I’m Buying Businesses For $50K Down By Doing This | 348

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Transcript

SPEAKER_01 0:00

Welcome back to the Business of Beers Podcast, your daily dose of strategies, tools, and tips to help you build an eight-figure business. Today's episode is a clip from one of my YouTube lives. If you'd like to hear the whole thing, there's a link below in the description. Cheers.

SPEAKER_00 0:16

Another thing is talk about the price. And banks are going to require independent appraisals, right? They're going to want this pro forma, they're going to want this, they're going to want that, they're going to want all this stuff. And with poor performing stores specifically, sometimes the seller is stuck on a high price. Or and maybe not even a poor performing, but but they're stuck with a price in their mind and they're not going to sell it for anything less than that. And so even if I had gotten an appraisal and said, well, you know, the stores are only worth this, they may say, Well, too bad. Like I'm not sell I'm a stubborn old person. Like I am I'm not going to sell it. You're like, all right, I guess, I guess, I guess I'm not going to buy it then, right? But if you don't use the banks, the price can be whatever you you need it to be. And what I focus on instead is the terms. It's the cash in, the cash out. I focus entirely on the terms. I don't even care about the price. But they care about the price. So I can give them a price that they're happy with, but the terms that work for me, then we're cruising. So this one. I bought two stores. Well, there were two stores. They were making $118,000 total, like each like total between the two of them. I offered $350,000, 3X, thought it was a fair offer. She comes back, says $500K, that's my minimum. That is like I'm not going to sell for penny less than $500K. And I'm like, well, no bank's going to agree to like a $4-2 valuation. It's not going to be able to support the debt load and all the crazy math and blah, blah, blah. And she doesn't care. She's like, whatever. I'm not, I'm not selling for anything less. So deal goes cold for six months. Because I'm like, all right, well, maybe like she'll come around, maybe the sales will get better, uh, you know, whatever. So I come back and I make an offer and says, all right, I here's what I'll do: I'll do $50,000 down, and I'll give you $4,000 a month for 12 years. That was that was my offer. No balloon payments, no like $50K down. I'm into the stores and I'll pay you know $4K a month. She agrees. And I I put $50K into the store. Over the last 12 months, we made $230,000 between those two stores. So getting better. Not not up to our our standard, but but good good investment, right? And I and I the the thing is, right, as we start to grow, all the numbers I'm gonna give you are cash flow numbers, not revenue. Are that like there's this thing that in the beginning, when when your business is small, you view it as a job, right? Because you are it is literally your job. Is you you you you work in it, it makes money. If you don't work in it, it doesn't make money. It is it is purely a job. And the the biggest chat like the biggest challenge is like turning that job into a business, where now you've got a team of people and things work without you, right? And like you can go on vacation and and it and it still continues to run. And often we all these start as jobs, but then they we turn them into businesses. And but a lot of times when I am buying these small deals or when you are going to buy another person's uh small business, often you're buying their job. And for them, it's like it's this like relief that, like, oh, I don't have to get up and do this thing anymore because it's a it's like a job. And you have to have these systems in place to make it into the business. Otherwise, you are gonna have that job. Like, if you don't have good systems to be able to replace it, you are gonna fall into that same trap. And so that's why it's like it's really important that you know how to hire, you can have people, you can run the process, you can generate cash flow, all this stuff. But then the next level, the the final like boss level, is it becomes an investment vehicle. And that is something that I I want to say I only learned maybe three years ago or less in that like I can take money out of the business, and maybe I go and I put it in the stock market and I make 15 or 20% this year or whatever, or maybe 10% on average. But I could take that same money, that $50,000 that I was gonna go buy like a Vanguard fund with, and I can put it in to buying a two more stores that get me a what's what's that an eight? That's not 800, like a crazy return, what's that 400% return on my money? Like, there's no once you can get the systems down, your mind shifts, and it's like you view it as this investment vehicle. And that's how honestly how I've compounded you know our our business. We only have like a hundred grand of bank debt. I have like about a couple million in seller notes, but like I have no investors, all self-funded. It's because I I switched my brain from like I need to take money out of the business and I need to go like build like defenses and I need to go like invest in all this other stuff, and I and I still have money and other stuff, obviously. But like, but back into the business of like, what if I just put more money into the shops? What if I just bought another store? What if I quote overpaid for another opportunity, but it can it can make 100% of my money back in the first year? And I have the systems and people and process in place so that I'm not like I'm not the one physically going there. That's like ultimate game boss, right? So the wins. So we think about this thing like just getting these deals done and just like the net gain of it all, where the seller gets the price that she wanted, $500,000. She also gets another $126,000 of interest income over those 12 years. Remember, I'm paying her $4K a month, 12 months, 12 years, that's $576K plus the $50,000. $626 is the total cash if I don't pay it off early from my bank account to her bank account, right? And so instead of paying Chase $126K, I'm paying uh this lady in her retirement plan that. So like that's a huge win for her. Me, like I get this thing for $50K down, $25,000 a store essentially. And we hire more people, like we've already hired more people, we pay them better. Some of them are the same people that work for her, now work for us, and they make double the amount of money because we have performance-based compensation plans where the more people you know perform, the more money they make. And so, yeah, some of them are really motivated. Plus, we do a bunch of, we spend a ton of money in marketing, and we have better, we're just like better at getting customers and more bats, and we use DVI, like digital inspections, like we do all the things, and and for whatever your business is, you're gonna do all your things, but that like improve the business. And then we hire, we we we help the community. Like we are fixing more cars, we are making cars more safe, and then yeah, like I get a good return on that as the investor for taking the risk and putting it all together. Like, I should get paid. It's the whole point of right, capitalism. Uh, is is you get paid for risk and you get paid for benefit. And so that's what these can do. And I and I and it's just like a total unlock when you when you start to think about the business, not as just like, you know, uh, even for me, like I used to be like, I'm not paying more than two and a half times for this thing. Like, I I you know, I I'm all proud of a I just put out YouTube another video. I bought a store for $110,000 that was making a hundred thousand. That was one of my cash deals. I got it for basically one times earning. It was it was it was like the best, it was like one of the best deals I've ever done. And it was like, for many years, that's what I wanted. That's like all I would want. It's like I want to see how cheap I could get it. And like, like on the earnings multiple. But that held me back from doing other deals that other people ended up buying because I I I viewed it more as like this the the job slash like I need to get a really good deal, like I need a win, quote unquote, in the short term versus thinking about it over the long term and how much how much cash flow am I going to be able to make on this thing over the next, you know, five years or 10 years or whatever your timeline is. And then ultimately you're gonna be able to sell the business too. So like as an investment, all these have terminal value when you want to get out of it, if it, you know, if it makes sense.