How to Buy a Business With No Money in 2024

Summary

This video script reveals a strategy for achieving a five-figure monthly income by acquiring 'boring businesses' using other people's money. It emphasizes the low risk and high potential of this method, supported by statistics and real-world examples. The speaker outlines four ways to finance business purchases, with a focus on seller financing as the most favorable option. The script educates viewers on how to negotiate seller financing deals, positioning them as potential solutions for business owners looking to sell, and ultimately replacing their W-2 income with a profitable business venture.

Takeaways

• 💡 The speaker suggests buying 'boring businesses' as a smart way to achieve a high monthly income with a low failure rate.
• 🏆 Successful individuals like Warren Buffett have made their wealth through similar strategies, emphasizing the importance of business acquisition.
• 🚫 The speaker dismisses popular online business models like Shopify stores, Amazon FBA, or ad agencies as not being the best path to wealth.
• 💰 The opportunity to buy businesses is abundant due to a lack of buyers and an excess of businesses for sale, creating a seller's market.
• 📈 There are four main methods to finance a business purchase: using cash, bank/SBA loans, seller financing, and outside capital raise.
• 🎓 Harvard's case study indicates that entrepreneurs who acquire businesses earn more than consultants, bankers, etc.
• 💼 Most people with a net worth above 5 million dollars own their own small business, highlighting the link between business ownership and wealth.
• 📊 Small businesses are often profitable and have been in existence for a long time, making them a less risky investment than startups.
• 🛡 The main barriers to buying a business include lack of awareness, not knowing how to find or buy a business, and financial constraints.
• 💸 The speaker shares personal experiences and examples of others who have successfully bought businesses with little to no money down.
• 📝 Seller financing is presented as the most favorable method for purchasing a business, as it can require little to no upfront cash and offers tax benefits to both parties.

Q & A

What is the main strategy discussed in the script for achieving five-figure monthly income?

The main strategy discussed is buying existing small businesses using other people's money.

Why does the speaker believe buying businesses is a better strategy than starting new ones?

The speaker believes buying businesses is better because it has a lower failure rate, allows for immediate income, and is a proven method used by many successful people, including Warren Buffett.

What are the four main ways to finance the purchase of a business mentioned in the script?

The four main ways to finance a business purchase are: using cash, obtaining an SBA loan, securing outside capital, and seller financing.

Why is seller financing the speaker's favorite method for buying a business?

Seller financing is the speaker's favorite method because it often requires little to no cash upfront, reduces risk for the buyer, offers tax benefits to the seller, and allows for flexible terms.

What are the common reasons business owners are motivated to sell their businesses, according to the script?

Business owners are often motivated to sell due to the '5 Ds': divorce, departure, disability, dissolution, and death.

How does the speaker suggest negotiating a seller-financed deal?

The speaker suggests framing the deal as a way for the seller to receive annuity payments over time, thus ensuring ongoing income for the seller while the buyer takes over operations without involving banks.

What is the Lindy effect and how does it relate to buying small businesses?

The Lindy effect is the theory that the longer something has been in existence, the more likely it is to continue. This means that a small business that has been around for many years is more likely to remain profitable compared to a new startup.

What advantages does the SBA loan offer for business buyers?

The SBA loan offers advantages like the government covering up to 90% of the purchase price, which is like 'free money,' although it involves debt and less flexibility.

What challenges do people face when trying to buy a business, as highlighted in the script?

Challenges include not knowing about the opportunity, not knowing how to find businesses to buy, not understanding the acquisition process, and concerns about financing.

What examples does the speaker provide to illustrate successful business acquisitions using little or no money down?

Examples include the speaker buying an internet business for $0 down that now makes $300,000 annually, a laundromat for $0 down that cash flows $67,000 a year, and other individuals who bought businesses with little to no upfront costs.

Outlines

00:00

💼 Leveraging Boring Businesses for High Income

The speaker introduces a strategy for achieving a five-figure monthly income by acquiring 'boring businesses'. They emphasize that this method has a low failure rate and is favored by wealthy individuals like Warren Buffett. The speaker dispels common misconceptions about starting businesses and instead promotes buying existing ones, utilizing other people's money to finance the purchase. They outline four ways to overcome financial barriers to business acquisition, highlighting the current market's demand for buyers due to an abundance of businesses for sale and a lack of buyers. The speaker also references studies that show owning a small business is linked to higher net worth and that small businesses are typically profitable and have longevity, making them a safer bet than startups.

05:02

🏦 Financing Strategies for Business Acquisition

The speaker discusses various methods to finance the purchase of a business without relying on personal savings. They begin by explaining the use of personal cash, which is straightforward but risky. Next, they describe the use of SBA loans, which offer significant government support but come with the downsides of debt and a potentially cumbersome application process. The speaker then introduces the concept of outside capital, where friends or wealthy individuals provide funds, offering flexibility but requiring negotiation skills. Finally, they highlight seller financing as the most favorable method, where the seller effectively pays the buyer to take over the business through future profits, offering significant benefits to both parties involved.

10:02

🤝 Negotiating Seller Financing for Business Acquisition

The speaker provides insight into the negotiation process for seller financing, emphasizing its advantages such as requiring little to no upfront cash and offering the seller tax benefits. They share real-life examples of successful deals, including one where the buyer acquired a business with zero down payment and another that resulted in a substantial monthly profit. The speaker explains the negotiation technique of offering the seller a premium in exchange for financing the entire business purchase. They also address common objections and misconceptions about seller financing, asserting its prevalence and effectiveness in the market. The speaker concludes by encouraging the audience to consider seller financing as a viable option for business acquisition and offers to buy businesses from those looking to sell.

Keywords

💡Boring businesses

The term 'boring businesses' refers to traditional, often overlooked, and stable businesses that consistently generate profit. The speaker emphasizes that these types of businesses are a smart investment for generating steady income, contrary to popular trends like e-commerce or tech startups. Examples mentioned include laundromats and car washes.

💡Seller financing

Seller financing is a method of buying a business where the seller agrees to finance the purchase instead of requiring the buyer to pay the full amount upfront. This approach allows buyers to acquire businesses with little to no initial capital. The speaker highlights this as a preferred method due to its lower risk and flexibility compared to traditional bank loans.

💡Leverage buyouts (LBOs)

Leverage buyouts involve purchasing a company using a significant amount of borrowed money, with the assets of the company being acquired often serving as collateral for the loans. The speaker likens seller financing to LBOs, emphasizing the strategy of using other people's money to acquire businesses.

💡Small business profitability

The speaker notes that small businesses, on average, are profitable and have been for more than five years. This profitability and longevity make them attractive investments compared to riskier startups. The concept of the Lindy effect is mentioned to illustrate that the longer a business has been around, the more likely it is to continue to succeed.

💡SBA loans

Small Business Administration (SBA) loans are government-backed loans that provide funding to small businesses. The speaker describes SBA loans as 'free money' provided by the government, covering up to 90% of the purchase price of a business. Despite the benefits, such as low interest rates, the speaker mentions drawbacks like the structured process and lengthy approval times.

💡Baby boomers

The term 'baby boomers' refers to individuals born between 1946 and 1964. The speaker highlights that many baby boomers are retiring, leading to a surplus of businesses for sale and a shortage of buyers. This demographic trend creates a significant opportunity for acquiring established businesses.

💡Cash flow

Cash flow refers to the net amount of cash being transferred into and out of a business. The speaker discusses the importance of cash flow in financing business acquisitions, emphasizing that a business's existing cash flow can be used to finance its purchase, particularly through methods like seller financing.

💡Equity

Equity in this context refers to ownership interest in a business. The speaker mentions equity in relation to raising outside capital, where giving up equity means sharing ownership and profits. He contrasts equity financing with debt financing, expressing a preference for maintaining full ownership of the business.

💡Acquisition

Acquisition is the process of buying another business. The speaker outlines the steps and strategies involved in acquiring a business, including finding businesses for sale, negotiating terms, and using various financing methods. Acquiring established businesses is presented as a lucrative alternative to starting new ventures.

💡Lindy effect

The Lindy effect is a theory that the future life expectancy of non-perishable things, like businesses, is proportional to their current age. The speaker uses this concept to argue that businesses that have been around for a long time are more likely to continue to be successful, making them safer investments than startups.

Highlights

The best way to reach five figures in monthly income and hit your first $10,000 a month is by buying businesses and using other people's money to pay for it.

Many business owners need buyers because there are too many businesses for sale and not enough buyers.

You can finance a business using other people's money and there are four different ways to do it: cash, bank or SBA loan, seller financing, and outside capital.

75 million baby boomers are retiring, creating a wave of business sales opportunities.

Most small businesses are profitable and have been for more than five years, making them less risky than startups.

91% of people with a net worth above $5 million own their own small business.

Four main obstacles to buying businesses: lack of awareness, difficulty in finding businesses, not knowing the buying process, and money.

Seller financing allows you to use the future profits of the business to pay for it, and it's used in 60% of all small business purchases.

SBA loans can cover up to 90% of the purchase price of a business.

You can negotiate with sellers to finance the whole business for zero dollars down by offering a higher purchase price.

The Lindy effect suggests that the longer a business has been in existence, the more likely it is to continue to exist.

Most small businesses will not sell and will close unless they find a buyer.

There are five main reasons why business owners sell: divorce, departure, disability, dissolution, and death.

The process of negotiating seller financing involves proposing an annuity payment to the seller over several years instead of a lump sum.

Understanding how to buy small businesses with zero money down can lead to significant profits and financial freedom.

Transcripts

I'm going to tell you guys the hands

down smartest way I've ever seen to get

to five figures in monthly income and it

is the best way to hit your first ten

thousand dollars a month especially in

2023 according to me it has the lowest

failure rate it allows for income on day

one and it's how people like Warren

Buffett made his millions I know it's

not the stock market it is how the

largest percentage of people on the

Forbes 500 list made their money and yet

it is the only strategy that you and I

can do that they also do

believe me they aren't doing Shopify

stores or Amazon FBA or ad agencies no

they're not for you it all starts with

two words that I made sort of famous

boring businesses boring business boring

businesses so your first ten thousand in

monthly income or your next million can

come from one thing buying people's

businesses and using other people's

money to pay for it what if I told you

right now that not only can you do this

but owners need you to do it there are

too many businesses for sale and not

enough buyers it's not my opinion it's

just math so by the end of this video

you're going to know how to completely

replace your W-2 income by buying a

business you're going to learn how you

could finance a business using other

people's money in order to buy a

profitable business you're going to

learn the four different ways that weak

cash flow and buy businesses and there's

no better time to do this why 75 million

baby boomers 10 000 retiring a day we

are amidst these waves Harvard did a

case study of who earns more College

Consultants Bankers Etc or those who buy

small businesses yes who wins sorry

Harvard it's going to be those who

acquire businesses entrepreneurs win by

a long shot how long of a shot this long

of a shot also people who own small

businesses typically have a higher net

worth 91 of all people with a net worth

above 5 million bucks own their own

small business the next reason is the

average small business is profitable and

has been for more than five years in

fact there's a famous study called the

Lindy effect which basically means that

the longer something's been in existence

the more likely it is to continue to be

in existence except obviously perishable

Goods so owning a small business that's

been around for 10 years is actually

less risk than that startup you're

thinking about starting right now that

you're going to blow a bunch of money on

you're going to spend a bunch of time on

and you're going to hope and dream and

pray that it becomes the next big thing

that is the next big thing that actually

is very unlikely to happen

but there are four things that stop

people from achieving all of that the

first reason is they don't know about

this opportunity why because Wall Street

KKR Carlisle they don't want you guys to

know about it they want to buy all the

businesses instead of have little guys

like you and I do it two is people don't

know how to find businesses to buy they

don't know that all around them are

actually small businesses waiting to be

bought but nobody thinks about it you

have to learn to reframe your mind three

they don't know how to buy a business

they don't know the actual process from

one to ten to acquisition that I teach

that I built from my 15 years plus in

private Equity it's not complicated but

it is work but the number one reason why

people actually will not buy a business

is this last one it's one word that

stops everyone else and triggers most

people and it's money so how do you buy

a business when you have little money I

don't have any money let me show you

exactly how I did it I just bought this

internet business called

approachment.com for zero dollars down

on that will do three hundred thousand

dollars this year it was doing about 60

when we bought it we bought it for 60k

over multiple years I bought this

laundromat for a hundred thousand

dollars that cash flows sixty seven

thousand dollars a year for zero down

but it's not just me Hannah Ingram

publicly talks about a car wash she

bought and makes 140k a year she did it

when she was like 22 for zero dollars

down and then Johnny who's an absolute

stud he's in his 20s he didn't finish

college and he bought a Biz that makes

250 000 a year that's top line revenue I

don't remember what the profit is but he

bought it for a couple thousand dollars

and I could go on and on but let's go

where most people won't but you will

because you're here there's four main

ways to buy this first is Cash Second

Bank or SBA loan third Finance through

seller that's called seller financing

and fourth outside Capital raise so

let's break them down cash you use all

your own money to buy a business pretty

straightforward you can do that if

you're rich cons you're out the money

you can't use it anywhere else you have

all the risk couple Pros maybe you get a

better deal probably just like with real

estate and you get it done fast but this

is my least favorite way to buy most

businesses second is the SBA loan this

is the government giving you free money

the government will give you up to 90

percent of the purchase price of a

business to buy it like pause on that

for a second the government will pay you

to buy a business yes they will the cons

are it's debt which means you're on the

hook if the business fails well as the

U.S government love more risk interest

rate involved very structured less

flexibility and getting a loan from A

bank is like a colonoscopy can I say

that on YouTube it's annoying but the

pros are it's like free money basically

the straightforward process lots of

people help you in the SBA in the actual

government organization still my second

least favorite way I hate working with

90 of banks I mean don't don't you also

I find that sometimes you lose the deal

because the SBA takes too long now Third

Way outside Capital go ask friends and

rich people to give you some cash the

cons are it's hard to do it first most

people don't know how to and how rich

are your friends that's the constraints

Pros are less rest you're not the only

one on the hook as you are with debt

faster to close and potentially you get

a better deal also because you're

bringing cash to the table even though

it's other people's cash now this one's

actually my second third I can't decide

least favorite because I'm selfish with

good deals I hate giving away Equity

that's a whole different subject we can

get into it's kind of technical if you

guys want to go deeper hit me in the

comments and say I want to understand

why Equity is more expensive than debt

I'll tell you my favorite my favorite

two magical words seller financing this

is where the seller pays you through

future profits of the business to buy

his business like a loan but the seller

is the bank this happens for 60 percent

of all small businesses that are bought

meaning super common now cons can take

longer to do to negotiate it some

sellers won't do it for sure and you

have to know about it but you're here so

you got that part now the pros is you

need way less cash in fact sometimes

zero cash there's less risk on you the

seller gets great tax benefits you get a

ridiculous deal and you make up any

terms unlike with a bank pause for a

second there people will tell you this

is not possible that's because they

don't know what they're talking about

they don't know what you're talking

about people love to tell me on Twitter

why these deals won't work they've

probably never done a deal it's as

common as a mortgage for a house not

gonna work every time but it will work

over time if you're saying you're

looking to grow your bank account and

not deplete it by using cash up front so

I love doing zero cash deals all day

long in fact in private equity in my old

world we call this lbos leverage buyouts

it's a fancy word for saying we have

banks that pay for us to do deals but

then people say to me okay if it's so

great for you it's Gotta suck for the

seller right not the case extra profit

from interest meaning they get their

purchase price plus they get like a

little check in the mail from you every

month or quarter it's just the interest

costs faster than loan financing taxes

from the sale are spread out because

it's annuity they don't get a lump sum

they agree to sell their financing which

can mean the difference between actually

even getting their business sold or not

we already know this most small

businesses will not sell crazy statistic

is that most small businesses that get

listed in the US will never sell they'll

close so why are so many business owners

out here trying to sell the 5Ds divorce

departure disability dissolution death

think you can guess what most of those

are they're tired they're sick they're

ready to leave they've had some sort of

legal event they need to sell and you

are their answer so let's go through an

actual a deal in seller financing so I

can show you how this works live okay

Revenue you can see here 332 thousand

dollars and we've got the profit of a

hundred and twelve thousand dollars we

bought this business for 2x the purchase

price which means 224 000 as the cost

now in this one they originally wanted a

10 down or twenty two thousand dollars

down to pay for the business and the

rest of it they would Finance the seller

would give us two hundred and four

thousand dollars to buy this business

that means under these terms we would

make a monthly profit of nine thousand

three hundred and thirty three dollars

and if you add that interest payment

that we would have to make for the

seller financing loan of 212 bucks a

month we've been making about 9 121

dollars a month profit in our pocket or

about 109 000 a year now that cash on

cash return number and cash on cash

return really just means with the money

you put down AKA twenty two thousand

dollars how much money do you make on it

but in this instance let's say we didn't

have the twenty two thousand dollars

down like the person who actually bought

this business did not instead of taking

the offer of 224 he said what if I pay

you 245. I increased the price of the

business but I want zero dollars down

you finance the whole business for me

I'll pay you a little bit of a premium

for that and I'm going to take the whole

business beautiful way to negotiate

seller financing where you put zero

dollars down to acquire a business

that's going to make you a hundred

thousand dollars a year and this is just

one deal look at this next deal I won't

go through every single section of it

but probably take a screenshot this is

1.5 million dollar deal that netted us

thirty five thousand seven hundred forty

two dollars a month this is a real deal

we did we're 428 000 this actually is a

plumbing company so that means we make

188 cash on cash return for this deal

and look at that the seller finances the

business the seller pays for me to buy

this business this is not only possible

it happens every single day and now you

know how to do it next up let's teach

you how to negotiate it all right so the

real key to seller financing is this one

work negotiation

it's trying to say hey this is Samuel

Samuel I want to buy your business but

instead of me giving you

I just threw a bunch of cash at him a

bunch of money I want Samuel to give me

the money to buy his business how do we

get that to happen it's pretty

straightforward if I was to have this

conversation it would go something like

this I'd say to the seller you've

already been talking about buying your

business and I think you have a business

that could really fit in with what we do

but I just want to make sure we're on

the same page for something most

businesses are bought and sold with

something called seller financing I'm

sure you

to get this deal done quickly and at the

best terms possible how about we do this

deal with seller financing which

basically means you're going to use your

profits of the business for me to buy it

I'm going to give you an annuity over

the course of the life of this deal so

for the next three to five years you are

going to get an annuity a payment every

month or a payment every quarter in

order for me to take over the day-to-day

operations of running your business

every single day and because of that we

don't have to involve a bunch of banks

or the government to see this deal not

go through I just wanted to make sure we

both understood we were on the same page

with using seller financing and what

you're going to find is most business

owners are going to go uh oh okay okay

yeah I'm sure we can figure something

out and right there my friends you took

the first step in learning how to

negotiate seller financing what do you

need to do now well the truth of it is

you've already learned the opportunity

in buying small businesses you've seen

this 10 steps it takes to buy small

businesses and now you're starting to

learn how to negotiate seller financing

and using other people's money to buy

profitable businesses think about this

for a second maybe you are going to be

the solution for not one more Starbucks

on a corner but instead your coffee shop

on the corner oh and if you're selling a

business I'm always buying I'll take it

[Music]