Buying a Business With 50K
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- Опубліковано 6 жов 2024
- Want to SCALE your business? Go here: acquisition.com
Want to START a business? Go here: skool.com/games
If you’re new to my channel, my name is Alex Hormozi. I’m the founder and managing partner of Acquisition.com. It’s a family office, which is just a formal way of saying we invest our own money into companies. Our 10 portfolio companies bring in over $200,000,000+ per year. Our ownership stake varies between 20% and 100% of them. Given this is a YT channel, and anyone can claim anything, I’ll give you some stuff you can google to verify below.
How I got here…
21: Graduated Vanderbilt in 3 years Magna Cum Laude, and took a fancy consulting job.
23 yrs old: Left my fancy consulting job to start a business (a gym).
24 yrs old: Opened 5 gym locations.
26 yrs old: Closed down 6th gym. Lost everything.
26 yrs old: Got back to launching gyms (launched 33). Then, lost everything for a 2nd time.
26 yrs old: In desperation, started licensing model as a hail mary. It worked.
27 yrs old: "Gym Launch" does $3M profit the next 6 months. Then $17M profit next 12 months.
28 yrs old: Started Prestige Labs. $20M the first year.
29 yrs old: Launched ALAN, a software company for agencies to work leads for customers. Scaled to $1.7mmo within 6 months.
31 yrs old: Sold 75% of UseAlan to a strategic buyer in an all stock deal.
31 yrs old: Sold 66% of Gym Launch & Prestige Labs at $46.2M valuation in all-cash deal to American Pacific Group. (you can google it)
31 yrs old: Started our family office Acquisition.com. We invest and scale companies using the $42M in distributions we had taken + the cash from the $46.2M exit.
32 yrs old: Started making free content showing how we grow companies to make real business education accessible to everyone (and) to attract business owners to invest or scale their businesses.
34 yrs old: I became co-owner of Skool.com to help the many people who want to start a business online do so.
Today: Our portfolio now does $200M/yr between 10 companies. The largest doing $100M/yr the smallest doing $5M per year. Our ownership varies between 20% and 100% ownership of the companies. Many of them we invested in early and helped grow (which is how we make our money - not youtube videos).
To all the gladiators in the arena, we’re all in the middle of writing our own stories. The worse the monsters, the more epic the story.
You either get an epic outcome or an epic story. Both mean you win.
Keep crushing. May your desires be greater than your obstacles.
Never quit,
Alex
FULL DISCLOSURE
I make content to make money - just - on a longer time horizon than most. I want to build trust with business owners so we can find the best ones and help them scale. And if they’re awesome, write them a check and go all the way as partners.
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Alex please cover this more! The people need this. Show us how to buy them, and grow them quickly. 😀
This is from a full video on his channel, can’t remember the full name but probably “how to start a business for free” or something like that
Codie Sanchez talks about this ALOT
@@xsw882 yeah she does
Fatal flaw is getting someone to sell you a business that makes 250k a year ...with owner financing. Why would they sell something that makes roughly a million dollars every 4 years and take on risk from someone with now 2 loans and only sitting on 50k in liquid lol
Well yea if that’s they’re only business but maybe somebody is retiring maybe they have more lucrative things going on and it’s too much of a hassle
Actually I did a 2 year incubator program doing just this type of deals and there's A LOT of reasons why someone would sell a business like that ... Reasons you woundlt normally think of. As a matter of fact there's lots of businesses on the market like this RIGHT NOW. You don't even have to take my word for it, you can just google business for sale and find it yourself.
only instance i can imagine is if the guy is old and wants to retire.
@@EssiCranawould you be able to give more context on what these reasons might be? I would love to look into this more and sell the concept of seller finance to potential sellers
Because almost no one pays cash for a business of that size. Nearly every business under $10MM in revenue has at least some owner financing component.
I'm doing this right now. It's definitely not as clear cut as Alex describes. There are balloon payments that you have to include in your business plan, cull dates to keep track of, closing costs, and so on...
Oh and the lawyer fee I'm paying for the initial contract is $5k
Did you buy your business?
@@knowkatrina nope Seller backed out, but not after I paid the lawyer of course.
@edpasternak aww man, that sucks! I'm sorry. Did you get back on the horse and search for another business? I hope you didn't give up.
@@knowkatrina ya I kept at it. Ended up starting my own business flipping houses. I know so innovative lol. So far it's going alright. Waiting on my flip to sell so I can take that capital and move it into the next one!
@@edpasternakhey, how’s it going, did you end up moving on to the next one?
Would love to see more content related on this topic. I appreciate what you’re doing for us Alex!
On paper, it's that simple. In reality, well, that's another story.
That has no substance. That goes fir anything in theory
well sir/ma'am any knowledge y6csn give us will be very much appreciated
Nothing worth doing is easy. He's giving an extremely straight forward framework of how to go about acquiring such a business. Obviously you'd need a good amount of preexisting business knowledge, experience in the niche of the business and a ton of research on the topic. If anyone sees this short and tries to do this without those prerequisites, may God have mercy on their soul and wallet
Exactly, not to mention the process & logistics vary depending on where you live. There's a bunch of specific random rules & red tape everywhere.
@@asparrow9876 nope.
I would probably have a hard time getting 3/4 owner financing since I have no experience owning or operating a business
If you gain 50k from your own business, if you buy the other one for 625k which specializes in your knowledge area I think you will have enough starter experience. We learn from mistakes.
Yes. You could even get a highly experienced board in exchange for shares, and roll up companies with seller financing and debt. You could even use top 5 accounting firms and lawyers with success fee, for the due diligence.
QLA?
Verbalase messed up
Ong
That would be you getting a loan (from the bank), by you putting 25% down, and that loan would be the downpayment for a bigger loan (the seller financed one)
So?
What actually happens is the seller says fk off I want all the money on closing, no seller financing
SBA loans only allow up to 5% owner financing. You’re also not making $250k because there’s now debt to service. Oh yea and SBA is gunna want you to put your house and other assets as collateral in case you fail.
Conventional loan is 3 percent of your credit is 620+ and debt to service would be payed for from the customers that purchase items from your business or service.
why would someone sell a business netting them $250k/year for 700k
Some people are ready to sell their businesses and don’t want to put the extra effort to increase the revenue on the business. A lot of small business oweners might do that honestly. Especially if that’s revenue and not profit
Lots of people actually. Specifically people looking to retire or just get out and focus on other things that are important to them. Most business listings around me (Florida) are for 50-100k and make 20-40k annual.
@@donworryboutit7631 where can i find those listings
@@AK-hi4hmdamn bro u want the 50k too
@@donworryboutit7631 where to find those listings
Codie Sanchez has entered the chat
ALEX TEAM: JUST FYI - THE THUMBNAIL MAKES HIM LOOK LIKE MICKEY MOUSE. 😂👍
I was just about to post that!!@
Is this a leveraged buyout?
Cool, business advice from Mickey
VERB-
describes a thing, place or person.
Verb-
$625k for $250k profit? Thought the multiple would be higher than 2.5X… more like 7x eh?
In any event, seller financed deals can be super nice. especially buying an existing business with enthusiastic customers and a good few years under its belt - way way way less risky. Think there’s a book called Buy then Build, might have more in the topic.
7x MAYBE in a very, very solid SaaS with a clear path to growth and a few other qualities. You can find lots of other types of businesses out there with multiples lower than 3x.
why would sellers agree to seller finance, how does that benefit them can you explain for me? ty
You are stupid? Why would a potential buyer of a business wanna wait 7 years to make their money back. 2.5x is the average across the world.
@@dustinlee54031. They stop working on the business which is huge. Businesses take a shit ton of time. 2. They are tired and want to retire or start a different business. 3. Their business is about to blow up (they know something you don’t) and want to get rid of it asap
No business owner is going to wear that seller finance loan risk.
Then you don’t know how desperate some business owners are to sell.
@@kareem199928why would any business sell for $250K/yr in profit lmaoooo
Because they know something you don’t
@@kareem199928if they are making $250k pa profit... They ain't desperate to sell.
Most time it’s because they want to retire or a illness is involved.
Whereas how can we identify such businesses is US ss well ss outside and how to evaluate
If he puts his head in the middle of the frame he turns into money making mickey mouse
Noone would sell you a business that does that well, for that little.
It's rare but it exist.
It might only net a quarter of that (a completely unknown variable). If it was netting $250k I would say it's still possible someone wants out. It's not that far fetched.
Someone smart that would do exactly the same with that 250k "buying a million dollar worth company with that money" would do this.
I would never sell a business on those terms.
ya.. but you have to pay your loan and the seller now... and that will eat a big chunk of biz income, plus overheads, you are left with 60k per year with extra headaches... congrats!
Realistically a business doing 250k profit per year isn't selling for anything less than a million... I love you Alex but this wasn't it
You don’t know what you’re talking about. If you took 3 seconds to check businesses for sale you’d see that his estimate is accurate. Delete your account before you embarrass yourself again
I have absolutely no idea what you're talking about, mate. But yep, I'll buy it.
Very risky. The only way you get a business at 2.5 multiple is if the basis is SDE, meaning that “profit” includes depreciation, amortisation and non-recurring expenses.
You can’t create money so regardless of how clever you’ve been with the accounting end of the day you’re owing 600k. If you’re repaying over 5 years you’ll be paying out about 140k annually on top of depreciation etc.
original video link please
How the fuck is this only a short. This should be a in a entrepreneur master class
Well business must be operated. Just buying it wouldn't solve anything if not get things worse
If you’re in the same field already, then it would just leverage your time and effort
Yeah this isn’t going to happen. I know nothing about pricing business but no one making $250k from a business is selling it for $650k unless they’re rich or really want out super fast. I’d say most people would want $1.2m which is way more.
you know nothing about pricing business. you should of stopped there lol
So, a Leveraged Buy Out
Could someone in the comments or Alex 😅 talk about the personal guarantee requirements here? Some banks require it while some may not.
@newsoul.9balance is a seller’s note that you pay directly to the seller over the term agreed upon by you and the seller.
you can buy a airplane but can you fly it? the same with business… you can buy a company but can you manage it?
Anybody else get a Mickey Mouse Vibe shortly after that video started?
Verbalase really messed up
Nice explanation.
if I make 250 per year and I want to sell the business. it means I want the 600_700 k now . not with the loan I can make it in 3 year and still keep my business
what types of small businesses would sell like this? restaurants, gyms?
The only bad part is having the seller agree on seller finance then
Getting the sba loan cuz they only put 5% of what ever you need
my plan was to get an 850 on 8-10 different cards with the highest limit possible while saving 50-60k in the next year, theres no way i could do this you guys are saying?
But why the owner sell a business making 250k profit, he would have to be out of his mind or drunk?
Because life. I purchased a business last spring that was/is profiting +200k plus annually. The owner has kids in middle school. He ran it for over a decade and was looking to cash out and chill.
It ain’t that easy. They forgot to mention you gotta put in hard work. Majority of the population is not cut off for this.
Unless you have experience. Start with what you know or would like to know and get at it
99% would fall over in the “real” world as soon as you mentioned seller financing. You make too many generalised assumptions here and it borders on being misleading.
Overall you get it all faster but your paying way more long term
Don’t expect to save 50k and be able to pull this off lol you need to be able to get that much credit on top of the 50k
my plan was to get an 850 on 8-10 different cards with the highest limit possible while saving 50-60k in the next year, theres no way i could do this you guys are saying?
That's only if you can guarantee the business continues to make at least 250k
That seem interesting but What is this seller financing thing?
Why seller would do that? Instead of keeping it and keeping all thé money and rents
This is true but also not, you have to think about the equity and actual hard ware value, business worth 10 mil can make only 250k
My question always comes back to working capital. How do you handle that in the early days of the business.
Great question. Hopefully the business cash flows. If not have a good amount of credit card limit and pick wisely what you spend capital on. Also knowing the industry and what turns a profit is a huge key.
Good financial advisor who can look at your income, cash on hand and debt. Then tell you how much money you can actually put down to purchase the business. For me I was recommended to keep at least 15% of the entire COGS for the year as working capital.
AR factoring
Why u sell a business making 250k a year profit?
Well it's that aaand not taking an income for 4-6years while you pay off the business theeeen you have a business hopefully putting 250k a year in your pocket if you're lucky I worked my ass off at mine and this and next year are the first years where I should actually see serious coin and not just scrape by and that is in an industry where I had 10 years experience but I'm a slow learner and learned some hard expensive lessons
So how much knowledge do I need to attain a business And not be too risky
Came for the mickey mouse ears.
Don't forget to mention this process takes at least a year for paperwork to go through.
Went through the entire SBA process in less than 3 months. Started mind feb 2022 and closed May 11th 2022
However, I was very fortunate that the SBA argent, the banker and the business owner I purchased the company from where all on top of their shit. Likewise I was pulling all nighters getting the docs needed/created for pre flight and closing process.
@@justinbeard hey, how can I get in contact with you? You seem smart and wealthy (as opposed to rich) I like knowing those kinds of people.
great
But after taxes and debt servicing. Now you’re back down to 100k a year.
sounds simple if you are someone that run 5 different businesses as alex did at same time. But chance of you ruining the business in this example is big. Because if it was easy to lead no sane man would sell it like that for 250k.
The business didn’t sell for 250 the business sold for 625. He said It’s 250 in profit.
Also we are in the mist of the richest generation retiring what do you think is happening to those businesses?
@@ocimakno the business sold for 250 upfront, and other 400k will be payed over time. The point is you wont know how to run that business probably if you only worked a job for 60 k before that.
You make it sound easy but is it so easy though?
Similar strategy to Mr. Pena
Is it just me or does the guy look like Mickey Mouse with those big giant ears?
Where can I find these businesses? Where do people buy/sell businesses?
There aren't any. It's just a story that sounds nice.
Assuming you can get a $250k/yr profit business for a 2.5x multiple...... Good luck with that lol
What? No mention of profit here
@@CabinetFramingUK he says "$250,000 in profit" multiple times.
That’s a good valuation for a business this size
@@mohammadjolaj7795 you don't know any other details about the business. There isn't near enough information to put a valuation on it, let alone a multiple as low as 2.5x.
2.5x is not a low multiple
If it’s that simple why haven’t you bought up all these businesses at 50k each😂
Which video is this from ?
Show me this business for sale and I will buy it
Awesome
Someone who profits 250k a year would be nuts to sell for 625k
No one sells a business at a 40% cap rate
LOL @ SBA loan.. good luck with that
What? For buying an already established business? No luck needed
What about the collateral requirement?
you have the business lmao
@@ballsligmer5572Right, but if it’s a service business and there’s no collateral such as real estate, recurring cash flow, or equipment it could be tough.
I just learned that to combat that, lenders will take out an insurance policy on you to ensure that if something happens to you, they’ll get their money back.
7.6% down nice
This is a fucking sign
Have you yourself bought a 625k business?
So owner says no 😒 or bank says no 😒😒.
Company valued at 625k doesn't make 250k a year in profit lol
Anybody else thought he was cosplaying mickey mouse from the thumbnail?
Why the heck i will sel my business for 3 years of profits ? Wtf
15 years i minimum
I can get 50k in student loans but not business loans
Anyone selling their business that way = a terrible business to buy
Came for mickey mouse. Not disappointed
I have no idea what you're talking about.
🎉
You look like you have Mickey ears on 😅
Good luck getting a business to sell for 2.5x earnings 🤣 business owner is getting ripped
Terrible idea
looks like Mickey Mouse
Mickey Mouse !
if u think I CAN PAY THE BANK AND THE SELLER EVERY MONTH and still have income leftover for myself thats anywhere close to 250k. u my friend are delusional
….??
Alex before steroids
Mickey mouse
Terrible idea!
Most business sell at 5-10x, this is stupid.
yeah yeah.. wtf.. most people cant manage there own life.. and then you accept them to manage a busn..
Lmao trying to sound smart with imagination numbers.
This guy trimmed his beak a while ago…looks bad
He beçame rich through acquisition Entreprenuership, sharp