Today’s episode of the podcast, Robert Hirsch from Freedom
Factory discusses “How to Buy a Business When You Don’t Have the
Cash”.
listen to the podcast, watch the video or read the
transcript below.
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Transcript of Podcast
Hi, Robert from Freedom Factory here. And I want to talk to you
about a question that we get from buyers of a lot, which is, well,
what if I don’t have $1 million check to write? And the reality is
most of us don’t have $1 million check to write, but how do you buy
a business if you don’t have $1 million check? And that’s what
we’re going to jump into today.
So it’s my personal belief that small businesses are the most
undervalued asset class on the entire planet. If you’re buying a
stock and you’re buying it at a 30 times multiple or 30 times price
to earnings ratio, which is the value of the company.
When you’re looking at a small business, you’re looking at three
to five times multiple, which obviously is significantly different
than the stock market. If you have a special set of skills, which
is how do you run a small business, there couldn’t be a more
undervalued asset class, and I think the opportunities are
limitless.
And I think one of the big reasons that many people don’t
consider buying it is they say, well, I don’t have $1 million check
to write. And that’s true for most of us. And so let me talk to you
about some options. There there are many more, but I’m just going
to go into some early ones. Most businesses sell with some sort of
seller financing, especially if the seller believes in their
business.
So sometimes you’ll have a 30% note, 50% note, sometimes an 80%
note to the seller. And what that means is the seller is carrying a
note of the financing or carrying part of the financing on the
business, and it’s secured by the business. So if you didn’t make
the payments on that note, the seller would come back and take
their asset, and that’s okay with them.
So usually we see some sort of seller financing, and obviously
there’s no bank requirements, no prequalification. All the seller
has to do is say yes. Another option that we do is we’ve been
selling businesses for an of a long time. And so we have several
relationships with SBA lenders across the country.
And usually, we can get a go or no-go in 24 to 48 hours. And if
a business is a good SBA business or small business administration,
which essentially is a government-subsidized loan, then it can give
you up to 80% of the value. So you can buy $1 million company with
a check of only a few hundred thousand dollars. That’s a great way
to go as well.
I’ve even taken over a business where I have not spent any money
out of pocket and people say, well, why would you do that? It
was a tea business and as some of you know, I used to work in the
search engine industry and had an early search engine in Silicon
Valley and I was considered a search engine expert 10 years ago in
my career. Well, there was a tea company that acquired all their
customers through search engine optimization. And so they wanted to
work with me, but I wasn’t willing to write them a check. So I took
over the business. I didn’t even make a payment for the first six
months to make sure it would work, and I eventually bought it and I
didn’t even write a check for a penny out of pocket. All I did was
fund the operating capital needs of the company.
So there are lots of ways that you can buy a business without
writing $1 million check. In fact, most of the businesses aren’t
one buyer and one seller writing a seven or eight-figure check. And
there’s lots of ways to be able to do that. Of course, you can
raise investment, you can syndicate, there’s lots of options.
And if you have any questions about what’s the best way to
either buy a seller finance business or what makes a great
candidate for an SBA business. Why don’t you give us a call at
Freedom Factory? If you’ve even thought about buying a business,
there’s never been a better time than there is today. We look
forward to speaking with you soon.
Thank you so much for watching. Please like and subscribe.
Contact Freedom Factory
Freedom Factory
5500 Greenwood Plaza Blvd., Ste 230
Greenwood Village, CO 80111
Phone: 844-MAX-VALUE (844-629-8258)
https://www.freedomfactory.com/
https://g.page/freedom-factory-denver
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