In this week’s episode of  CEO Warrior Podcast, Mike Agugliaro interviews Ace Chapman, who is an expert in how to buy and sell businesses and create wealth. Ace is a micro private equity investor who has acquired over fifteen offline businesses, sold thirteen, and also acquired twenty-four online businesses. If you ever thought about buying a business, this is a great podcast for you!

Main Questions Asked:

  • What were some of the mind games or mental road blocks you experienced?
  • What are some insights you can give people on what you’ve learned in selling your first business?
  • Where does your ‘no fear’ approach come from?
  • What holds people back from thinking that buying a business is possible?
  • Are there any nightmare stories where someone bought a business, but didn’t have an expert and it turned bad?
  • How can adding businesses into your portfolio magnify wealth?
  • What is the magic piece of advice on growing a business?
  • If you could start again, what are a couple of things you would do differently?
  • How can people avoid ‘getting bored’ in their business?
  • What are the first three things someone should do when buying a business?
  • What should we think about when selling a business?

Key Lessons Learned:

  • In the business world today, you have a few options such as work for a company, start your own business, or buy a business.
  • Two million baby boomers own businesses in the U.S., and a lot of them are looking for buyers but there aren’t enough buyers.
  • When you are working with a mentor or expert, it helps people control their emotion and ‘jump in’ reflex.

Buying a Business vs. Starting a Business

  • There is little awareness and conversation around buying businesses, as it is mostly around staring new businesses.
  • Even though there is a solid supply of businesses, when it comes to entrepreneurship and business ownership 99.9% of the conversation is about starting from scratch.
  • Often buying an existing business is simply not part of the awareness.
  • People think that if you start a business from scratch with low money up front then it is cheap, but it’s actually more expensive than buying an established business.
  • If you can become a professional at finding really great deals instead of starting a business from scratch, then you can attract a lot of money.
  • If you buy a business that has already been around for a number of years, then that business has already broken past the ‘five year failure rate’ point.

Buying a Business

  • The biggest problem with starting a business from scratch is that you have to be amazing at everything: tech, finance, marketing, and sales. But when you buy a business, you can match your skills with what the existing business is lacking.
  • The average person does due diligence on 6.5 businesses before they buy one.
  • One of the problems in buying a business is that people get stuck on one deal and don’t look at enough deals.
  • As a broker, Ace looks at a lot more businesses than the average person would on their own. His clients look at an average of 100 businesses before closing on one.
  • Something that people overlook when buying new businesses is spending time to find a motivated seller.
  • Ace says that he finds a lot of deals through referrals from divorce. This is an example of a motivated seller, as they often just want to get out of the business quickly.

Magnifying Wealth

  • When it comes to building the dealmaker skill set, it becomes a long-term view of your return.
  • As a business broker, Ace likes to see a business buyer get their money back within two years.
  • Businesses are purchased at two times earnings (sales price is 2X annual cash flow). This means that even if you make a mistake in buying a business, it allows you to make up for any mistakes quickly.
  • These numbers allow you to build equity as over the course of 2 years if you are paying the business down. Then you can take the cash flow and invest elsewhere.
  • Ace likes ‘roll ups,’ which is buying up competitors in the market and then grow the business through acquisition. This creates a snowball effect.

Advice on Growing a Business a

  • Have a trackable time and results system so you can match the time input and money.
  • As a business broker, Ace tries to build and buy businesses that fit into the entrepreneur’s personality and how they are naturally built.
  • It is best to come up with a wealth building strategy in line with who the entrepreneurs are on a natural level.

Selling your business

  • Set your business apart from everything else on the market, as it will have a big impact on the buyer.
  • Have systems in place. Most businesses don’t have operation systems documented to hand over to a potential buyer. If you create a franchise-like system, then this will set you apart.
  • When you can not only answer questions but let the buyer know there is a resource that will help with selling, you will be able to sell your business at a premium.

 

2 click to tweet links (clicktotweet.com)

Thought about buying a business but don’t know where to start? Find out w/ @acechapman & @Service_Key https://secretsofbusinessmastery.com/

What are pros & cons of buying a business vs starting a business? Find out w/ @acechapman @Service_Key https://secretsofbusinessmastery.com