Often, it’s better to buy, because you start with customers and cash flow on day one. But there are 3 main ways into business, and each one can work:
- Raise funds for a start-up.
- Start one lean, bootstrapping with minimal cash, and get to profit before you grow.
- Buy one that already works (often with as little as 10 percent down through an SBA 7(a) loan).
No matter how you start, the key is building the team and systems so the business runs even when you aren’t there. I did this over 18 months starting in 2015, then took 63 days in Italy, and the business grew. It didn’t happen overnight. I had to align compensation, systems and processes, and delegate roles, not tasks.
Build your business this way, and you get to decide whether to keep it, sell it, or leave it as a legacy.
I started my first business at 15, detailing cars with the supplies in my dad’s garage. I practiced on a 1975 Chevy. I did everything by hand. Every dollar of profit went back into garbage bags, air fresheners, paper floor mats, and supplies that saved time. This was about being resourceful, learning the basics, and starting strong. It wasn’t fancy, but it taught me the essentials.
It also led to business competitions, and that’s where I learned more about income statements, balance sheets and pro formas. I won Young Entrepreneur of the Year. I spent the $5,000 prize on software and training to get a fast start in finance.
Again, I was reinvesting in myself for the next chapter. Not dollar cost averaging or locking it away in retirement plans, but building the asset that, as Walker Deibel points out in Buy Then Build, 91 percent of people worth $5 million or more own: a business.
Since 1994, I’ve started several businesses with no money, sold an Inc. 500 financial firm, bought 2 businesses with seven figures of cash (one with my own money, one with a loan), and made plenty of mistakes along the way. Here’s what I’ve learned about each path.
Why Do So Many Businesses Fail?
About half of new businesses are gone within 5 years, and about two-thirds within 10. That’s from the Bureau of Labor Statistics. It sounds like bad luck, but it follows a pattern.
An early fix: set up a company instead of operating as a sole proprietor. That removes unlimited personal liability, sets things up right from the start, and increases your odds of success.
Next, focus on cash and cash flow, and plug the hidden leaks that drain it. The typical small business holds only 27 days of cash, according to the JPMorgan Chase Institute. Most failures come down to 3 things: cash, the wrong model, and making the big decisions alone.
What speeds up every path is what I call the Accelerator Method, and it’s a big part of the different path to wealth for entrepreneurs. Skip it, and the lessons get expensive.
Hire expertise, avoid making every mistake yourself, and don’t go it alone. The Accelerator Method has 4 parts:
- A mentor asks you questions to find your path and your model, and to get clear on your vision.
- A coach tells you how to get there once you know what you want.
- Systems turn an idea into a business, get you beyond effort, give you more support, and create something sellable. AI makes them cheaper and faster.
- Accountability keeps you moving. People pay attention to what they pay for. Make commitments, keep them, stay in momentum, and share your ideas instead of keeping them to yourself.
How Does a Business Actually Create Wealth?
A business can pay you 3 ways at once.
It grows in value, because a business is worth a multiple of what it earns.
It pays you cash flow while you own it.
And with the right structure, it’s tax efficient.
The balance sheet is what the business owns. The income statement is how you benefit from it: what comes in, what goes out, and what remains. Cash flow, the net income, is what you actually keep, and reinvesting it buys more of what earns.
When you have assets that create income, you’ve connected your balance sheet to your income statement. When you manage your liabilities, you transform your expenses:
- Remove destructive expenses.
- Manage lifestyle expenses. Don’t let lifestyle creep get you, and don’t borrow to consume.
- Address protective expenses: insurance, asset protection, and cash on hand.
- Increase productive expenses.
That means you don’t see every liability as a problem. Some are a way to access an asset. And you don’t let assets sit around. You turn them into cash flow.
The balance sheet is the muscle. The income statement is the blood flow. Grow both, because without flow, the muscle dies. That’s what happens in a tough economy. If you don’t have liquidity, you suffer, you sell assets at a loss, and you realize your balance sheet is BS if it can’t be converted to cash and cash flow.
In 2012, I wanted my wife to know she was the priority. That meant less time in the business, and we might not have been ready for me to step away yet. We were still building the team, the systems, the marketing, and the fulfillment.
So we focused on margins instead of revenue. We raised prices, removed old programs, and cut what wasn’t earning its keep. Revenue went down, and I still took home the same money.
That gave my team time to mature, grow, and learn to do more on their own. It was a step toward a summer in Italy, and one of the most memorable years of my life. I was home so much my wife started to worry. Are we going to be OK? How is the business? We focused on the team, got lean, and got clear on what was worth it and what wasn’t.
That’s what knowing your margins and your fixed versus variable costs can buy you: time, life, and a real business.
How Do You Start a Business With Little Money?
My friend Rich Christiansen has founded or co-founded 51 businesses, built 16 into multimillion-dollar companies, and sold 19. He says each one started with $10,000 or less.
His Zigzag Principle says you don’t go straight at the big goal. You zig to profit first, then zag to add resources, then scale, and repeat. In his book Bootstrap Business, written with Ron Porter, a $5,000 start grew to about $1.2 million in a year.
Years ago, many people on our list didn’t own a business yet. That’s when I met Matt and Jason at Amazing.com. They showed people how to start a business on Amazon for about $5,000. We had clients make six figures, some seven, and a few exit for seven figures.
One client sold CrossFit equipment. She paid $5,000 for the program, built the store, and later sold the business for seven figures. Very little capital, and a strong return. Results like hers aren’t typical, and they took real work.
How Do You Pick a Business Worth Owning?
Harvard professor Michael Porter found 5 forces that decide who keeps the profit in any industry. The stronger each force, the less profit is left for you. Ask these before you start or buy:
- New entrants: could someone copy you in 90 days with $10,000?
- Suppliers: if your top supplier raised prices 20 percent, could you walk away?
- Buyers: does one customer bring in more than 20 percent of your revenue?
- Substitutes: what else solves this problem without anyone in your industry?
- Rivalry: do your competitors fight mostly on price?
When rivalry is low, barriers are high, substitutes are few, and customers and suppliers are many, you have a business worth owning. That’s why the quiet ones, like pest control, HVAC, self-storage and property management, build quiet fortunes.
When Does Buying a Business Beat Starting One?
Often. People will put 20 percent down on a rental that nets $300 a month, and never look at a business they could buy for 10 percent down that nets $200,000 a year.
My friend Walker Deibel wrote Buy Then Build. His point is simple: buy something that already makes money, then grow it. And the timing is good. About 2.9 million U.S. businesses with employees are owned by people 55 or older, and only 13 percent of business owners have a formal exit plan.
The partners matter as much as the numbers. This month a client walked away from a partnership where the numbers worked, because the partners didn’t. And this week I helped a Wealth Builders Club member structure a merger the right way.
I’ve done partnerships right. Engenuity, my first business, lasted for years, until my partners died in a plane crash. I have decades-long relationships with Tanner, a CPA, and Andrew, an attorney, who bring capabilities I wouldn’t otherwise have to serve our clients. We have a clear path, clear objectives, different abilities, and a great plan.
And I’ve done partnerships wrong. As a recovering people pleaser, I was a doormat sometimes. I did the work and shared the reward. I avoided the tough conversation. I started with excitement and no clarity. I partnered with people who were better as employees or consultants than as partners.
Those were expensive lessons. All the signs were there, but they felt like light feathers to the face instead of a brick to the head. Pay attention: people will show you who they are, so see them. They’ll tell you who they are, so listen. The manipulators don’t even know they’re manipulating. They do life the way they were taught as kids, and many never grow up.
Create your standards, deal with the details before the deal, and know your value before you give too much away.
How Do You Build a Business That Runs Without You?
It started when my wife said she wanted to spend a summer in Italy. When she said it, a shiver went down my spine. It wasn’t excitement. How could this be possible? How would we do that?
It triggered scarcity, and a belief that no longer served me: my business runs because of me, and if you want something done right, you have to do it yourself. Here’s another way to see it: if it’s worth doing, it’s worth delegating. The scarcity ran in my family. My family left Italy because they couldn’t afford to live there, and now I was going to go play there for a summer. What!
In 2015, I found the courage to tell my partners I wanted to spend a summer in Italy with my family. We booked the villa 18 months out, and the team built toward it. In 2017 we spent 63 days in Tuscany, and it became our highest income year to that point.
Delegate, don’t relegate. Collaborate instead of grinding. Build your team, not just your task list. Get clear about what you do that others can learn, and hire. There is a way.
Here’s what changed in those 18 months:
- Marketing that worked without me: paid ads, book offers, and upside for the marketing team. The book offers turned out to be our preparation for COVID, and they saved us when all my speeches got canceled.
- Team compensation: people on salary took a lower base plus a percentage of the campaigns they ran. Within 12 months of my leaving for Italy, their pay went from $125,000 or $175,000 to $500,000.
- Project management: Bobby owned sales, Mat owned marketing, and we ran a weekly cadence that I slowly stepped out of and delegated.
- Delegated roles: I went from teaching all 3 days of our workshop to only day one. When I was in Italy, the team ran the whole thing and still closed two-thirds of the room.
- Management by Objectives: the firm had 5 objectives, every person had their own 5, and we were clear about who did what.
At first, when I was away, I couldn’t relax. How will they do? Will they get enough leads? It took about two and a half weeks, and the team figured it out because they had to. When they did, I finally had my first Aperol spritz and celebrated at an Elton John concert. It was a new level of relaxation, and a breakthrough in my production when I came back refreshed.
When Is Selling the Right Move?
Most business owners sell once, and the buyer has done it many times. Rob Follows founded STS Capital Partners to sell businesses to strategic buyers, and those buyers pay for what the business is worth to them. Rob sold his first company at 29, then learned the buyer would have paid 3 times more.
When several strategic buyers bid, instead of one firm trying to get the best deal, you find the buyer with the most upside. Rob’s process is worth a look if you’re selling.
Still, I only recommend selling a business you don’t love, or one that isn’t what you really want to do.
My view: the best outcome is often a business that runs without you and pays you. Then you can keep it and leave a living legacy. Retire in the business, not from it. When you sell what you know best, you risk that money by investing in things you know less about.
I lost some of the money from my sale, mainly out of boredom. I tried to impress my kids by buying a Steve Aoki NFT that came with the chance to write a song with him. I got the song, and I lost the money.
Having a purpose so big you can dedicate your life to it, and a team that can work with or without you, is the magic. If you do sell, sell on your terms, with someone in your corner who’s been on both sides.
Where Do You Go From Here?
Pick your path: start, buy, or build what you have to run without you. Then get the Accelerator around you before the lessons get expensive. I’m bringing Rich, Walker and Rob into Wealth Builders Club to teach their part live. The link is on my profile.
So here’s my question for you: if you could start, buy, or step back from a business this year, which would you choose, and what’s stopping you?
In prosperity,
Garrett Gunderson
Frequently Asked Questions
Is it better to start a business or buy one?
Often it’s better to buy, because an existing business comes with customers and cash flow on day one. Starting lean can work well too, if you get to profit before you grow. The right choice depends on your cash, your skills, and your Investor DNA.
How much money does it take to start a business?
Less than most people think. Rich Christiansen says each of the 51 businesses he founded or co-founded started with $10,000 or less. The key is getting to profit first, then using that profit to grow.
Can you buy a business with 10 percent down?
Often, yes. An SBA 7(a) loan can finance a business purchase with at least 10 percent equity from the buyer, and a seller note on full standby can cover up to half of that. You and the business still have to qualify, so confirm current rules with an SBA lender.
What are Porter’s five forces?
Michael Porter’s five forces are new entrants, supplier power, buyer power, substitutes, and rivalry. The stronger each force, the less profit is left for the business owner. A business worth owning faces weak forces on most of them.
How do you make a business run without you?
Align team compensation with results, give people roles instead of tasks, run a clear project management cadence, and set objectives for the firm and each person. It took Garrett 18 months of preparation before his 63 days in Italy.
Not ready to build yet? Start by keeping more of what you already make. Most business owners lose 10 to 20 percent of what they earn every year to four leaks: taxes, interest, investment fees, and insurance.
