We’ve recently been sharing some excellent content from Roland Frasier’s Epic Challenge (Ethical Profits In Crisis). Today’s show is an eye-opening 8-minute episode on how you can buy a business with no money down.
“You’re only limited by your creativity and how you do this.” Roland Frasier
Who Is Our Host Roland Frasier?
Co-founder or principal of 5 different Inc. Magazine’s fastest-growing companies (e-commerce, e-learning, SaaS + real estate), Roland is a serial entrepreneur who has built or sold 24 businesses with adjusted sales ranging from $3 million to just under $4 billion. He’s a mentor and investor and an excellent podcaster too! Read more about Roland here.
Listen For,
• 7 Essential (tried and tested) strategies for buying a business with no cash out of pocket.
• The power of talking to people and finding out their needs and wants so that you can configure a truly win-win arrangement.
• The difference between a Sweat Equity deal and an Earn In agreement.
• The off-the-cuff strategy he first pitched to William Shatner, that has worked since then, time and time again.
If this episode helps you, head over to our home page and sign up for occasional memos and messages. You can also follow Roland on Facebook, where his profile is always full of content and conversation.
7 Ways To Buy A Business With No Money Down.
1. Borrowed from the Real Estate Industry, Seller Financing is the easiest and simplest way. Offer no money down out of pocket, with a fixed stream of payments.
“So you can frequently offer a higher interest rate than they would be able to invest the money and take on no risk because you’re securing it with the assets or the stock of the company that you’re buying. So the worst case for them is they get their company back, plus whatever cash they got out of you before you defaulted”. Roland Frasier
2. Credit Card Cash Advance.
“Use your existing credit to get the down payment, buy the thing that you want to buy and then pay your credit card off because it’s usually pretty expensive.” Roland Frasier.
3. Offer an Earn-Out Deal. Configure a formula where they’re going to get paid over a while based on the company’s performance.
“So an earn-out typically happens when you can’t agree for whatever reason on the purchase price now…but it also works if you’re cheap like I am, and you just don’t want to pay anything out of pocket.” Roland Frasier
Negotiation Tip: If you find out what they want the money for, or what they’re going to do with the money, it tells you how much cash you need to put together for the deal. Listen to Roland’s examples of this.
4. Consider an ‘Earn In’ Deal a.k.a Equity deals.
An Earn-in is when you come in and bring value, and both parties agree on performance milestones. And then, as those milestones are met, you have earned into the equity of the company.
“We’ve had 50% of 20 million dollar company earn-ins, just because we come in with the skills and the connections and the resources that we have”. Roland Frasier.
5. Sweat Equity Deal.
“Sweat equity is, I agree that I’m going to come to the company and actually do specific services, and regardless of what happens, you do not have to pay for me. I cost a lot of money, and therefore I’m going to get this much equity.” Roland Frasier
6. The Deferred Down Payment. This language is nothing short of magical.
“You would be amazed. Almost every time, that language works! So don’t forget the ‘deferred down payment.’ What’s fantastic about it is that it means that you don’t have to come up with a down payment. You pay for the company through the earnings that it generates after you acquire.” Roland Frasier
7. Swaps.
Cash is just an asset. So if you have an existing business, you can swap equity in your company for equity or assets of another company, or you can swap assets that you have for equity or assets of another company.
“We can exchange anything that’s on the balance sheet, which includes equity, and equity can come in as many flavors as you can create.” Roland Frasier.
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