BY MIKE WARREN— I wanted to share with you a technique that I have rarely shared. I also know that some people who read this will say “Mike, what the heck does this have to do with real estate?” That’s a good question.
Over the years I have always looked to diversify my investments. I like some in real estate, some in paper, some in stocks and some in businesses. Specifically businesses that throw off hundreds of thousands of dollars a year in profit and can be sold for seven or even eight-figure paydays. So bear with me for a minute and let’s see if I can peak your interest.
Have you ever heard of business flipping? It’s where I find a nice business that is doing about $1 million a year in gross revenue. I then buy that business using the business’ own cash. So I literally have no money out of pocket. Once I buy the company I typically triple its profits in about 12 months. I then position the company so that I can sell it after 24 months. Right now you may be thinking that it sounds like a lot of work.
Let me let you in on a secret: I not only buy the company no money down, but I get someone else to run the company and do everything that needs to be done to grow it quickly. Along the way, I make a $5,000 -$20,000 a month salary out of the business while we grow it to be sold.
In essence it is just like buying a house and reselling it. You can buy a house no money down and you can buy a business no money down. You can get rental income from a house and I can get cash flow from the business. You sell the house for a profit down the road and I sell the business down the road (typically 24-36 months). The big difference in the two scenarios is that I make 100x more “rent” and I also make 50-100 times profit when it is sold!
Let’s take a company that has annual revenue of about $1.5 million. It’s earnings are $300,000. I go in and buy the company with none of my own money. In most cases I like to keep the owner in place (you will understand why this makes your life super easy) to run the day-to-day operations as we bring in a new operations person who gets trained by the owner to take over.
Then using some proven marketing strategies, we grow the company quickly (typically we triple a company’s profit in 12-18 months). So if we triple the company’s profit from $300,000 to $900,000, we can actually sell to a private equity firm for a higher multiple of around 6. In other words we get to sell the company for $4.6 million dollars. I
f you subtract out the $300,000 we paid, we get a net profit of $4.3 million dollars. Plus while we grew the company we were pulling a salary/management fee of around $5,000-$20,000 a month. Do you like these numbers?
Just keep thinking about the part where you got paid $5,000-$20,000 a month until you sold it and made $4.3 million profit. Can you say cha-ching?
Have I gotten your attention?
Would you like to learn what I do?
I have a free webinar training that is about 90 minutes long that walks you through the ins and outs of buying a company using no cash, zero credit and flip it for a big payday. In fact, I cover the 5 key secrets you need to be successful, plus give you lots of real world examples of deals we have done. I’m going to be taking this training down shortly, but while it is available you can go watch it at FlippingBusinesses.com.
Let me leave you with this final thought. I want to buy companies, and I’m willing to pay you $20,000 for just giving me a lead.
Want to learn how to do that? Then check out our training at FlippingBusinesses.com.