Kevin Bell

Doubling His Income Through Small Biz Acquisition

Medium Article

LinkedIn Post

Twitter Post


The value of talking with someone on the same mission as you is sometimes hard to quantify.

The best way to describe it is what it looks like to take one match on fire and put it right next to another match on fire. What you get is an exponentially larger flame from the combo of the two.

Those conversations don’t happen everyday, but when they do, they are INCREDIBLE. I had one of those conversations the other day and wanted to share with you the breakdown.

But before you read any further, I have a few questions for you. You don’t need to respond back, just answer these in your head and that will determine how much more you read on. Its like an interactive TL:DR

Questions:

If any of this resonates with you, you should definitely read on. We are on the same page here. The conversation I had was with a guy named Kris who not only thinks this way, but he’s actually going out and doing it.

Conversation breakdown👇

Background: Kris has been working in the oil industry for the past 20 years. He loves his job, but like any other W2, he’s well aware that the life he wants to create for his family is not going to be created through his current gig. He does well making about 160k a year but also works his ass off. 40 hours a week. Every week.

After missing the opportunity to throw an offer down on an adjacent company that he had been familiar with, it lit the fire under him to understand what it would take to purchase business.

Not having bought a business before or having any acquisition experience in this way, Kris went deep into research mode, joined an acquisition community and got to work.

Within 6 months, Kris landed a deal that has legitimately changed the course of his life and set him up to do this again and again.

👉 I’m over simplifying this here, but let me breakdown the numbers for you so you can see what he’s working with here and how possible this is.

Deal Breakdown:

Purchase Price - 2.6M

Kris Put ~5% down (135k)

Seller matched that

SBA loan for the rest

Full standby on seller note

--There’s a lot going on here, but stay with me.

An SBA loan is going to require 10% down at the minimum and then fund 90% of the deal. Kris got the seller to put down 5 of that 10% and then he put down the other 5%. The rest was covered by the SBA.

A few great things about this scenario:

  1. It keeps the seller in the game and accountable
  2. The way he set it up was what’s called a full standby. He doesn’t have to pay on the 5% seller note for 2 years.

The bank counts that as part of the down payment though.

ANOTHER great thing was that the owners took a pay cut to free up money for Kris’ salary.

You might be wondering why a seller would do that. What’s in it for them? It’s actually a LEGIT deal for them.

Main points:

This is HUGE! For 5% down, Kris owns a business worth about 2.6M. The owners are staying on and business remains as usual.

But what in the world is an SBA and how does it apply to this situation?

These situations happen all the time! You just have to know what you have when you’re looking at it.

Now let’s talk SBA🏦

SBA stands for Small Business Administration. So an SBA loan is a very fitting loan for what we are trying to do here.

This article isn’t about SBA loans so I won’t get into the nitty gritty. Instead I’ll show what you want to look for and how you can use the SBA like Kris did.

First, you’ll want to get pre qualified. There’s a ton of ways to go about this and places to use. I know Live Oak through my storage investments and the storage division they run. They’re a rockstar group. But there are plenty of other lenders out there.

Regardless of what you’re prequalified for, you can use that and leverage it with the seller like this:

“Hey Mr. Seller, I’m pre qualified for X amount. It’s not much, would you be able to put down X amount?”

It’s all in the way you phrase these conversations with the sellers and brokers. Any little bit of an SBA will help and then combining it with a sellers note; you’re in business.

Having the pre qual in your back pocket is huge. What this shows the broker and the seller is that you are serious. Even if it’s a smaller amount than you’d hope, it’s more than most out there have. People like to kick the tire down the road. A pre qual says more than words.

Pre qual ✅

Next you need to set up an easy and quick deal filter. Deals are endless. We’re in a time right now when there are more businesses selling than there are people to buy them. That’s a good thing AND a bad thing. It means you need to know what a good deal looks like and what YOU want out of the deal.

Kris uses these 3 questions to determine whether it’s worth ANY more time:

  1. what’s management structure?
    • Does it have Fractured management = workers but no GMs.
    • Are the bosses dicks or shady?
    • You want to buy a happy and healthy company
    • You want employees who are passionate about their work
    • Do you like the owners?
    • Do the employees want to stay?
  2. Based on the management structure question, it will determine whether you can be semi absentee or not. If you can’t, you’re buying a job. Negative ghost rider.
  3. Do the numbers work? After seller note and SBA, what’s your profit?

The idea is to find a company with the owner or a GM already running it, keep them there, keep your day job and help grow the company based on what you bring to the table. You profit and pay the loan off over 10 years or sooner. This gives the seller a peace of mind that the company is taken care of and they can comfortably exit at any time.

What to look for to accomplish that:

Don’t overthink this part. Kris found his business on BizBuySell. That’s by far the biggest pool for business acquisition right now. But here’s a little hack; when you get in touch with a broker about a certain deal that you’re looking at, reach out to them directly and ask to be added to their email list. Tell them your buy box and stay in touch with them. It doesn’t have to be a mass email thing where you’re reaching out to a ton of brokers everyday. Just as you get in touch when them over the week, be a regular, normal human and chat with them. It will go a long way with building those relationships.

As you search, there will be more duds than not, but when you do find one of interest, you want to appeal to the seller as much as you can. This is called “The Pitch”.

The key here is to ACTUALLY mean all of what you’re saying. The point isn’t to be fake, the point is to express that you genuinely want to leave a legacy for you family. That’s why we’re doing all of this anyway. That’s why THEY (the sellers) built up their business. But no one in their family wants to take it over… So it’s up to you.

Even as you get this far down the line and you’re talking with sellers, things still might not work out. And that has to be okay. You learn from each situation and take that experience on to the next deal. Kris went down the road with a deal for 6 months before he had to pull the plug on it and go to his second choice. He closed on it and is sitting pretty, to essentially DOUBLE what he makes and in a few years own the business outright and sell or maintain with huge profit.

What I’m telling you right here with all of this is a LIFE HACK. It’s not simple or easy BUT it’s possible. And that’s the beauty of it, IT’S POSSIBLE. Most don’t even know that things like this can be done. You don’t need to have 2.6M cash to buy a biz like this. If you did, you’d be stupid to put all that cash down.

THIS is how you create REAL wealth. Generational wealth. As long as your desire and relentless determination exists, the opportunities are there.