Six ways to pay nothing down but buy into money-making businesses!
Another priceless episode in the series Roland’s been taking us through, on how to 10X Your business. Listen closely to this episode as Roland explains and breaks down these creative ways that he has actually purchased or bought into companies.
We’ve listed his first few below, but if you want to dive deeper with Roland on these things, provide us with your email here. You can also consider doing one of Rolands Intensives, (Leverage, Exit, Grow and Scale!).
Okay, this stuff is GOLD! Listen in here or find us on your preferred podcast player.
#1 Through Seller Financing.
Assure the seller that you want to give them close to their price, but ask them to allow you to pay for that over time. Everything is up for negotiation.
#2 Through An “Earn-Out”
Usually, this is when there’s a price disparity, due to the projected income being a lot higher than the current income. Agree on a formula for what you will pay over time, based on the business performance (e.g. 10% of income or 20% of revenue).
#3 Equity or Asset Swaps.
#4 “ABL”. Asset-Based Lender financing.
Look at all the assets that you’re about to buy, and see if you can get money out of them upfront!
So look at what you can borrow against in order to buy the company. Real Estate or Accounts Receivables would be examples of this through a process called Factoring. There’s even Container Financing, Purchase Order Financing, and Equipment Financing.
#5 Baseline Payment Structures.
Negotiate with the seller, reassuring them that you don’t want to take away their current profits. BUT, you’re confident that you are going to come in and grow that profit margin. So you agree, that for a term, they get preference on the direction of their current profits, but above that – you split the profits 50/50. Put a time cap on this, so that you switch to 50/50 as soon as you’ve doubled the profits (or whatever you agree is reasonable).
#6 Self Liquidating Payments, otherwise known as “Slip Financing”.
Structure this deal when you know that the revenue on the existing company will cover the note. Or, if you can’t cover it that way, forecast what you will earn and structure it with the increased value factored in. Make your payment structure so that you can easily cover the dues.
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