Everybody wants to know: “Walker, how do I reduce risk and still get a solid return when I buy a business?”

It’s the age-old question of investing. High risk, high return. Low risk, low return. So where does buying a business fit in?

Let’s break it down.

 

A Real-World Example: When I Walked Away

A few years ago, I was in a proprietary deal with a guy who owned a solar installation company. They had big projects and Fortune 500 clients. Architects, installers, engineers, sales teams – you name it. I’d been introduced through a mutual contact, and I was really excited by this deal. I love energy, and I’d been wanting to get into the space.

So I reached out and said, “Look, I hope this doesn’t come off as too bold, but I’ve bought a number of companies before, and I’d love to talk about what it might look like to work together.”

One thing led to another, and soon we had a high-level agreement. I was introduced to his team as a consultant and given full access to the business during diligence.

And what I found was… not good.

The company was bleeding cash. Not because it didn’t have customers – but because the cash conversion cycle was killing them.

 

Source: Analyst Prep

 

These were massive contracts with big-name companies. But the customers delayed payments by 60, 90, even 120 days. Meanwhile, the business had to front-load labor, pay contractors, and buy equipment.

Every time they sold something, they lost money. The gap between cash out and cash in was too wide. It didn’t matter how great the top-line revenue looked. They were never going to be profitable without fixing the cycle.

For me, that was a dealbreaker. I got out.

But – and here’s the key – if someone had spent 20 years working in corporate procurement, knew how these Fortune 500 accounts worked, and had relationships to accelerate receivables, that person could have fixed it.

For them, the deal wouldn’t have been high risk. It would’ve been a huge opportunity.

Alternatively, I could have bought the company and hired that person to run it.

The business wasn’t bad. It just wasn’t a fit for me. And that distinction matters more than people realize.

 

Risk vs. Return: Let’s Visualize It

Let’s plot this out.

Imagine a graph. On one axis, we’ve got risk (low to high). On the other, return (also low to high).

If you plot all the different kinds of investments – T-bills, real estate, startups, public equities – it would form a line that looks like this:

 

 

But what we’re all really trying to do is find the sweet spot: low risk, high return.

That magical top-left corner of the graph.

 

Two Approaches to Business Buying

Now, let’s talk about how buyers approach this in practice.

 

Approach 1: Minimize Risk First

This is the institutional approach. Think traditional search funds – especially the ones coming out of Harvard and Stanford.

These searchers are usually recent MBA grads backed by investors. The investors aren’t operating the business, so their #1 goal is to protect downside.

Their criteria checklist is airtight:

• Stable, predictable cash flows
• Recurring revenue
• No customer concentration
• No capital intensity
• No labor intensity
• Low economic correlation
• B2B services
• Clean financials
• Growth potential

 

In other words: the perfect business at the perfect price, with zero hair on it.

Except… here’s the thing.

These businesses are unicorns. When I’ve spoken to M&A advisors and described what traditional searchers are looking for, they laugh. “If I ever found a business like that, I’d buy it myself.”

It’s like someone saying, “I want a 4,000-square-foot house with eight bathrooms and a huge backyard for $125K.”

Good luck.

The point is: this strategy is engineered by investors. It’s not about the operator. It’s about protecting capital.

If that resonates with you, that’s fine. But in my experience, it’s not where the biggest upside lives.

 

Approach 2: Run a Platform Company

Let’s talk about platform companies – but not the way private equity defines them.

In private equity, a platform company is the first one they buy in a vertical so they can bolt on more later.

That’s not what I’m talking about.

I’m talking about your platform. The business that aligns with your skills, your experience, and your ambitions.

 

 

When you buy a business that’s a platform for you, you reduce risk not because the business is inherently low-risk – but because you are uniquely equipped to run it.

The business might be risky for 99% of people. But if you’ve got the right mix of skills, background, and drive?

You de-risk it the minute you walk in the door.

And often, those are the businesses priced at a discount.

 

The 3 A’s: Attitude, Aptitude, and Action

Here’s how to know if a business is your platform. It comes down to three A’s:

 

 

1. Attitude

Do you have the mindset to be an entrepreneur?

Can you make decisions with incomplete information?

Are you comfortable with ambiguity? With taking action even when the path isn’t totally clear?

If not, this path might not be for you. It’s not about being fearless – it’s about being willing to walk forward anyway.

 

2. Aptitude

What are you good at?

Are you a revenue generator (sales, marketing, growth)? Or a profit maximizer (operations, execution, finance)?

Most small businesses need both. But knowing your strength helps you find the right fit – and hire the right complement.

When I bought my distribution company, I did it because I saw a simple change that could unlock huge growth: update the e-commerce storefront, replicate it across all locations, and scale.

That was my aptitude.

 

3. Action

What do you want to do every day?

Do you want to be in the field or behind a desk?

Do you want to sell? Operate? Build?

Running a business isn’t just strategy – it’s work. And you need to be excited about how you’ll spend your time.

 

Your Edge Isn’t in the CIM

Back to that solar deal.

The reason I didn’t move forward wasn’t because the business didn’t have potential. It was because I wasn’t the person to unlock it.

But someone else could have been. And that’s the point.

When you find a business where your attitude, aptitude, and action align – you are the thing that makes it low risk.

You’re not buying perfection. You’re buying potential – and you’re the one who brings it to life.

That’s where the upside is.

And that’s how you find high returns without taking on unnecessary risk.

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.