in a number of road races. I was actually the Missouri State champion in 2010.

The point is, I spent a lot of time on bicycles – about 20 hours a week riding and racing. When I wasn’t on the bike, I was in the bike shop, because that’s what people do when they’re hooked on a hobby – they live and breathe it. I always loved being at the bike shop, checking out all the gear, talking to the mechanics, and hanging out with other cyclists.

Having spent a lot of time at the bike shop, I started to notice two types of buyers. 

The first type would come in, say they were at level four, buy a level four bike, and leave. 

The second type would come in and say something like, “The only reason I’m not Lance Armstrong is because I don’t have his $10,000 carbon fiber bike. So that means, if I buy his $10,000 carbon fiber bike, I’ll be Lance Armstrong.” To the bike shop owner’s delight, they would buy the bike and leave too. 

 

Source: Singletracks

 

There was a key difference between the two buyers. 

The first type knew their current level and bought a bike that matched their skill level. However, the second type believed that acquiring top-of-the-line gear would transform them into elite cyclists overnight.

The first type of buyer invested in a bike that allowed no room for growth, while the second type was overly ambitious and unrealistic. 

When it comes to buying a business, the ideal mindset is somewhere in between. It’s about finding a balance between your current capabilities and your potential for growth – ensuring you don’t stay completely within your comfort zone or aim for light-years away from it either. 

Here’s an example from the first company I acquired. 

 

Managing 45 Employees While Delegating HR

 

Back in 2006, I had a full-time job in sales, but I was looking at buying a business. My next career move was supposed to be running a region or a specific division, where I’d have two dozen direct reports, but instead of climbing the corporate ladder, I went rogue and started buying companies instead – starting with a printing company. 

Now, at that point of my career, I’d never run a division, let alone multiple divisions, but the printing company had over 45 employees. That was almost double the number of employees I was going to manage in my current job. 

I’d never run a team or company of that size, and handling HR tasks wasn’t something I was interested in. Luckily, this business already had an HR director, and I was able to simultaneously manage her and learn from her in terms of how to manage the teams and the company as a whole. 

Although I hadn’t managed that many employees before, the prospect of having 45 employees wasn’t overwhelming; it felt manageable and like the next step in my journey. 

Now, if the company had 450 employees, I probably would have thought differently, but with 45, it felt like something I could handle. 

The growth opportunity of the printing company was another reason I decided to purchase it. There was a clear market opportunity to build out a new product line and launch it to the customer base. Even though I didn’t have experience with that either, it still felt doable and within my reach. 

 

Have a Growth Mindset: Learn By Doing

 

I often talk about Carol Dweck and her book Mindset: The New Psychology of Success. 

If you haven’t read the book, the premise is that there are two types of mindset: fixed and growth. With a fixed mindset, people assume they already know the outcome of their efforts. On the other hand, with a growth mindset, people believe they can cultivate capabilities they don’t already have with the right amount of time and effort. They are focused more on the journey of learning and growing than they are the specific outcome. 

 

Source: LifeHack

 

This mindset is a big element of what it takes to be a successful entrepreneur because you need to believe that you can solve whatever problem you encounter. If you don’t have this mindset, you probably shouldn’t buy (or start) businesses in the first place, as it’s pretty fundamental to the job.

Here are some examples where I figured it out on the fly: 

 

1. Learning to Be a Product Manager: When I bought my distribution company, I needed software experience since we were planning to build proprietary software to grow the business, but I had no experience as a product manager for a software build-out. I had worked next to one in a startup, but somehow I needed to learn how to become one quickly and on a shoestring budget. We ended up building the new proprietary software in about nine months, rolled it out to a Fortune 500 company, and then continued to use it as a selling point to get into other companies. 
2. Learning to Manage a Business Remotely: With my manufacturing company, I had to learn how to be an absentee owner, even though I didn’t have any previous experience being an absentee owner. I didn’t know how to interact with my team from a distance, and that was something I had to figure out how to do. As entrepreneurs, we tend to like having control and insight into everything, so delegating the entire company’s operation was a new challenge for me. But it felt like the next step.

 

Pro Tip: This isn’t about diving into the deep end when you’ve never been in a pool before. Remember that if you have the gist of the main roles but need a couple of specific skill sets to operate a business, part of the transition post-close should involve the seller staying on for a period of time to get you up to speed. The buyer-seller transition is helpful to bridge the gap and you’ll want to be sure there’s an agreement about the nature of this transition included in the closing documents. That said, you shouldn’t be in a position where you’re relying on the seller to teach you everything about the business.

 

Avoid Staying In Your Comfort Zone

 

If you’re not stepping out of your comfort zone when acquiring a business, you’re doing it wrong. If you’re buying a fencing company and you’re not slightly freaking out at times (this is normal), it’s because you’ve set the bar too low. You want to buy something you can grow into – something that pushes you. This is the essence of “buy then build.”

James Clear talks about this concept in Atomic Habits where he describes the Goldilocks Rule concerning setting goals: they shouldn’t be so attainable they bore you, but they also shouldn’t be so ambitious that you’re destined to fail. Somewhere in the middle is optimal.

This is partly why I created the Acquisition Lab. We teach the business model, provide the tools, and share the resources you need to succeed. We prepare you for the leap, but you need to understand the growth opportunities and be ready to embrace them. 

Now this is where things get interesting.

 

How to Approach Your Future Role as CEO

 

When approaching the role you’re about to take on within the company, there are a couple of rules I always keep in mind.

 

1. First, consider the pay rate for hiring someone to do the work that requires growth skills and abilities. 
2. Second, think about whether or not this is a skill set you want to have in your “forever pouch” – something you want to be doing long-term. 

 

These two factors will guide your approach.

Let’s talk about pay rate. If I need to hire a software engineer and pay them $150,000 a year to develop something, it might strain the cash flow of a newly acquired business. As the new CEO, my priorities are building safety, running strategy, and being hands-on with various tasks. I might leverage platforms like Upwork to find lower-cost talent to manage the project initially, but it wouldn’t be smart for me to hire a full-time software engineer at a salary of that rate – not at this point of the business. 

Recall Dan Martell’s “replacement ladder” in his book Buy Back Your Time: Get Unstuck, Reclaim Your Freedom, and Build Your Empire:

When you buy a business, you might envision yourself as the CEO, focusing on high-value tasks like strategy, partnerships, and corporate sales. While this is eventually where you’ll be, you can’t avoid getting your hands dirty. Like Theodore Roosevelt alluded to, the people in the trenches, with blood on their faces and dust on their hands, are the ones who get things done. They’re the ones building wealth and creating value for their customers, employees, and families. 

This is not a “buy then chill” model. (If that’s what you’re looking for, head here.)

As a brand new business owner, pay close attention to what’s happening in the business. Learn about all the little cogs in the wheel and how they function. If you’re not directly involved, have major oversight and make key decisions to understand the impact of each role. This way, you won’t have the wool pulled over your eyes as the new owner. 

Understanding how things get done and how the sausage is made in your business is vital if you’re going to grow the business without “over-delegating.” 

 

My Delegating Mistakes in the Beginning

 

When I bought my e-commerce company in 2016, I had a couple of goals in mind. First, I wanted a product that wouldn’t face any major technological innovations. That’s why I bought a toilet business. Second, I wanted a strong SEO opportunity because I saw search engine optimization as a key way to add long-term value to e-commerce and online businesses. Even though I had never done SEO before, I knew it was something that could be mastered. 

So I did. I took online courses and immediately hired out the SEO work because there were critical aspects I didn’t want to handle myself. 

My first hire was a disaster, unfortunately. I flushed $25,000 down the drain, no pun intended, without getting the results I needed.

But I knew what needed to be done and the outcomes I was looking for, so I moved on to another team, and then another. By my third team, I finally found a good fit. We’ve been working together for several years now, and our site has become one of the strongest in our segment since 2016.

 

 

Balancing Skill Acquisition and Outsourcing

 

The point is, I knew SEO was a skill set I wanted to acquire and keep forever – it was an important skill set that would serve me across many businesses. However, I also recognized that some parts of it, like the actual execution, were best outsourced. 

That said, make sure you’re not outsourcing “blindly.” You need to know what you’re outsourcing so you can select the right vendors or employees and evaluate them properly. 

As a small business owner, you’ll need to either handle or have oversight of sales, production management, product launches, and operational management, but in order to do so, you need to understand the current level of each department once you come on board. 

Are they sophisticated with robust teams? If so, pay attention to your overhead and what’s actually happening there. Was the previous owner lazy, or did they build the business for growth that you can continue? Or were the teams scrappy but underemployed, generating bigger profits for the seller before they handed the business over to you?

To recap: 

1. Understanding the state of the business so you can figure out the skills you need to operate and grow it. 
2. Decide what skills you want to keep forever and which you want to delegate. 
3. Know the pay rate associated with managing this skill set, whether you’re doing it yourself or hiring someone. 
4. Lastly, run 90-day learning cycles to deeply understand each department, one at a time.

 

So back to the original question: can you buy a business without having the necessary skills? 

Yes, absolutely. In fact, if it makes you slightly uncomfortable to consider embarking on, I recommend it. It’s all about understanding your value as a buyer and assessing the business’s needs. From there you can determine which skills you already have, which skills you can learn, and which ones you’ll outsource.

Having a growth mindset is the key to being successful as an acquisition entrepreneur in the long run. Embrace the challenges, learn as you go, and don’t be afraid to get your hands dirty. 

Ready to acquire a business in the next 12 months? The Acquisition Lab is your first stop. Reach out to us today and get on the fast track to becoming an acquisition entrepreneur.