How She Bought a $3.1M Business WITHOUT Quitting Her Job (Case Study) — Transcript

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1. 0:00We helped Tatiana close on a $3.1
2. 0:02million business in Rochester, New York
3. 0:04in 7 months.
4. 0:05>> I honestly [music]
5. 0:06never in a million years considered
6. 0:09buying a business.
7. 0:10>> Without her quitting her day job. She's
8. 0:12a Manhattan big law attorney who still
9. 0:14bills 60 hours a week. She runs the
10. 0:15business from 350 miles away and in her
11. 0:18first 3 months of ownership, revenue is
12. 0:20up 50% year-over-year.
13. 0:22>> You know, the cash flow is great.
14. 0:24>> [music]
15. 0:25>> So how does a lawyer who'd never bought
16. 0:27a business before pull off a $3.1
17. 0:29million deal without burning out? It
18. 0:31came down to three specific choices that
19. 0:33almost no first-time buyer thinks to
20. 0:35make.
21. 0:35>> I am a lawyer. I'm an attorney. Um and
22. 0:38have been pretty much my entire adult
23. 0:41career.
24. 0:42>> Obvious explanation is that she's a
25. 0:43lawyer. So of course she figured it out.
26. 0:45But Tatiana had never bought a business
27. 0:47before in her life.
28. 0:48>> It's just not something that I've done
29. 0:50in my life.
30. 0:51>> She first heard about business
31. 0:52acquisition from a Facebook ad I was
32. 0:54running. And 5 days after joining our
33. 0:56SMB Deal Hunter Pro program, which is
34. 0:58how we help working [music]
35. 0:59professionals find evaluate and close on
36. 1:01a business in 6 to 12 months or until
37. 1:03they close, she was already looking at
38. 1:04the deal she ended up buying.
39. 1:06>> I sometimes look back and say, "Did this
40. 1:09really
41. 1:10Did all of this really happen, you
42. 1:12know?"
43. 1:12>> 2 months after that, she had a signed
44. 1:13LOI. 7 months in, she closed.
45. 1:15>> The business that I ended up buying is
46. 1:18the first business that I was interested
47. 1:20in. The very first.
48. 1:21>> So how does a total first-timer working
49. 1:2360 hours a week pull off a $3.1 million
50. 1:26deal and come out the other side less
51. 1:28stressed than when she started? After
52. 1:30walking through every piece of this with
53. 1:32her, three specific factors emerged.
54. 1:34Here they [music] are. Factor number
55. 1:35one, Tatiana didn't buy a business she
56. 1:37planned to make semi-absentee. She
57. 1:38bought one that was already running that
58. 1:40way. The business she bought is 35
59. 1:42[music]
60. 1:42years old and it's a B2B print and mail
61. 1:44operation. It has 99% recurring revenue,
62. 1:47a 5-year average customer tenure, and
63. 1:50seven employees [music] plus a manager
64. 1:52running the day-to-day. But here's the
65. 1:53detail that actually mattered. Sitting
66. 1:55on page one of the SIM, which is a
67. 1:57marketing document a broker puts
68. 1:58together when pitching a business for
69. 2:00sale, it said the two retiring owners
70. 2:01were already working just two to three
71. 2:03days per week and often remotely. Think
72. 2:06about that means. The [music] owners of
73. 2:07this 35-year-old business had already
74. 2:10separated themselves from the
75. 2:11day-to-day, [music] already built a
76. 2:13manager layer underneath them, and
77. 2:14already proven the business can run
78. 2:16without [music] an owner on the floor.
79. 2:17That work, the work of making a business
80. 2:19semi-absentee, is the hardest part of
81. 2:22small business ownership. And most
82. 2:23buyers try to do it themselves after
83. 2:25[music] they close. They buy something
84. 2:26completely owner-dependent and spend the
85. 2:28next two years trying to extract [music]
86. 2:30themselves from it on top of the job
87. 2:32they're already working. Tatiana skipped
88. 2:34all of that by buying the finished
89. 2:36product.
90. 2:37>> This business [music] just has great
91. 2:39bones. It's a solid, solid business.
92. 2:42>> Whether a business can be run
93. 2:43semi-absentee isn't a mystery you have
94. 2:45to solve for once you close. It's a
95. 2:47filter you use before you even make an
96. 2:50offer. When a seller tells you they work
97. 2:51two days a week, take that seriously and
98. 2:53verify in diligence because it's the
99. 2:55most important data point on the page.
100. 2:57Now, buying an already semi-absentee
101. 2:59business gets you halfway there, but on
102. 3:00its own doesn't solve the math problem.
103. 3:02[music] And the math problem is where
104. 3:04most first-time buyers go wrong in a way
105. 3:06that guarantees they'll end up quitting
106. 3:08their job within a year, which takes us
107. 3:09to factor number two.
108. 3:11Factor number two, and this one is the
109. 3:12most counter-intuitive of the three. If
110. 3:14I told you I was about to buy a business
111. 3:16while keeping my full-time job, your
112. 3:17instinct would probably be that I should
113. 3:19start small, something lower risk, maybe
114. 3:21a $300,000 business that feels
115. 3:24manageable. [music] That instinct is the
116. 3:25reason most people who try this fail.
117. 3:28Here's why. Tatiana's business earns
118. 3:30$867,000
119. 3:31a year, which is a number called SDE or
120. 3:34seller's discretionary earnings. It's
121. 3:36the real operational profit the owner
122. 3:38takes home. 867K is enough to do three
123. 3:41things [music] at the same time. Pay a
124. 3:42general manager to run the day-to-day,
125. 3:44service the SBA debt she took on to
126. 3:45[music] buy the business, and still pay
127. 3:47Tatiana a meaningful distribution on top
128. 3:49of her law firm income. Now, picture
129. 3:51that same business at 300,000 SDE. It
130. 3:54can't cover all three. Something has to
131. 3:56give, and the thing that almost always
132. 3:58gives is the GM line. The owner is
133. 4:00running the business by default because
134. 4:02there's no cash flow left over to hire
135. 4:03someone to run it for them. That's how
136. 4:05people who set out to buy a business on
137. 4:07the side end up quitting their job six
138. 4:08months after close. So, the principle's
139. 4:10counterintuitive but clean. Personal
140. 4:12time or skills inversely with deal size.
141. 4:14The 300,000 deal that looks safe is
142. 4:17usually the one that eats your life. The
143. 4:18$3 million deal with the right structure
144. 4:20is the one that gives your life back.
145. 4:22Now, I know what you're thinking. 3
146. 4:23million sounds completely out of reach
147. 4:25if you never done this before, and it
148. 4:27would be if you had to pay for most of
149. 4:28it up front. But, the third factor is
150. 4:30the one that actually makes a deal this
151. 4:31size possible [music] for a working
152. 4:33professional, and it's the factor most
153. 4:35buyers never think about until it's too
154. 4:37late.
155. 4:42Factor number three, and this is where
156. 4:43the real unlock is. Most buyers, when
157. 4:45they look at a deal, focus almost
158. 4:47entirely on the price. How much is it,
159. 4:49and how much can they negotiate it down?
160. 4:51Tatiana barely focused on the price at
161. 4:52all. She was focused on the terms, and
162. 4:54that distinction is the entire
163. 4:56difference. Here's the part that's going
164. 4:57to sound insane. The business was listed
165. 4:59at 2.9 million, and Tatiana ended up
166. 5:02paying 3.1 [music]
167. 5:03million for it. I know how that sounds.
168. 5:05Everyone on the buy-side internet will
169. 5:07tell you to chisel the price down, and
170. 5:08she went the other way. But, stay with
171. 5:10me because the price is the least
172. 5:12interesting part of this deal. Of that
173. 5:133.1 million, the retiring seller carried
174. 5:16roughly 2.35 million himself as a seller
175. 5:18note. Three quarters of the deal was
176. 5:20financed by the person who built the
177. 5:22business, and that note was tranches
178. 5:24across a decade with an initial piece at
179. 5:26close, a [music] second tranche at year
180. 5:28two, and a balloon payment for the
181. 5:29balance at year 10. That year 10 balloon
182. 5:31cut her required down payment roughly in
183. 5:33half because of how SBA rules treat
184. 5:35certain seller note structures, and she
185. 5:36took a small SBA loan to cover the rest.
186. 5:38So, on day one, Tatiana didn't walk into
187. 5:41a cash-strapped, debt-heavy business
188. 5:43with a clock ticking faster. She walked
189. 5:44in with years of runway before the big
190. 5:46payments hit with room to make her early
191. 5:48moves and let the business grow into its
192. 5:50obligations. The structure did one more
193. 5:52[music] thing. The seller's retirement
194. 5:53income now depends on Tatiana
195. 5:55succeeding, which means he has every
196. 5:57reason to help the transition and
197. 5:59introduce her to his existing customers.
198. 6:03>> This guy's in it with me. I'll always be
199. 6:05able to rely on him to call him. He is
200. 6:08heavily invested because his retirement
201. 6:11depends so he's never going to compete
202. 6:13with me.
203. 6:13>> And now contrast this with the buyers
204. 6:15who actually won the LOI before Tatiana
205. 6:18did. They came in with a big offer, went
206. 6:20into exclusivity, and then during due
207. 6:22diligence tried to re-trade the seller
208. 6:24down to 2/3 of what they'd originally
209. 6:25offered. The seller blew up the deal
210. 6:27because he wasn't going to sell his
211. 6:2835-year-old business to buyers who
212. 6:30insulted him at the finish line. Tatiana
213. 6:32walked in right after that fell apart
214. 6:34and closed it by paying above asking and
215. 6:36aligning their interests instead. The
216. 6:38lesson isn't that you should overpay.
217. 6:39The lesson is that price is one variable
218. 6:42and terms and relationship are the two
219. 6:44that actually determine whether a deal
220. 6:46fits into your life. So, what does this
221. 6:48look like day-to-day? Tatiana has two
222. 6:49laptops on her desk, one for her law
223. 6:51firm and one for the business. Every few
224. 6:53hours she spends 5 to 10 minutes on
225. 6:55emails. She schedules business calls
226. 6:57into her work day the same way she
227. 6:58schedules client calls. And she does the
228. 7:00QuickBooks herself on weekends because
229. 7:02she was a math major and she enjoys it.
230. 7:03That's the entire operation. And in her
231. 7:05first 3 months revenue is up 50% year
232. 7:08over [music] year. Tatiana and hundreds
233. 7:09of other members use our six-part proven
234. 7:11process to close their deals in 6-12
235. 7:13months.
236. 7:14>> I really don't know how one would do it
237. 7:17without you and [music] your program.
238. 7:19>> If you want to be the next one, book a
239. 7:20call with our team through the link
240. 7:22below. If you're still in research mode,
241. 7:23hit subscribe. We publish a new buyer
242. 7:25story every week and one of these is
243. 7:27going to be about you.