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GOLD! From 0 To $240,000 Per Year PROFIT In 18 Months

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@richardd Count me in on a profit-sharing deal with the initial investment guaranteed, as you said. What you've described is a 50% ROI. Impressive. ($416*/(10k/12 months)).

When you're pitching this type of deal to investors, you don't have to make your investment larger to justify a right to buy them out later; it could be the same or less than those of some other investors. Some people want the convenience of investing passively, and they also recognize that they don't have the experience to recognize a good deal or run the business after acquisition.
 

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levijean

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@richardd
I have excess liquidity at the moment and would be interested to look at a proposal.
 
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richardd

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@richardd Count me in on a profit-sharing deal with the initial investment guaranteed, as you said. What you've described is a 50% ROI. Impressive. ($416*/(10k/12 months)).

When you're pitching this type of deal to investors, you don't have to make your investment larger to justify a right to buy them out later; it could be the same or less than those of some other investors. Some people want the convenience of investing passively, and they also recognize that they don't have the experience to recognize a good deal or run the business after acquisition.
FYI, the ROI for this business is much greater than 50%. Thanks for the feedback. I'll think about it. If we get more interest, we will see. I figure if we get a quarom, it would interesting to get the details negotiated. That may be fun, and a good exercise even if we can't come to terms, huh?
 
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payingkarma

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Someone recently came to me with the idea of going into a partnership when purchasing a business. My initial thoughts were that I hated the idea. One of my criteria is to retain control, but when you go into a partnership, you lose some control. But the more I thought about it, the more I liked the idea. Most importantly I thought that if a partnership could be structured that I retained the control, but the other partners received value, then maybe it could work. And just as important, as long as there was an exit strategy that was agreed by all, it could be even more workable.

So I'm throwing an idea out there for everyone. I see a business that I can purchase in 6 months, but I don't have the capital to get it now. I love the business a lot, not because it's exciting or sexy, but because the business model is simple, the barrier of entry is great, and the product/service is in demand and used by thousands. I'm going to get it in 6 months if it's available. It's a no-brainer for me. But there is a risk that it won't be available then. Although I have a feeling it will still be on the market because it is so mundane.

I think I can offer $105,000, but should be able to get it at $110,000. I'd disclose the ROI, but I have signed an NDA, so I won't disclose that. But for the sake of example, let's say the business makes $50,000 a year in profit. If I got a consortium of investors who equally invested the same amount, and then shared that percentage of the profits, the deal might look like this:

1) 9 other investors contribute $10,000
2) I invest the rest, maybe $15,000 or $20,000 depending on the negotiated sales price
3) All investors including myself receive 10% of the profits: for this example each person including myself would receive roughly $416 per month
4) I have the option to buy out each investor of their share at the $10,000 amount any time after 6 months, thus receiving their corresponding profit share moving forward
5) I retain full control of business operations

Does this type of deal seem fair to the other 9 investors? What they get is profit sharing, and a return of their initial investment upon buy-out. I'm curious to know what other people think of this type of deal structure.
I must give you the control - which is okay, to a limited extent if you are running the show - but giving you the option to buyout at the original 10k basis is toooo bad.

And the option can be exercised in 6 months?? meh

Terrible deal in my opinion.

And you never mentioned about the risk part - What happens if you get scammed - do you reimburse the 9 investors?
 
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richardd

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I must give you the control - which is okay, to a limited extent if you are running the show - but giving you the option to buyout at the original 10k basis is toooo bad.

And the option can be exercised in 6 months?? meh

Terrible deal in my opinion.

And you never mentioned about the risk part - What happens if you get scammed - do you reimburse the 9 investors?
If you invest $10,000 in something with an annual return of 50%, you would realize $2500 earnings in 6 months, and then you'd also get your $10,000 initial investment back guaranteed without having to do anything besides invest $10,000. Is that a bad deal? Now extend that to 12 months before buy-back. You invest $10,000, and during and after 12 months, you'd get back $15,000 including your initial investment which again is guaranteed without having to do anything. If the business fails or is a scam, you get $10,000 back.

What investment instrument can give you that kind of return AND offer a guarantee of your initial investment AND be completely passive?

Maybe I'm not understanding what you find wrong with this? I personally wouldn't do this deal, but that's because I want long-term control with the opportunity to earn more over the long haul. I'll earn $50,000 a year investing $100,000 in this business, own it wholly, and never look back.

Can anyone explain to me your hesitation? Intellectually, I'm curious. Is it too good to be true, too risky, poor return on investment?
 

pumpking

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Sure thing. I have others that have PMed me as well. I'll see if we can at least get 10 people including myself interested.
We've been PM-ing on the topic of course, but just to throw my hat in the ring- I'm also interested so happy to hear more, should something come together. :thumbsup:
 

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Richard,

If I were doing this deal, I’d raise the $100k from 10 people at $10k each and give them each 5%. I’d keep 50% because I’m running it.

They’d get 25% return on their $10k a year and be happy. Where else could they get that?

There’s no reason you need to give up the actual percentage that they are paying in. Their money is not equal to your money and expertise.
 

arl

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If you invest $10,000 in something with an annual return of 50%, you would realize $2500 earnings in 6 months, and then you'd also get your $10,000 initial investment back guaranteed without having to do anything besides invest $10,000. Is that a bad deal? Now extend that to 12 months before buy-back. You invest $10,000, and during and after 12 months, you'd get back $15,000 including your initial investment which again is guaranteed without having to do anything. If the business fails or is a scam, you get $10,000 back.

What investment instrument can give you that kind of return AND offer a guarantee of your initial investment AND be completely passive?

Maybe I'm not understanding what you find wrong with this? I personally wouldn't do this deal, but that's because I want long-term control with the opportunity to earn more over the long haul. I'll earn $50,000 a year investing $100,000 in this business, own it wholly, and never look back.

Can anyone explain to me your hesitation? Intellectually, I'm curious. Is it too good to be true, too risky, poor return on investment?
I don't think the deal is bad per se. As you said a 25% ROI in 6 months is fantastic in my opinion. The problem is the way the deal is structured. You are taking the fun out of it. If I invest in a company is because I want to be somehow involved, and even though there might be a risk, there is also the possibility of a reward. Otherwise I'm just loaning you some money. With your track record you could probably get some people to loan you money at a much lower interest than 25% in 6 months.
 

Timmy C

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Sure thing. I have others that have PMed me as well. I'll see if we can at least get 10 people including myself interested.
I am interesting in having a chat with you guys and seeing if we can get a deal together.

Timmy.
 

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richardd

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People have given me some great feedback on my idea of managing a purchase of a business with a partnership structure in mind. I'll just copy and paste what I told @pumpking:

I didn't make it explicitly clear in my posts. In a partnership of this nature, all partners would be intimately involved in the whole process. That was my intention all along. Now I wish I laid that out. No matter. I'll clarify in my thread.

My thoughts have always been to have all of us go through the process, excluding finding a business since I've already done that. All the phases of the deal would be open to everyone with their input, gaining knowledge of all aspects of each phase:

1) negotiation of sale
2) sales contract
3) due diligence
4) closing
5) asset transfer
6) knowledge transfer

With that type of deal structure, along with the monthly profit sharing based on investment level, does that sound like a good opportunity for people to learn?
 
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richardd

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I don't think the deal is bad per se. As you said a 25% ROI in 6 months is fantastic in my opinion. The problem is the way the deal is structured. You are taking the fun out of it. If I invest in a company is because I want to be somehow involved, and even though there might be a risk, there is also the possibility of a reward. Otherwise I'm just loaning you some money. With your track record you could probably get some people to loan you money at a much lower interest than 25% in 6 months.
I definitely understand this. I think the main reason though for this opportunity is to get everyone first-hand experience buying a profitable business. People hesitate out of fear or lack of funding. This type of deal I feel solves those problems. There is no substitute for going it alone though. You sink or swim, and you learn a ton by doing it. But if one is not ready for that, this may be the next best thing to get them comfortable with the whole process, while having some skin in the game. The end result is that whoever is involved in this partnership can then use what they learn in order to build their own portfolio.

@pumpking described it as a seminar. But I think it's more than that. It's a real world case study where everyone is an active participant in that case study in real time. Maybe I should put together a seminar in the future!
 

biophase

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I didn't make it explicitly clear in my posts. In a partnership of this nature, all partners would be intimately involved in the whole process.
This is a bad idea. You should have 100% control of this process. But you provide daily or weekly information to the others. Else, this deal will fall apart with everyone putting in their opinions.

Can you imagine 10 people going through the purchase contract? It's tough even having 1 person and 2 attorneys doing that.

After the purchase are all 10 people involved in the day to day also?
 
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richardd

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This is a bad idea. You should have 100% control of this process. But you provide daily or weekly information to the others. Else, this deal will fall apart with everyone putting in their opinions.

Can you imagine 10 people going through the purchase contract? It's tough even having 1 person and 2 attorneys doing that.

After the purchase are all 10 people involved in the day to day also?
I would be in ultimate control and final decision maker. I would have open communication with everyone gathering their input and feedback, but I get to decide on everything. I'd also be responsible with running the business. People would be welcome to be as involved in day to day operations, but again I run it.
 

Kid

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I'm with Bio on this.

If people would get control or part of decision making they would start fighting.
I don't know how many investors can realistically judge other's and their own ideas.
But i guess not many.
 
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richardd

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I'm with Bio on this.

If people would get control or part of decision making they would start fighting.
I don't know how many investors can realistically judge other's and their own ideas.
But i guess not many.
They would have no control, only input. It would not be a democracy.
 

biophase

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They would have no control, only input. It would not be a democracy.
This is what is dangerous. They should have no input at all.

Having input will go something like, "I think we should raise prices to $20". You say no, it's staying at $10. Then the person feels insulted or dismissed.

Then he goes to 7 of the other investors stating his case and why he wants the price to be $20. All 7 agree and come to you to raise prices to $20. They say, it's 70% of the owners wanting the price increase. You say, I don't give a shit, it's staying at $10.

Now everyone hates you. :)
 
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richardd

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This is what is dangerous. They should have no input at all.

Having input will go something like, "I think we should raise prices to $20". You say no, it's staying at $10. Then the person feels insulted or dismissed.

Then he goes to 7 of the other investors stating his case and why he wants the price to be $20. All 7 agree and come to you to raise prices to $20. They say, it's 70% of the owners wanting the price increase. You say, I don't give a shit, it's staying at $10.

Now everyone hates you. :)
LOL! In our partnership agreement, discussion is encourage, but I'd get final say. There will be clause in there that no partners have the right to hate me.
 

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Let me see if I'm understanding this correctly.
It sounds like you really want to help people learn how to profitably acquire businesses. But you're trying to structure it as a partnership instead of an educational experience.

I'm interested to see how it turns out, but it sounds like a stressful situation to me (if I were leading it). Why not just let them pay to look over your shoulder? If you didn't want to keep their money, you could use that cash to fund an investment into their first purchase.
 
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richardd

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FYI, I have 6 people plus myself interested in this partnership. I haven't decided if I want to cap it at 10 or 20. I guess that may be arbitrary.
 

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richardd

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Let me see if I'm understanding this correctly.
It sounds like you really want to help people learn how to profitably acquire businesses. But you're trying to structure it as a partnership instead of an educational experience.

I'm interested to see how it turns out, but it sounds like a stressful situation to me (if I were leading it). Why not just let them pay to look over your shoulder? If you didn't want to keep their money, you could use that cash to fund an investment into their first purchase.
It will be stressful, for sure! I keep asking myself why I would do this to myself. The educational experience I think needs to be an active involvement in the process and that means people need to be vested in it as well.

A traditional seminar of sorts will not have the impact that I want for those involved. And I wouldn't want to charge people for that type of experience. I will do that for free. I'm doing that now for many via PM.
 

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@richardd I’m more interested to know how you have time to constantly be responding to this thread if you have like 6 businesses and consulting clients
 
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richardd

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@richardd I’m more interested to know how you have time to constantly be responding to this thread if you have like 6 businesses and consulting clients
The short answer is that I don't have the time. I am working on two consulting jobs right now simultaneously as I type. For one, we have a scheduled maintenance task starting in 6 minutes. For the other, I'm building out a new document management system. All while answering some support tickets for my businesses. I'm pretty busy.
 

arl

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I definitely understand this. I think the main reason though for this opportunity is to get everyone first-hand experience buying a profitable business. People hesitate out of fear or lack of funding. This type of deal I feel solves those problems. There is no substitute for going it alone though. You sink or swim, and you learn a ton by doing it. But if one is not ready for that, this may be the next best thing to get them comfortable with the whole process, while having some skin in the game. The end result is that whoever is involved in this partnership can then use what they learn in order to build their own portfolio.

@pumpking described it as a seminar. But I think it's more than that. It's a real world case study where everyone is an active participant in that case study in real time. Maybe I should put together a seminar in the future!
I can definitely see the value in your approach. Heck, I'm actually thinking about joinning. I've been thinking about buying a business for years. But the businesses I see below 20k are usually crap, and anything above that is a big gamble for my financial situation.

I am sure I could learn a lot from someone like you. But If I'm going to invest in a company that I will not have any decision power (which I totally get, because it would be a nightmare for you) I'd feel just like an spectator.

I was thinking that you could probably package the whole thing as an educational experience and actually sell it instead of involving people in the investment process. I'd happily pay $50 or something like that to receieve the same kind of information your investors are going to get. This way you probably could get the money you need to buy the business and actually keep it and not buy anyone out in 6 months.
 
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richardd

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I can definitely see the value in your approach. Heck, I'm actually thinking about joinning. I've been thinking about buying a business for years. But the businesses I see below 20k are usually crap, and anything above that is a big gamble for my financial situation.

I am sure I could learn a lot from someone like you. But If I'm going to invest in a company that I will not have any decision power (which I totally get, because it would be a nightmare for you) I'd feel just like an spectator.

I was thinking that you could probably package the whole thing as an educational experience and actually sell it instead of involving people in the investment process. I'd happily pay $50 or something like that to receieve the same kind of information your investors are going to get. This way you probably could get the money you need to buy the business and actually keep it and not buy anyone out in 6 months.
Thanks for the feedback. I actually don't have an interest in doing a paid subscription/tutorial on this. You or anyone can work with me privately for free. For something like this though, we will be dealing with proprietary information that I wouldn't want nor would I imagine that any other investors would want non-vested members to be privy to.
 
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richardd

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Someone privately reminded me of SEC regulations when it comes to soliciting private investment. I knew a little about it, and I realized, man, what a pain in the a$$! So, I'm just not interested in that headache. I'll come up with some other way of teaching people how to do what I'm doing. Maybe expand it out into a group session. I will definitely continue working with people independently. I enjoy that. I got some prized students! You know who you are.
 

1milclub

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it works well too to secure owner financing
Hi Richard, do you normally ask/go with Seller finance? or is it when the purchase is above certain price limit? I don't see seller finance option for small businesses<20-30k, but I guess you can always ask.
 

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