🧰 Building A Cash-Flow Empire

Good Morning! This is the Capital Letter. Every week we give you:

• A Playbook 🧰: You get a tool from a top entrepreneur or investor. Use it to start a business, grow yours faster, or get promoted.

• The Money Guide 💰: Guests share 1 business opportunity you can pounce on, how they make money, and their investment strategy to build wealth.

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Hey, Hey 👋!

Today you will learn how Taylor Wallace “accidentally” bought 2 doggie daycares in the last 18 months after 10+ years in tech and Venture capital.

Many entrepreneurs believe the only path is to try and build a Unicorn tech company. The reality is that the odds are low, and burnout can be high. It turns out there are other ways.

Big Opportunities In Small Business

Local markets are filled with profitable opportunities ranging from mismanaged businesses to unmet market needs.

In 4 minutes, you’re going to learn:

• How Taylor sourced, financed, and grew his first acquisition

• A business hack to learn more in 1 day than most do in 6 months

• The exact no-code tech stack Taylor and his team use to run their operations seamlessly

Taylor Wallace - Building A Cash Flow Empire Through Doddy Daycare:

Taylor cut his teeth in the tech start-up world, thinking he had to go big. After accidentally buying 2 dog hotels, he quickly realized he could drive profit and positively impact local communities.

• Started working for start-ups at the ripe old age of 21

• Exited with a licensing deal at 27

• Bought a one-way ticket to Berlin and became a consultant nomad

Paws ‘N’ Rec, a Doggie Day Care, is Taylor’s business of choice, but this playbook will work for any local business.

Let’s dig in.

The Vertical SMB Acquisition Playbook

Here’s the step-by-step process to get started:

1. Pick Your Geographic Area

2. Pick Your Niche

3. Become The Expert

4. Source The Deal

5. Get Your Financing In Order

6. Build & Run A Growth Playbook

Let’s dig in!

Step 1: Pick Your Geographic Area

If the goal is to impact a community, you need to know where you want to plant your flag. This isn’t just a preference play for a fun place to live. You can look for specific needs in that area and fill them. Knowing where your business will be located helps determine if you want to buy or build.

Taylor’s geographic choice resulted from his business partner working in a local doggy daycare facility. He knew the staff, SOPs, and market quirks. This made acquiring the business an attractive situation which Taylor took advantage of.

Step 2: Pick Your Niche

Now that you know where you will be, pick what you will do. What service, product, or experience will be a great fit for your new market? The key component here is expertise. If you do not personally have the skills and knowledge for your offering, make sure that you are partnered with someone who is incentivized to grow the business. Be prepared to give up equity. Otherwise, you will be held hostage by an employee who knows you don’t know what to do if they leave.

Taylor didn’t know much about the day-to-day operations of a doggy daycare, but his college roommate knew all there was to know. Combine this fact with Taylor’s business acumen, and you have a powerful match.

Step 3: Become And Expert

Once you know what you will sell, do market research on how other people are selling it, franchises are an excellent resource for this. They want to sell you on purchasing a franchise, so these companies will have done a lot of the legwork for you. If you compare franchises in the same space, you can get a good framework on best practices and financials. Best of all, it's free (just be prepared for the constant sales pitch and endless email inquiries).

Before deciding to go the acquisition route, Taylor explored purchasing a doggy daycare franchise. This experience was invaluable for figuring out that the franchise route was not the way to go. More importantly, Taylor and his partner did not see anything in this discovery phase that they felt they could not do at the same level or better.

Step 4: Source The Deal

One way to source your first deal is to connect with someone currently looking to sell. This has the advantages of typically a broker being involved who are incentivized to move the deal forward and force a decision. The financials and other relevant information have already been put together. Popular websites to source deals are BizBuySell.com and WithKumo.com. A secondary option is to find an existing business and persuade the owner to sell. This has a lower success rate and can be more expensive as your offer has to generate demand that isn’t already there.

Taylor’s first and second deals are based on his contacts. His business partner worked at their first location, and their second location came from information in his network. In both cases, Taylor and his partner had to persuade the owner to sell. Once they felt comfortable with the model, they built the third location to see if it would be cheaper than acquiring.

Step 5: Financing

Many people go the SBA route, which can cover about 75% of the cost of purchasing a new business if the financials check out. The drawback to this method is it takes a long time, there is a ton of paperwork and typical bureaucratic headaches.

Taylor went the road less traveled and acquired private debt to fund his first acquisition. Now that the cost of borrowing is rising, he and his team are looking more seriously at the equity option.

Step 6: Document Your SOPs & Dial-In Your Tech Stack

Once the business is up and running, write down everything from the latches on the doors that work the best to the flows on your CRM. The goal is to have a standard operating procedure so that everything proceeds smoothly when you build a new location or turn one over. Done correctly, this makes your business portfolio more valuable and can present franchising and licensing opportunities.

Taylor’s NoCode tech stack allows him to scale sales, customer service, and marketing across new locations. He utilizes Active Campaign, Airtable, Notion, Zapier, and a specific doggy daycare CRM called Ginger for seamless revenue operations.

I hope this got you thinking. I'll See you next week!