Loading summary
Transcript2 lines
- [00:01]
A
Welcome back to the Business of Beers podcast. Your daily dose of strategies, tools and tips to help you build an eight figure business. Today's episode is a clip from one of my YouTube lives. If you'd like to hear the whole thing, there's a link below in the description. Cheers.
- [00:17]
B
Another thing is talk about the price. And banks are going to require independent appraisals, right? They're going to want this pro forma. They're going to want this, they're going to want that, they're going to want all this stuff. And with poor performing stores specifically, sometimes the seller is stuck on a high price, or maybe not even a poor performing, but they're stuck with a price in their mind and they're not going to sell it for anything less than that. And so even if I had gotten an appraisal and said, well, you know, the stores are only worth this, they may say, well, too bad, like, I'm not, I'm a stubborn, like, old person. Like, I'm not going to sell it. You're like, all right, I guess, I guess, I guess I'm not going to buy it then, right? But if you don't use the banks, the price can be whatever you need it to be. And what I focus on instead is the terms. It's the cash in, the cash out. I focus entirely on the terms. I don't even care about the price, but they care about the price. So I can give them a price that they're happy with, but the terms that work for me, then we're cruising. So this one, I bought two stores. Well, there were two stores. They were making $118,000 total between the two of them. I offered 350,000 3X, thought it was a fair offer. She comes back, says 500K, that's my minimum. That is like, I'm not gonna sell for a penny less than 500k. And I'm like, well, no bank's gonna agree to like a 4, 2 valuation. It's not gonna be able to support the debt load and all the crazy math and blah, blah, blah. And she's like, whatever. I'm not, I'm not selling for anything less. So deal goes cold for six months. Because I'm like, all right, well maybe like she'll come around, maybe the sales will get better, you know, whatever. So I come back and I make an offer and says, all right, here's what I'll do. I'll do $50,000 down and I'll give you $4,000 a month for 12 years. That was, that was my offer. No balloon payments, no like 50k down. I'm into the stores and I'll pay, you know, 4k a month. She agrees. And I put 50k into the store. Over the last 12 months, we made $230,000 between those two stores. So getting better, not up to our standard, but good investment, right? And the thing is, right as we start to grow, all the numbers I'm going to give you, our cash flow numbers, not revenue, are that like there's this thing that in the beginning when your business is small, you view it as a job, right? Because you are, it is literally your job is you work in it, it makes money. If you don't work in it, it doesn't make money. It is purely a job. And the biggest challenge is turning that job into a business where now you've got a team of people and things work without you, right? And you can go on vacation. And it still continues to run. And often all these start as jobs, but then we turn them into businesses. And. But a lot of times when I am buying these small deals or when you are going to buy another person's small business, often you're buying their job and for them it's like, it's just like relief that, like, oh, I don't have to get up and do this thing anymore because it's a good job. And you have to have these systems in place to make it into the business. Otherwise you are going to have that job. Like, if you don't have good systems to be able to replace it, you, you are going to fall into that same trap. And so that's why it's like, it's really important that you know how to hire. You can have people, you can run the process, you can generate cash flow, all this stuff. But then the next level, the final like boss level is it becomes an investment vehicle. And that is something that I want to say I only learned maybe three years ago or less in that like, I can take money out of the business and maybe I go and I put it into the stock market and I make 15 or 20% this year, year or whatever, or maybe 10% on average. But I could take that same money, that $50,000 that I was going to go buy like a Vanguard fund with and I can put it in to buying a two more stores that get me a. What's it said? That's not 800, like a crazy return. What's that 400% return on my money? Like, there's no. Once you can get the systems down, your mind shifts and it's like you view it as this investment vehicle. And that's how to say how I've compounded, you know, our business where we only have like a hundred grand of bank debt. I have like a couple million in seller notes. But like I have no investors, all self funded. It's because I switched my brain from like I need to take money out of the business and I need to go like build like defenses and I need to go like invest in all this other stuff. And I still have money and other stuff obviously, but like, but back into the business of like, what if I just put more money into the shops? What if I just bought another store? What if I quote, overpaid for another opportunity? But it can, it can make 100% of my money back in the first year. And I have the systems and people in process in place so that I'm not like, I'm not the one physically going there. That's like ultimate game boss, right? So the wins. So we think about this thing like just getting these deals done and just like the net gain of it all where the seller gets the price that she wanted, $500,000. She also gets another 126 grand of interest income over those 12 years. Remember, I'm paying her 4k a month, 12 months, 12 years, that's 576k. Plus the 50,626 is the total cash if I don't pay it off early from my bank account to her bank account. Right. And so instead of paying Chase 126k, I'm paying this lady in her retirement plan that. So like that's a huge win for her. Me, like I get this thing for 50k down $25,000 a store essentially. And we hire more people. Like we've already hired more people. We pay them better. Some of them are the same people that work for her now work for us. They make double the amount of money because we have performance based compensation plans where the more people, you know, perform, the more money they make. And so yeah, some of them are really motivated. Plus we do a bunch, we spend a ton of money in marketing. We have better, we're just like better at getting customers and more bats. And we use dvi, like digital inspections. Like we do all the things and for whatever your business is, you're gonna do all your things but that like improve the business. And then we hire, we help the community. Like we are fixing more cars, we were making cars more safe. And then yeah, like I get a good return on that as the investor for taking the risk and putting it all together. Like I should get paid. It's the whole point of capitalism is, is you get paid for risk and you get paid for benefit. And so that's what these can do. And I, and I. And it's just like a total unlock when you start to think about the business. Not as, just like, you know, even for me, like I used to be like I'm not paying more than two and a half times for this thing. Like I, you know, I'm all proud of a. I just put out YouTube, another video. I bought a store for a hundred thousand, $110,000 that was making 100,000. That was one of my cash deals. I got it for basically one times earning. It was, it was like the best, it was like one of the best deals I've ever done. And I was like for many years that's what I wanted. That's like all I would want is like, I want to see how cheap I could get it and like on the earnings multiple. But that held me back from doing other deals that other people ended up buying because I viewed it more as like this the job. Like I need to get a really good deal, like I need a win quote unquote in the short term versus thinking about it over the long term and how much cash flow am I going to be able to make on this thing over the next five years or 10 years or whatever your timeline is. And then ultimately you're going to be able to sell the business too. So as an investment, all these have terminal value when you want to get out of it, if it makes sense.