Find a retiring boomer with a good business.

There’s millions of them at the moment.

Cant find buyers because things like HVAC ain’t “sexy” enough.

And the $1-$5M range isn’t big enough for investors.

They’re therefore open to offers with small down payment + deferred https://twitter.com/ROGUEWEALTH/status/1333915647915462656

So:

Find a business doing $3M in revenue with a tired, worn out owner.

The operating profit is likely to be significantly less than $1M for a business that size.

That’s important because a business valuation is generally the operating profit X a multiple (2-5x typically)

Let’s just say the operating profit is $500k.

If you use a multiple of 3 then the valuation is $1.5M to buy it.

The company has assets which you can use to finance:

- Property
- Machinery
- Receivables
- Inventory

Etc

Use those to raise money for the deposit.

You raise $500k from financing the assets.

You give that to the owner as the down payment for buying the business.

You then agree to pay $1M over 3-5 years.

This then comes from the money you make from the company you buy itself.

So you acquire a company doing $3M in revenue by paying $500k which you raised from the assets of the company itself.

You now need to service that debt, as well as the debt you owe the owner.

Obviously you check financials were strong enough to cover it before making the deal.

But this is where it gets interesting:

Boomer businesses make money from the old way of doing business.

Referrals and relationships.

Most of them stopped actively marketing a long time ago!

They’re outdated in terms of tech, systems and processes.

So when you take over, you get to work:

- upgrade systems & processes
- rocket fuel with online marketing

This will immediately boost the numbers, giving you ample money to service the debt and make a decent profit.

Note:

Some owners are so worn out, they are prepared to give the business away for free.

Why would they do that? Makes no sense.

Because...Legacy.

They’d rather see their business of 30-40 years carry on than die.

If nobody buys = liquidation.

More importantly...

...they’ll have staff that has been loyal.

Closing company means loyal staff of 10+ years being made redundant.

The survival of the company therefore is more important than them pocketing a huge profit.

You can also use an earn-out.

What’s that?

If the company is valued at $1.5M say you’re willing to offer $2M...

...but the extra amount is only to be paid if the business hits a certain number in profit after you take over.

In other words, you only pay if the company performs

Point being there are ways to find a GOOD company, without putting in a huge investment.

Ultimately it comes down to relationship building and creativity...and then finances.

Everyone just believes it’s about finances when buying a business.

It’s not.