How to Buy a Business With No Money in 2024
Summary
TLDRThis 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
- đĄ The speaker suggests buying 'boring businesses' as a smart way to achieve a high monthly income with a low failure rate.
- đ Successful individuals like Warren Buffett have made their wealth through similar strategies, emphasizing the importance of business acquisition.
- đ« The speaker dismisses popular online business models like Shopify stores, Amazon FBA, or ad agencies as not being the best path to wealth.
- đ° 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.
- đ There are four main methods to finance a business purchase: using cash, bank/SBA loans, seller financing, and outside capital raise.
- đ Harvard's case study indicates that entrepreneurs who acquire businesses earn more than consultants, bankers, etc.
- đŒ Most people with a net worth above 5 million dollars own their own small business, highlighting the link between business ownership and wealth.
- đ Small businesses are often profitable and have been in existence for a long time, making them a less risky investment than startups.
- đĄ The main barriers to buying a business include lack of awareness, not knowing how to find or buy a business, and financial constraints.
- đž The speaker shares personal experiences and examples of others who have successfully bought businesses with little to no money down.
- đ 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
đŒ 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.
đŠ 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.
đ€ 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.
Mindmap
Keywords
đĄBoring businesses
đĄSeller financing
đĄLeverage buyouts (LBOs)
đĄSmall business profitability
đĄSBA loans
đĄBaby boomers
đĄCash flow
đĄEquity
đĄAcquisition
đĄLindy effect
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]
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