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Action Academy | Millionaire Mentorship For Your Life & Business
The 3 Lies Stopping You From Buying a Cash-Flowing Business (SOLVED LIVE)
00:25:19
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- [00:00]
A
Brian, I want to talk to you about something that holds a lot of people back. I imagine you get people all the time saying, like, I'm interested in buying a business, but I don't think I'm qualified yet. And I'm just wondering, like, what do you tell them? Because they might be, like, in their corporate job, they might be living their life, but they don't think they have what it takes yet.
- [00:17]
B
Okay, cool. So again, as stupid simple as it sounds, it all starts with a decision. So you have to make a decision if you are starting a company or if you're buying a company. Regardless, we're making the ownership decision. And it's very much so that it is a decision. So because here's the thing, everybody is chasing perfection. And if you chase perfection, and I'm talking, I'm talking to myself as much as I'm talking to everyone else, I'm doing content right now, and I don't want to do content because I'm not perfect at it. But the irony is there is no perfect content, and therefore there is no perfect business. So anybody that is like, I have to have these credentials, like these certificates, like this X, Y and Z experience in order to do this business. Like, like, it's just not going to happen. Like, you need to make a decision where you're just like, hey, I am going to do this and I'm not going to give up. That is business. That is the best piece of advice you can give to anybody that's doing business. And if you're asking the question, like, if you truly want to ask the question, am I cut out to be a business owner? The answer to that question is, can you persevere through pain? Can you endure suffering and just not give up? And if that answer is yes, then all the rest of the stuff is skills that you can learn. All the rest of the stuff. Hiring, leadership, delegation. I don't care if you're an intro. An introvert. I don't care if you're an extrovert. I can learn systems and spreadsheets and data to scale my company. And I've got introverts on my team that have learned how to, like, lead and manage and inspire people. It's all skill sets, but it all starts with, can you endure suffering? Because there's a quote that I really love, which is, it's either increase your sacrifice or reduce your. Your desire. And so in business, it's like, you have to increase the sacrifice in order to do what's required. There's been so Many times that I've gotten kicked in the dick, left, right, sideways, and like, nobody even took me to dinner first. I just got kicked. And so you just have to be able to go through it, man. And so if you can persevere, then you are cut out for a business owner. But if you have really thin skin and you just are going to faint at the slightest issue, you, you can't be in business because if you, if you can't handle even the smallest of problems, then that is business is literally the process of solving problems for the rest of your life. Like you solve problems. That is business.
- [02:31]
A
Yeah, well, so, so someone's been like, let's picture this, someone's climbing the ladder for 5, 10, 15 years. How do those skills actually translate, right? So to running a business, do they have to start over? Or is there something like, if I'm working in the sales background. Is that, That's a great question.
- [02:46]
B
That's, that's a great question. So somebody says, somebody says at Surface, they're like, I'm not qualified to run a business. To which I would reply, well, where are you pulling the qualifications? Did you Google what are the qualifications of a business owner? Did you ask ChatGPT? You're pulling it out of thin air, right? So you're doing a lot of shoulds. And if you're careful, if you're not careful about a bunch of shoulds, you're going to should all over yourself, right? So I should do this. I should be, that I should be here in order to run a business. So what I like to tell everybody is to do what's called a career capital audit. So we're going to sit down and we're going to actually make a list, a physical list. So you're going to take a piece of paper, you're going to put it on your phone, put it on your computer, and you're going to divide it into like two columns and you're going to put a line down the middle and then you're going to say, okay, cool. On the, on the left hand side, I'm going to put skills. And then one out of 10, how good am I at that skill in my current job? Because here's, here's the kicker and like, here's the God's honest truth for most people that are consuming this type of content, even listening to the sound of my voice right now, you are most likely a high performer. There's very few people that are in my ecosystem that consume business and entrepreneurship and investing content, that are making like, $30,000 a year as a janitor. And even if you are, like, you can still make it, but most people have some skill sets. And that's what I'm looking for. Like, if you're making, if you're making six figures in particular, like, you can for sure you have the, like, the capabilities to run a business. So what we're doing on this sheet is we're writing out the skills and writing out accomplishments that you've done. And on the right, we're ranking them either 1 through 10, or you're saying what you've done. So, like, sales skills, leadership, delegation, all this stuff, and we're just going down and taking an audit. And if you can't think of any, like, if you can't think of an accurate way to rank yourself 1 through 10, just list out what you've done in your job and, like, go back and be like, what's your resume? Like, act like you're writing a resume for a new position and you're writing that resume and you're saying, hey, you know what? Like, I helped my General Manager save 17% to the bottom line by implementing this new software system, or I helped train these new reps, or I. I fixed this spreadsheet. And because I fixed this spreadsheet, people were able to do their jobs significantly. And so a lot of us have a lot of skills and a lot of talent, but we haven't just taken the effort to uncover it and look at it. So when you actually are deliberately looking at things, then you can realize, oh, my God, I'm way more qualified than I anticipated. And this advice actually applies a lot when you're going into a new room and when you're introducing yourself. So what you do is when you're introducing yourself in a new room, you don't say like, hey, I'm just getting started and buying a business. You say, like, hey, I'm Brian. I was number eight out of 5,079 sales reps. I know how to sell B2B. I know how to sell b2C. Actively looking to pursue small business ownership and entrepreneurship for myself. And I'm looking to partner with anybody that's in systems and data. So, I mean, it's just the same person as saying, oh, like, hey, I work a sales job and I'm trying to figure out how to buy a business, right? So it's the same person is just framed and positioned differently. So the, the TLDR is you need to do an inventory, you need to do an audit of the current skill sets that you have. And I would actually say, especially if you're in a management position in corporate, like you are better suited to run a business than most small business owners, period already. Because most people that are running businesses kind of have no idea what they're doing. They just don't give up. And so they're making millions of dollars in spite of themselves.
- [06:09]
A
Well, well like let's talk about that flip side, right? So like the flip side of that is there's probably a, there's probably a bunch of stuff that small business owners are great at that people in the corporate space might struggle with. How do you go about identifying that in yourself like this something that, cause like, you know, a lot of people probably struggle with that initial yes, I can do this, I'm going to try this. But that next step after that is what are the things I'm actually going to have to learn? What am I not good at? What do small business owners seed in that I have to grow in the.
- [06:38]
B
Biggest skill set that I mean I could just answer from personal experience like coming from, coming from sales, not managing people and working hard in a commission based role to where I work harder, I make more money versus I have to win through a team. That's the biggest difference in business ownership. Because if you do not build the skill of leadership and, and hiring, like hiring leadership and strategy, high level strategy, those are ways of thinking that are not trained to you as a corporate employee. And those are three like billion dollar skill sets. So again like let, let's do the first one. So let's just say hiring in general, like most people don't have experience hir corporate hiring is the most important thing that you do in, in your business. There is nothing more important than attracting, retraining, attracting, retaining and training top talent, period. Because everyone says I want passivity, but the passivity comes on the other side of profits, processes and people. So people build the processes right there. So those are the two that you need to focus on. So hiring is the big one and just the mindset of you're not just doing this on your own. Like for the first two years of my business I tried to do everything myself because I was still thinking like an employee. You have to think like an owner where it's like this is the thing that needs to be done. I'm hiring this person for this thing. Here's the standard for this thing, here's the training on how to do this thing to a high level and a high degree. Go do this thing. While I go claim territory over here. And that is just the, so that is single handedly the hardest and most beneficial skill to, to build is, is leadership and being able to accurately have a giant goal in breaking it down into chunks and sections for each different department and each different person to own. Like that is your job a hundred percent. And a lot of business owners again are doing millions and millions and millions of dollars for 20 years and they still haven't figured this out. They're still operators in their business. Most business owners are still operators and not owners. So for me, as me, as me and you are sitting here and doing this podcast episode, I'm like, my marketing team is marketing. My, my content is going out, my sales team is selling. I, I, I think we've done like 20, $30,000 while we're sitting, while me and you are sitting here doing content. And that's just my core business. That's not even all my passive income coming in, you know. So my, my hotel team is building my hotel in South Florida right now. My Northern Lights team is just, did like a team launch to where they're integrating and, and getting this new company ready to go. My gym, my gym company just called me and he's like, hey, we're, yeah, we're ready to launch January 30th. And then my kitchen hood cleaning company is ripping right now and they're thinking about buying a third location. So all this stuff is happening while I'm sitting here working on the business, not in the business. Yo, what's up guys? One sec. You're listening to a podcast right now and I freaking love that. But this is not making you more money. What makes you more money, more wealth, more equity, is being in the room with the people that you're hearing on today's episode. If you want to be around hundreds of other people like you leaving corporate America, doing big deals in business, commercial real estate and land, check out action academy.com. go in the show, link the show description and click the link to book a call with our membership director team. We'll give you the resources, the connections in the community to actually pull off the stuff that you're learning about on this podcast. And we'll hold you accountable to the actual implementation of the information that is actionacademy.com now let's get back to today's episode.
- [10:13]
A
Let's talk about the money side of things. You're talking about how you're at this stage where your money's making money for you. It's in some Cases active, but in a lot of cases, passive. And a lot of cases you're wearing this kind of investor shirt. I think a lot of people assume you need to be wealthy to buy a business. So, like, especially in the corporate world, I might struggle and say, okay, well, unwilling to set aside this amount of money to bet on myself, I need to be more wealthy in order to be in a place where I can buy businesses, especially from scratch. So what's the reality of like financing a deal?
- [10:44]
B
Yeah, so people. So I mean, so let's have a conversation here about how do you actually purchase a business and how much money do you, do you need to purchase a business? Because this is a massive misconception. And if people realized how accessible that this actually is, they'd be able to take off and have significantly more confidence in that to the tune of. I have had five people in the last two weeks personally DM me with over $300,000 of liquid investable capital that are asking me to introduce them to people that are good operators that are buying small businesses. So I've got about $2 million, $3 million in my DMs of five DMs of people that are capital that only want to passively invest in small businesses like I am, so that the person listening to this, the person watching this, can go buy the business $0 down for them out of pocket. So first, let's talk about the couple of ways that you can finance businesses. There's three ways. There's, there's two ways to do it on paper and then there's multiple ways to actually bring it down. So if you're buying a small business, first and foremost, you're buying it normally 10% down. So a lot of the things that I do is through what's called the SBA 7A loan. So the SBA is the Small Business Administration. And it's basically like The Fannie Freddie 30 year mortgage that you're going to buy on a single family house or an Airbnb that you buy. So it's 10% down. SBA will finance 90%. Now that's one way is 10% down. So if you got a business that's $2 million, that's $200,000 down. Okay, get it. Got it. Good. You can also sell or finance a business. So it's going to be a business that's off market, and I'm talking full seller finance, where the seller is the bank. A lot of the times, like 8 times out of 10, if the business is off market, aka not packaged for sale. You're going to sell or finance it and talk directly with the owner because the owner for the most part isn't going to want to pay a 30% tax on the $2 million in cash they would get. And guess who else doesn't have $2 million in cash to pay you. So what you're going to do is you're going to negotiate seller financing with that seller. So you're going to make payments directly to them. It's probably going to be interest only if you negotiate well for the first six to 12 months and you're going to be negotiating just a, a monthly payment that works for both of you. So there's price, there's duration and there's terms. So price, duration and terms. So how much are you buying the asset for, what are the terms and how long is the loan? Those are the three levers that you can pull in order to do a seller finance negotiation for a small business. Now if you were giving them their price or higher, you negotiate the length and you negotiate the terms. Your price, my terms, my duration. If you are doing your price and you're trying to negotiate the price down, it is on their terms and their duration, if that makes sense. So you can negotiate a higher price. Most of the time in seller finance, you're, you're pitching them as two options. One, we can take this to the bank and you can do X, Y and Z to get this ready to sell. It's going to take you like nine months to do this or we can do it faster. I'll give you an extra a hundred thousand dollars. I'll do, I'll buy it for 2.1. But we're going to negotiate this in the way that makes most sense for me, for the business right now. So which of those two paths is the best for somebody buying their first business? The answer is to do the SBA 7 loan, I believe. Why is this? It's more paperwork, it's a headache, it's a pain in the ass. I've done it a few times, comma, but I want as many eyeballs on your deal for your first deal as humanly possible because you just do not know what you do not know. And so for me, I can go seller finance a business and I can pretty much be able to tell where the bodies are buried for the most part. And I can structure a deal and structure the debt and structure the earn outs and the clawbacks, you know, in a way that's sophisticated, that protects my downside. But for you as a first time business buyer, you need to go and a get something that's on market. I would prefer on market. So that means it is listed by a broker on a website called Biz, Buy, Sell or any other websites like that. So think about it like Zillow for real estate. Why is this important? This is important because when a business is packaged for sale, there's a few things that happen there. Number one, a business broker is the one that is in charge of it. So a business broker is going to receive the 300 calls and maybe two of those calls from businesses that are trying to sell are going to be ones that they take on to package and sell. So the business broker is already looking at their financials and is already looking at them as a company and is underwriting them for you to make sure that they are even in a position to sell. Does this guarantee that everything listed is a good deal? No, but what it is guaranteeing is at least they've put effort into the process of preparing. So that means that their financials are cleaner, their, their revenue is stronger, you know, they're a better packaged business. All right, this isn't to say that the seller finance deals off market aren't that. It's just I can almost guarantee you that their books are going to be super like back of the napkin books, probably hand done to probably have a lot of paper receipts and a lot of manual processes from before. Number two is the SBA is going to underwrite the absolute shit out of that deal. Okay? So the SBA on top of you is going to look at that and say, hey, we will or will not loan 90% of this money to you for this deal. So now you've got the broker's eyeballs on it, your eyeballs on it, your business partner's eyeballs on it, and you got the SBA's eyeballs on it. All right? So it's just more and more ways to protect yourself. And so, so let's say we do that, right? So let's say seller finance or SBA, let's just say it's 10% down. Okay, so you got a $2 million company and you want to do 10% down, that's $200,000. How much money do you have in Your bank account? 37,000. Right. Most people we talk, holy shit, there's a delta between the two, right? What do you do? How do you, how do you negotiate it? How do you go about capital raising? You're not going to do a syndication like you'd see in real estate. What you're going to do is you're going to go to a guy like me or a guy or a girl in Action Academy or somewhere along the lines, and you are going to position this to them as the best fucking deal they've ever seen in their entire life. Because it is as a capital partner. And here's why. For real estate, when I'm lending money to somebody doing a real estate syndication, let's say they're buying a storage facility. Let's say they're buying a mobile home park or an apartment complex, and they're raising $1 million, and I have 100, we'll say $200,000. I give them $200,000, right? I am not going to see that money back for three to five years. And in that case, they're going to hopefully sell it in three to five years, and I maybe double my money at that point. And in the meantime, I get what's called a preferred return. Normally around 8, 8% is what we're looking at 7 to 8% pref return, right? So that means that I'm paid as the investor before the operators are paid. So I'm looking at 200,000 and I'm looking at a 7 to 8% pref. And I'm like, well, shit, dude, I'll just invest that in the S and P for less. Less risk, less headache. Like, and I can liquidate it whenever the hell I feel like it. S and P averages 10%. So I'm like, okay, cool. Now, the reason that people do do that is because of the tax benefits. But that's not what we're talking about in this video, in this episode. So let's say I have the same $200,000, and you bring me a small business for $2 million. And you say, brian, not only am I going to give you 10% of this deal, I'm going to give you 10% of the profit. All right, let's make things even sweeter. If it's your first deal and you want to make it super irresistible, you're coming to someone like me, with experience and with capital, and you're saying, not only am I going to give you 10%, I'm going to give you 12 to 15%, because I need help. And I need you to hop on with calls with me once or twice a month, helping me negotiate and help helping me navigate through business ownership. So now all of a sudden, I got 12 to 15%, and that's called an equity kicker on this deal, that's a $2 million deal. And so that cash on cash for me on average is looking to be about 20%. So for every $100,000 that I put into a deal like this, I'm averaging $20,000 plus in return. So going from an 8% return to a 20% return annualized, that is 8. Insane. All right, if you got any stock that you're like, okay, I'm going to make 20% from this, that would be an insane purchase. And also what you're going to say is, by the way, you're not going to sign the personal guarantee. I'm going to sign the personal guarantee as the person that's operating this business. Right? So let's say that you were super generous and you gave your capital partner, just one capital partner, 15% of the deal for putting 10% down. Almost any investor worth their salt would be stupid for saying no, unless they just genuinely did not trust you as an operator or, or the deal was really, really crap, in which case it's still good to get some eyeballs in that and have somebody tell you that, right? So yeah, if you had. So if I'm making 40, $50,000 a year passively from this freaking deal, which would be probably significantly more than that for the deals that I've done, I'm like, hell yeah. And I'm not signing a personal guarantee. Hell yeah, times two. And so, dude, it's the biggest no brainer investment for me. So I can throw in my money and I'm like, all right, hell yeah, I'm getting the cash flow. So that's why my cash flow today, passively, like, once all these assets are up and stabilized and issuing distributions and all my freaking four companies that I've purchased are all up and operating, dude, I'm making like $220,000 in distributions passively. And the freaking person that bought the company, you know, I've got 80, I've got 15%. They just got a $2 million company, 85% equity, 85% of the profit, $0 down. I'll take that any day of the week over what other people online are pitching, which is, oh yeah, just seller finance it. You don't fucking know how to sell or finance. You don't even know how to analyze a company. Why would you go try to do a seller finance negotiation with somebody that's got 20 years of experience running their company? They are going to take you to the fricking toolshed, dude. That's stupid. Oh, and then what else did they Tell you, right? Then they say, oh well, then you just go seller, finance the business off market, direct to seller. And then you're going to go hire an operator to, to do the deal. You're going to hire them on salary and commission for them to go run the deal for you so you can go to Bermuda pool. Shit. Bullshit. That is like first off, you don't have the skill set to do that. You have no idea how to draw up a comp plan. Like you're telling me your first hire is going to be the person running your company. Dude, I am four years deep in business. I am going to be running an a $10 million company. Right now we do about $12 million a year aggregate across all of our companies. I'm going to be doing $10 million a year from one company next year alone. And I still barely feel comfortable hiring somebody that's like a president or somebody that's a manager to actually run my company. And I said for four years and $515,000 of education, that investment. So that is how you do it.
- [21:27]
A
Let me, let's just, let me summarize what just happened the last 20 minutes, which. So Brian, you, you basically showed people that their existing qualifications are immediately applicable, that the stuff that they don't know from a qualifications perspective can be pretty easily learned, and that the people that they're buying these businesses from might be savvy, but they're not necessarily corporate smart. And then you literally just gave another thing play by play. But you've gave a play by play of exactly how to make it happen, exactly the way to negotiate it. And, and, and whether you have $36,000 in your bank account, $0 in your bank account, or $200,000 in your bank account, you just gave that play by play. And this is where I want to end on this. I feel like most successful corporate people already have the skills they have. They might not have access to capital, but as someone that's received five DMs and $2 million in their DMs, it seems like they know people that have access to capital and every single one of them has the ability to at least improve a business, improve it. They're, they might be good at ops, they might be good at sales, they might be an engineer. They have the ability to improve this. What's holding people back really from doing it because you kind of just laid it out in daylight in 15 minutes is that it, is that it's just fear.
- [22:42]
B
Just that, bro, most of your life, most of the Things that you're doing in your life is fear. Think about back to when you were a kid, right? So like everybody, like, just go back with me for a second and think back to when you were a kid. What, what did you think you couldn't do? Nothing. Everything was possible. You're like, dude, I want to be a freaking astronaut. I want to be a cowboy. I want to go dunk a basketball. I want to be the center for the fricking 76ers. Like you didn't know. And so where did, where did the idea that you couldn't do things come from? Other people who couldn't do things. They transferred their beliefs onto you. And you've been riding around with that as an adult for 20, 30, 40 years of your mom, your dad or your uncle telling you you can't do something. Hey, here's a fun test to do. Go back and audit everybody you've ever gotten advice from and analyze. Have they achieved the result that you're looking to achieve? Because I highly doubt that your father or your uncle or your mentor that runs a business would tell you you can't run a business because they're doing it and they know how to do it. I would highly doubt that somebody with a six pack abs like your 40 year old father with a six pack would come to you and say, no, you can't be fit. Because they are. They know how to do it. So a lot of the times like your parents, your friends, your family just don't know how to do it and they just transfer that belief onto you. And then when you do win later, that's why they try to claw you down. It's not personal. It's because they're, they're seeing somebody else achieve what they thought that they was impossible. And now they realize it was possible and now they realize that they've just wasted their entire lives away, right? So I mean that, that's a massive thing. So my favorite definitions of fear are, number one, false evidence appearing real. Number two, face everything and rise. And number three, fuck everything and run. So we're not going to do number three. We'll do number one and number two. But what most people do is number three. Boom. Thank you guys so much for listening to another episode of the Action Academy podcast. My one Ask real quick before you go, if you enjoy this episode, if it brought value to you, please share this episode with one to three friends that you think could get value from it. This is how we grow the show. And at minimum, if you could leave us a five star rating and review on Apple podcasts, Spotify or whatever platform you listen to that would mean the world to us is how we get in front of other entrepreneurs. If you're done sitting on the sidelines, you're done listening to the podcast. You want to be the freaking guest on the podcast? Go into action academy.com, go in the show description, the show link, and book a call to speak with our Action Academy community. We have hundreds and hundreds of people just like you buying businesses and commercial real estate with full coaches, full mentors, full support, full capital. Everything. ActionAcademy.com is where you'll find us.