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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.
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Alright, so then how do you pitch it? I think is a good one. You know, I've talked about a couple ways just kind of in the, in the last couple minutes here, but just to like wrap it up, wrap this part up at least, which is I pitch it in first of all, figuring out what are their goals, what are their timelines, like, what would they do if they don't sell? Like, I would find out, you know, have they tried to sell it? Like you want to ask as many questions as you can to really, really understand kind of the mindset of where they're at. And then, I mean, I like to. It's a little easier for me that if it's your first one, it may be a little bit more of a challenge. But once you do them to kind of like establish, I'm gonna say it's like, I don't know if it's social, proof isn't the right way, isn't the right word. But like this idea that like, hey, listen, I've done this a bunch of times. You know, I can say, right? Like I've done this 25 times. Like this is how we buy these things and sellers love to finance it for a couple reasons. And then we can get into it, right? You can give the part out and just say, listen, this is like what is great for you, right? We can get you a higher price than cash, which is true. Like if I was gonna pay cash for something, I'm gonna pay way less than if I get terms on it. So I can get you a higher price. We can get you. First of all, this thing can be really quick. Like I could get this deal done in 30 to 45 days, right? We're gonna have no, we're have no like colonoscopies of like tax returns and all this crap. Like I'm gonna be, I'm gonna be, it's gonna be, it's gonna be really simple and your employees are not gonna find out because once again, we don't have to do all that stuff. You're gonna get to defer taxes and I'm gonna pay you interest instead of the bank. And by the way, you're gonna have all these documents and protection. So if I don't pay you for whatever Reason you get to keep all the money that I pay you, plus you get the business back. Okay? And like they're like, alright, like I've been doing this for 20 years. Like if I had to come back and like run this shop again or run this whatever business again, like, I could do that. I don't wanna do that, but I could, right? Cause it's something they know. So once you understand their goals, once you understand their timelines, then you can walk through and kind of ask discovery questions to really kind of dive into this. You know, when I'm doing it, it's not every single seller gets every single like pitch. For some of them it's time. All they care about is time. They don't even care about any of their stuff. All they care about is time. And it's the way to do it. Other ones, it's higher price. We work through that. So like anytime you're selling, you really want to like find out what's important to them and then speak to that versus like, what do you think think it's going to be? So let's talk about. We are not going to do. We are not going to use any words that a finance bro would say. We're not going to say amortization. We're not going to, we're not going to talk about like, like discounted cash flows. Honestly, I'm not even going to talk about interest rates in the beginning. I'm not going to talk about, I'm not going to talk about, well, depreciation wouldn't really count here. But basically I'm not going to talk about any of these fancy stuff. I am going to talk about one thing which is cash from me to you. All of my conversations are simply this cash that is going to leave my pocket and go into your pocket. That is the only way that I negotiate and structure these deals. And then yes, all that other stuff we figure out on the back end. But like, like you kind of heard earlier when I was like telling some of these stories, I find a business that I want, okay? And so like, let's say I have a store that is, I don't know, it's for easy math. It's making 100k in profit and we got to figure out a what, what is this thing worth, right? And so in my mind I'm like, all right, it's worth three, three times, right? So in my mind I think this thing is worth $300,000. So to start, I will simply make an offer that has three parts. It is the down payment, the monthly payment, and the number of months. Those are the only three things I talk about. All right, down payment, monthly payment, number of months. So I think this thing's making 100k. I say, hey, I would pay 300k for this thing. So I will start. Usually I say 50k down because I don't know the number works. I've literally bought a $2 million business. Another one that was like 500. Another one that was 600. Another one that was like 400. I don't know. It's like four deals. It's always 50k down. So then what I'll do, I'll just take 50k down. This is like, literally what I do. And then I'll subtract 300 from it. All right, so that's 250, right? So I have 300 minus that 250. Then I'll think to myself, all right, what do I think I could afford per month? And I'd say, I don't know. I think this thing can afford. Usually it's roughly half the profit. So in this case, if it's making 100k, I'd say, like, all right, I could afford a 50k. So it's like 4k a month. But, like, you know, I want to own a lesser number than that. So I'll just take this and I'll just divide it by, like, let's say 3K. All right, so my goal is to make a 3K payment, and then that would be 80. Let's just call it 84 months. Oops. So this is how I would start the deal. Say, I'll give you $50,000 down, and I'll give you $3,000 a month for 84 months. And so if they got out the calculator, you know, 84 times 3 is 100, 252 plus 50K. That would be $302,000 of total payments. So that's the pitch. I'll buy your business. I'll give you $50,000 now. I'll give you 3k a month for 84 months. $302,000 total payments. And then we wait for the response. And sometimes the response is a couple different ways. Sometimes they say, well, that's way too much. Or that's, you know, way too much. They never say that. They say, that's way too little. You know, I want, I don't know, $400,000 of total payments. So sometimes they'll start with that, with the total payment number, and then I'll say, okay, great. How about we do 50k down, and I'll give you 4k a month for. Hold on, I gotta do some math here. So we take 400 minus the 50k. That would leave me 350 divided by 4. That'd be 88. 88 payments. How's that? That gets you to 400k, 50k down, 4k a month for 88 months. And then they'd say, all right, well, I want my money sooner. Like, I don't want to wait. What's 88 months? That's like, what's that, seven years or something? And they're gonna say, well, I want to get paid in, I don't know, five years, right? And so I'd say, all right, so they want to get paid in five years. So I'll put 60 here. And I just like. I just, like, work the numbers to say, all right, I still want to put 50k down, but, like, what do I got to make my monthly payment? And maybe that other number has to go a little higher. And so I'd say, all right, maybe, maybe I say, let me try to get them to like, 350 here. That means I need 300k in payments. Divide that by 60. That would be what, 5k a month? I think I did that, right. Yeah. Right. So it's just this conversation back and forth and back and forth to kind of just land on these numbers. And at the end of the day, you know, 5k a month would be 60k a year. If the business currently is only making 100, I might think that's a little too, like, tight on having cash flow out the door. But let's just say we land on that. I could raise the down payment, right? The other option is I say, all right, I'll give you 100k down, you know, then 4k a month for six months or whatever, whatever the math ends up being. But these are the levers. And I found that if I start speaking in those terms, down payment, monthly payment, number, months, total payments, that that is how they respond. Because it's just easier to think about just this concept of, like, the cash flow from me to you, cash flow from me to you, once we agree on those things. So let's say we come to that agreement, which was 50k, 50k down, and 5k a month for 60 months. All right, so that is the, like, the terms of the deal, quote, unquote. Then what to get the purchase price. And I've created some calculators online. I'll try to link them below. But like, Honestly, I use one of these, like really simple mortgage calculators. I'll make the years. What is this? Five years? I'll make my payment $5,000 a month and then I'll put in some random interest rate like 5%. So in this case, I do this math, I put a 5% interest rate. It's telling me that the purchase price is about $315,000 at a 5% interest. Based on all these factors, right, of $50,000 down, five years of payments, $5,000 a month. But the funny part about the interest rate here is like it doesn't really matter what it is because if I did the same thing and I said, alright, let me make the interest rate 10%, I change the interest rate to 10%, the purchase price goes down to $285,000. But guess what? The math still the same in terms of like it's still $50,000 down five years and 5,000amonth. Or I do the reverse or where maybe I'll put a really low interest rate like a 2%. You can't do zero for IRS reasons and stuff, but you can do pretty close to it. This would put it at about 335,000. And again, it's all the same payment terms.