Best way to learn to build and sell businesses without high cost

[chrisbiz4444]

I found myself facing a problem about a year ago. I wanted to buy and sell business after seeing the massive profits that can be made. It also looked like a great deal of fun to me. I have also always loved buying and selling. However I found myself facing the problem of not having the proper resources or capital to buy and sell business's or commercial property's, even if I were to find an investor I certainly would have no room to make mistakes during the learning curve.

So in conclusion I looked for alternative ways to do this at cheaper cost with more room for mistakes and lessons. I think I found my solution, build online business's and sell them on sites like flippa. I feel like you can learn alot from doing this. I have also heard of people buying and selling domain names for big profits. For example if you were ahead of the curve and bought the domain sex.com you could have sold (just the name itself) for 13 MILLION dollars! and that is not all. There are many examples of this happening with domain names that are much less desirable. I know most keyword domain names are already taken. So most of the MASSIVE jackpots are already off the table. But I still feel like money is there. For example, namejet auctions. You can find highly undervalued domain names that are overlooked by most. (Just a little money making tip).

I recently started buying domain names to flip myself. But my question is to anyone here that has built an online business and sold it in a fairly short amount of time for profit. What should I know before diving into this. Is it as profitable as it appears to be?

 

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[Era]

Actually, a lot of the websites on Flippa actually aren't producing as much as they appear they are.
It's important to do lots of due diligence before you purchase an existing business on flippa.

Businesses that are being sold for real profit aren't using flippa.

The best way to learn to build and sell an online business is by "Doing"

By taking action, you will learn all you need to know.

 

[chrisbiz4444]

Yes I completely agree and understand that. My question is to those that have already been there and done it themself. Is this as profitable as it appears to be?

 

[hughjasle]

Go get a job as a business broker. I did it a few years ago to learn the insides. Check on the requirements for your state to be licensed. In Nevada I had to obtain my real estate license then pass another test & course for a business broker permit.

This will give you all the insights you could ever want. It will also teach you to hustle and you can make a sizable income.

Sent from my Nexus 4

 

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[chrisbiz4444]

WOW that was awesome info. I did not even know there was such a thing as a business broker. How much do they avg out per year?

Speed post for you my friend.

 

[hughjasle]

Business brokers are essentially like real estate agents. Your pay is based on you and your hustle. I couldn't give an avg because of that. We had guys in our office doing over $800k /yr. They had been in the business for ten years. We also had guys who didn't do anything. They wouldn't even pick up the phone.

However at one of our sister locations we had two friends just out of college join and team up and have made $250k EACH for the past couple years. They hustled like crazy and put up funds to market themselves from the get go.

Business brokers charge around 10-15% of the selling price. Naturally if you are working for a firm then they take their cut of that, but the numbers add up fast.

I would love to get back into brokering, but owning the brokerage myself next time. If you do go into it, just know that your first payout most likely won't be for a while, just like in real estate. I would say to plan on spending around $5k to get all the licensing done and a few months of marketing costs to get started. If you can handle all of that then you should be sitting pretty by the end of the year.

 

[chrisbiz4444]

Awesome man. I currently managing a car dealership but the pay just isn't enough for me so im looking to get into someone really lucrative. I am in the state of RI. Do you have an advice on what to do to get the ball rolling aside from getting a real estate license ( I already have one).
Thanks for the great info. And I also think becoming the owner of a business brokerage is a great avenue. How much do you think the owner of your location after overhead pulled in?

 

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[hughjasle]

I am in the state of RI. Do you have an advice on what to do to get the ball rolling aside from getting a real estate license ( I already have one).

Look up the the laws are in your state for business brokering. Some states don't require anything. Otherwise prepare yourself financially and start studying up on the brokers in your area both in terms of competition and to see who you want to work with.

Once you are all licensed and hanging your license somewhere, go out as fast as possible and start sending mailers to all the businesses out there. Its all about marketing and getting yourself out there.

How much do you think the owner of your location after overhead pulled in?

I don't know. My location was very different. The owner is the owner of the entire franchise which is now the third largest business brokerage franchise in the US. He started just over a decade ago now with just himself and his wife. They put the customer first and provided HUGE value in doing so. They made seven figures in their first year themselves. So I don't know how much he made off that one location nor do I know what the numbers are for the others. Sorry. I wish I did. He also owned the real estate of the building we were in and still did some of the bigger deals himself (from relationships from his earlier years as he doesn't actively go out and hustle himself anymore).

Random fact: he has sold one business seven different times in a ten year period. When you provide a good service to a customer as a buyer, they want you when they are ready to sell. He had made more selling that business than most of the owners have running it!


Sent from my Nexus 4

 

[recon187]

He had made more selling that business than most of the owners have running it!

That's is incredibly impressive.

 

[hughjasle]

That's is incredibly impressive.

Here is the numbers run down. If I remember correctly the business was a hair salon or something simple like that. Say the salon was netting the owner $50k and selling for $100k. At 15% commissions that is $15k per sale. Having sold the business 7 times means he made $105k over the years off this one business. A few of the sales were repeat customers. Meaning owner 1 sold it to owner 2 who found they sucked at running a business and put it back up for sale (using the same broker because of the good experience he had buying from him). The broker let owner 1 know it was back up for sale and owner 1 bought it back for a year only to sell it again now to owner 3. All of them had such a good experience and created such a good friendship with this broker that he was immediately called if the owner ever wanted to sell.

THAT is the importance of adding value. Value in creating such a good relationship and experience for the customer that they don't even think twice about coming back to you.

 

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[The-J]

http://foreverjobless.com/how-to-buy-a-ferrari-for-20k/

 

[Blueskies4me]

I've had some experience with the business broker business. Indiana doesn't currently have any licensing requirement (that I'm aware of)for the transactional sale of businesses. In order to fast track you in that business I would hit the streets & find the businesses for sale with 4 things: Non Franchised, WITH Assets (building / equipment), High Cap Rate (10% or higher) and Motivated Owner (want freedom, they're sick, no heir or heir uninterested in taking the business)then approach a seasoned broker and ask for a small percent of commission if he walk through the sale with you. Small percentage is 3% of potentially $150,000- $1,000,000+. That's not a bad commish. A lot of broker's are working on referrals if they've been in it awhile and may not be pulling in the low hanging fruit from just cold calling. I have scripts that we ran through call centers if you're interested. They're pretty powerful.

 

[Michael W.]

Id like to hear more about this. I've interacted with a few brokers and they seemed a little shady, first impression et al. Probably good people though. I like the idea of buying and selling businesses and this seems like a logical step in that direction and also to build some capital.

 

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[oldscool]

Hey hugh I seen some business brokerage franchises for sale on bizbuysell...I think they give you the infrastructure to buy businesses. At least they do in theory, (i.e. customer support training etc).
Anyways, OP have you read this book?
http://www.amazon.com/dp/0471547751/?tag=tff-amazonparser-20
I haven't read it but someone asked this same question in another forum and a guy recommended this book.

Lastly, a bit off topic, but, a hybrid of business brokering is just being a jv broker (which is really a business/marketing consultant) who positions himself to stick his hand in middle of all kinds of deals. Jay Abraham has a great info on how to do this with little to no cost,(in theory anyways). Someone posted the PDF book for free. Check it out. http://grumomedia.com/files/Jay_Abraham-From_Mediocrity_to_Millions.pdf

Let me know if the book from amazon is any good and if anyone have other books,audios,videos that are free that might help share your knowledge!

Oh here is an interview on a guy who allegedly did it with no money down.

 

[Blueskies4me]

Be careful with Bizbuysell.com it's built for by owner. Most high end business are going to want to sell on a confidential basis and the sites like those tend to draw 90% non buyers / transactional agents like yourself looking for a piece of your deal that you have to vett out. If you do the leg work and find a seller that has those 4 things I mentioned (familiarize yourself with the term EBITDA) sort of a big fancy term for Net Operating Income you will have the ear of a veteran broker. Yes, you could go find one and say please train me or try to do it yourself but if you hit the road and find sellers yourself, trust me the guys with SERIOUS vetted buyers will listen if you bring them a seller. They might bust your chops a bit but they're as eager for a sale as you are. So you get 3% of 12% no big dealio right? Most of these guys are regional so you need to find someone that's local to you. I have names of guys in my area and some internationals but you don't want that yet. Build a team of cold callers, run the script and meet with them. Be willing to help them.

 

[Blueskies4me]

Jay Abraham is good but I probably wouldn't shell out the money for the program he sells. Basically, his philosophy is if I can increase your business by implementing x,y,z, do you agree to give me a % of the increase. No one loses because if there's no identifiable increase then there's no payout. It also relies on the honesty of the business owner which really comes down to trust.

 

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[ManWithABeard]

Hey Chris, hope this helps, I'll share a short story about a former friend of mine in regards to selling an actual website.

Back in 2005, he started a niche messageboard and grew the members each month by doing youtube videos of reviews of products and such. He would then also invite members to either be part of the videos or do their own. Even had contests and stuff.

Well, long story short, in 2007, he sold the site for a 5 figure undisclosed amount. I'm the only other person who knows the actual amount, i was the only one he trusted at the time lol. I remember when he first started the site, had no members and struggled with the site for a while. He threw the most epic party I've been a part of.

What I learned was, he just built something that was valuable, informative, and gave people in that niche a place to discuss that particular product. He would was also giveaway some serious gifts to members too as gratitude for helping the site become an authority in that niche. He didn't even know what a flippa was ha ha. He built it, grew it, then sold it to some private buyer.

I guess what I'm trying to say is, I believe to really sell a website, it's definitely gotta have some serious value, possibly organically built.

Last I heard of him from mutual friends, I think he's now about to sell or has sold his car detailing business as well. He started that from scratch too.

 

[Michael W.]

How does the valuation of a business go and who does it if your working for a broker?

 

[Blueskies4me]

Valuations are tricky. Most brokers charge for them with their contract fees when the owner agrees to use you as a transactional agent. If you want to build a solid reputation, work with a broker to do a formal valuation. A quick unofficial valuation can be done with several simple online calculators. I would do this at an inital appointment. It solidifies your sales call by showing your interested owner that "My buyers would definitely be interested in learning more about your business because it qualifies in these 4 areas."

Realtors and banks do them too but they have different approaches that are often based purely on assets. Business brokers can figure in intangibles like market appeal, how quickly it can be re-managed and they can often bring a better idea of a business owner's options for financing in that valuation. I know several brokers that do Vet clinics and Medical offices only and can get 100% financing, because their funding is all in house.

 

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[Michael W.]

Valuations are tricky. Most brokers charge for them with their contract fees when the owner agrees to use you as a transactional agent. If you want to build a solid reputation, work with a broker to do a formal valuation. A quick unofficial valuation can be done with several simple online calculators. I would do this at an inital appointment. It solidifies your sales call by showing your interested owner that "My buyers would definitely be interested in learning more about your business because it qualifies in these 4 areas."

Realtors and banks do them too but they have different approaches that are often based purely on assets. Business brokers can figure in intangibles like market appeal, how quickly it can be re-managed and they can often bring a better idea of a business owner's options for financing in that valuation. I know several brokers that do Vet clinics and Medical offices only and can get 100% financing, because their funding is all in house.

That is a lot of great information! I am going to do more research but I am pretty close to doing this, this is right up my kind of alley. Pretty exciting.

 

[Blueskies4me]

Good luck. Let me know if you have any questions. I'll help if I can or point you to someone that can.

 

[WaystarRoyco]

Also, make sure you have a firm understanding of what's actually in their valuation. I've seen instances where there is a price listed on a business, but it may not include such things as inventory, property, or accounts receivable. These are all points negotiable within the purchase.

There are many calculations, but a cash flow analysis will give you a good idea of where the money is coming from and where it is going pay costs and what's left over. Many owners reduce their cash flow by expensing personal costs to the business. Be mindful of it and use it to your advantage. Seek your accountant's opinion on the figures; either spend a little now to find out whether the numbers are justified, or spend a fortune later in audits.

Hope this helps.

CK

 

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[oldscool]

Also, make sure you have a firm understanding of what's actually in their valuation. I've seen instances where there is a price listed on a business, but it may not include such things as inventory, property, or accounts receivable. These are all points negotiable within the purchase.

There are many calculations, but a cash flow analysis will give you a good idea of where the money is coming from and where it is going pay costs and what's left over. Many owners reduce their cash flow by expensing personal costs to the business. Be mindful of it and use it to your advantage. Seek your accountant's opinion on the figures; either spend a little now to find out whether the numbers are justified, or spend a fortune later in audits.

Hope this helps.

CK

Great information, but, assuming the person is a beginner, they likely dont have the infrastructure at this juncture to afford an accountant. What do you recommend as a plan B?

 

[Blueskies4me]

Many owners reduce their cash flow by expensing personal costs to the business. Be mindful of it and use it to your advantage.

Very very important. These are add backs. Business owners unfortunately get so used to using their businesses loopholes to keep the business from showing too much profit in order to keep taxes low but wonder why they can't convince a buyer that they're profitable.

 

[Blueskies4me]

Great information, but, assuming the person is a beginner, they likely dont have the infrastructure at this juncture to afford an accountant. What do you recommend as a plan B?

If you're doing a formal valuation, then you've likely signed a contract to be their "transactional agent" and there's usually a fee for that from as little as $500 to $1500. However, be really really careful with going it alone. There are so many things that could wrong after this point that could at minimum lose the client and at the worst you're crossing legal limits. I could list a hundred in between. My suggestion is that by this point you have already talked to a broker and said if I bring you a client under contract (make sure you do) that's ready to sell will you walk me through this. You have a private contract with him that gives him the lions share after the close and you're golden.

 

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[Blueskies4me]

By the way, "accountant" & "attorney" may sound like expensive things to have but they don't have to break the bank. A lot of accountants do the work on the side and don't charge a lot (if anything) for just consultations. But if you are considering being in any type of business this is not really negotiable anyway. Like going to the dentist or doctor. Don't wait until you need one. Sometimes it's just too late.

 

[WaystarRoyco]

By the way, "accountant" & "attorney" may sound like expensive things to have but they don't have to break the bank. A lot of accountants do the work on the side and don't charge a lot (if anything) for just consultations. But if you are considering being in any type of business this is not really negotiable anyway. Like going to the dentist or doctor. Don't wait until you need one. Sometimes it's just too late.

Couldn't have said it any better. Before I even got started in looking for businesses to buy, I interviewed accountants and attorneys to become part of my acquisition team. When you set the expectations that this isn't a transaction with them and they're going to be your long haul partners in business, they tend to be more flexible with payment terms as well as their actual service costs. That's been my experience.

Hope this helps.

CK

 

[oldscool]

The last two post has given alot better insight then I have gotten from SCORE which is pathetic because they are the ones who was suppose to help me put my vision into organized fashion. Sort of like a ghostwriter. My frustrations with them is more than you can imagine. It seems it ultimately comes down to knowing your numbers because the less you know the more you'll need to payout. Which is the reason my business plan never was done because I never got to speak with someone at SCORE who could help walk me through all the parties needed to create a win win for us all. They'll give you a template and say knock yourself out, but, there is noone who can help put puzzle together.

Perhaps my plan was overly ambitious, or, maybe i didnt explain it in an understandable way. Basically, I was going to do the same things mentioned above, except doing it ior broader types of businesses/fields,(hybrid of Jay abrahams jv method).

This thread has sort of rekindled my initial plan..though I can see the road blocks without a good marketing strategy, and, calculations which someone who is savvy in creative transactions would need to solve.

I am thinking about contacting sports agents/nba franchise front offices to see if I could get some insight into how they do transactions and whos help they use to complete them. That would be an interesting case study because those "mega trade deals" seem to be pretty complex. I'd like to know the list of people who are involved in the complexities. Come to think of it maybe I should watch moneyball again,lol.

I am thinking anyone who does financial transaction brokering deals would probably be good to learn from in any industry.

P.S. Just to clarify my earlier post. I wasnt suggesting that anyone buy jays stuff. I was just giving the link to pdf and video that was available.

 

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[Blueskies4me]

P.S. Just to clarify my earlier post. I wasnt suggesting that anyone buy jays stuff. I was just giving the link to pdf and video that was available.

Yeah. I know you weren't suggesting it. That was mainly for people following the thread. I just know that he used to sell a course for like $700 and while it's not a bad course, it just doesn't replace personal mentoring. I think you'll get more personalized guidance here.

Perhaps my plan was overly ambitious, or, maybe i didnt explain it in an understandable way. Basically, I was going to do the same things mentioned above, except doing it ior broader types of businesses/fields,(hybrid of Jay abrahams jv method).

My advice: Be careful with the buy / sell of business. You're possibly looking at capital gains at resale and if you're not really confident about building it, you might be out some hard cash. I'd stick with the transactional idea, especially if you get broker's to do the hard work and you just bring them clients. Not really fastlane but it'll get your feet wet. Not sure what you mean by "broader" types of businesses but definitely keep researching.

 

[oldscool]

Yeah. I know you weren't suggesting it. That was mainly for people following the thread. I just know that he used to sell a course for like $700 and while it's not a bad course, it just doesn't replace personal mentoring. I think you'll get more personalized guidance here.



My advice: Be careful with the buy / sell of business. You're possibly looking at capital gains at resale and if you're not really confident about building it, you might be out some hard cash. I'd stick with the transactional idea, especially if you get broker's to do the hard work and you just bring them clients. Not really fastlane but it'll get your feet wet. Not sure what you mean by "broader" types of businesses but definitely keep researching.

fair enough, I am going to reread this thread for starters and take a look at all the previous information I have written and continue to dig. I think one thing you said that has given me a lightbulb is "stick to transactional idea". Meaning just master that then perhaps after experience one can expand to those deeper gems hiding in the soil

You've been helpful, thanks so much.