Buy Business Pocket Final
Buy Business Pocket Final
Buy Business Pocket Final
Buy A Business
Using Its Own
Cash
By Mike Warren
Author/Business Maverick/Investor
Table of Contents
How to Buy a Business Using Its Own Cash ...... 5
Leverage, Leverage and More Leverage ........... 23
Find the Best No Money Deals Even Though
You Never See Them Advertized..................... 36
Starting Your Research on the Prospective
Company ....................................................... 54
Secrets to Buying a Business with Its Own Cash
and None of Your Own ................................... 61
LBO and Hidden Techniques for Buying a
Business ......................................................... 69
The Art of the Deal ......................................... 81
How to Make Financing is a Walk in the Park .. 93
Laugh All the Way to the Bank Taking Over Sick
Companies .................................................... 99
The Art of the Flip ........................................ 106
Get All the Guidance You Need for Cash Deals
and Flips ....................................................... 118
Wrap Up ....................................................... 126
Chapter One
How to Buy a Business Using Its
Own Cash
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Chapter Review
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Chapter Two
Leverage, Leverage and More
Leverage
You may not be aware of it but the only thing
that stands between you and no money down
purchase of a business understands the word
leverage. Believe it or not you actually already
know how to use it. Heres a simple example.
You have a credit card, right? When you go to
the store and you make a purchase and you use
your credit card did you know that youre using
the banks money to buy whatever that purchase
was? Youre using somebody elses money to
buy an asset and then you pay that money back
over time. Thats actually leveraging using
other peoples money.
Leverage is nothing more than using other
peoples money. So if you think back to the
movie Pretty Woman with Richard Gere and
Julia Roberts When you think back to that
movie, he was a high level financier who found
and bought businesses, broke them apart and
then sold off the different businesses he sold
them off in pieces. Well, hes flying back and
forth and hes wheeling and dealing and
negotiating. Hes got his penthouses and his jets
and his cars and limos. Hes got all that stuff.
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the checks clear and the seller gets his cash. The
seller had to think about it a bit, but thanks to
the relationship that had been built with Sally
and the time he had already invested in
negotiations, but he finally agreed to the terms
of the deal.
Question - So, Mike, whats the moral of the
story?
Answer - Once you realize price is nothing but
an object to be reached by walking up
individual, financial stair steps, youll never
again be frightened off by an asking price or
down payment. Nor will you any longer believe
the myth that it takes cash you dont have to
make such a transaction. As of today you
should just pretend the term down payment
doesnt exist anymore because, for you, it
doesnt. Essentially the phrase down
payment does not really exist for you anymore.
Now, with that I said I will also add that if you
have cash of your own to put into a business
you can get the deal down faster. Remember, it
does not have to be your cash.
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Chapter Review
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Chapter Three
How to Find the Best No Money
Down Deals Even Though You
Never See Them Advertised
First off, its not your fault. What I mean is
youve probably been conditioned to think
theres always a cash requirement to buy a
business.
Sellers, in fact, have also been
conditioned to always ask for cash because they
feel the need for some type of a payment in
exchange for turning over their business. Thats
why youll always find a down payment figure
attached to the announcement of the business
thats for sale. Unfortunately that figure scares
off a whole lot of potential buyers.
Well, the fact is virtually any business can be
purchased using its own cash or with no cash
down payment of any kind if you approach the
seller in the right way. But first you have to
know exactly what type of business is right for
you. In todays market, as its been even in the
past and itll probably be in the future, to sell a
small privately owned business is going to
require the owner to actually participate in the
sale meaning that they have to carry paper,
they have to help the sale of that business.
Otherwise, its not going to go through. Very
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1.
2.
So
how
do
locate
these
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Chapter Review
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Chapter Four
Starting Your Research on the
Prospective Company
Using the strategies in the previous chapters,
you may have identified a company that you are
interested in buying or flipping and have had
initiated negotiations with the seller. It is at this
point that it is crucial that you stop, look around
and make sure you have the right team in place
to properly evaluate the true value of the
company.
Your first instincts may be of
complete excitement and want to accelerate the
process just so that you can close on your first
deal.
STOP RIGHT THERE COWBOY! The most
common rookie mistake is to not do a thorough
evaluation of the business and just accept the
information the seller is providing you about the
business without doing an in depth evaluation
of the business, its assets and factors that affect
the industry your prospective business is in.
You need to take all the time you and your CPA
needs to look at the numbers, investigate all
things related to this business. A seller will not
be offended if you take some time to do this. In
fact they may be more suspicious of doing
business with you if you are in a hurry and are
rushing the deal.
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Chapter Review:
Dont make the mistake of being so excited
about the business that you dont take time to do
a proper evaluation.
Dont worry about offending the seller by
performing a rigorous evaluation of the
business.
A thorough evaluation will help you determine
the business true value and also its ability to
grow in the future.
On your team, make sure you have a deal
oriented CPA to help in evaluating the company
financials.
Some good signs include lots of assets meaning
anything that can be turned into cash with in
about 12 t 18 months.
Dont argue with the seller over the value of the
fixed assets being worth more than what is
actually shown on the books, it actually helps
you in negotiating the final price of the business.
Dont overlook hidden assets that can be turned
into immediate cash like old inventory or
equipment that can be sold off thats no longer
being used.
Talk to customers and suppliers about the
quality and relationship with the seller.
60
Chapter Five
Secrets to Buying a Business
Using Its Own Cash and None of
Your Own
I know you are going to absolutely love this
chapter. In fact; so many people have read
about this particular chapter because it gives
you some easy and yet quite often over looked
ways of getting the money that you need to buy
the business through that power of that little
word called leverage. My main goal is to show
you how to make the business pay for itself
without requiring you to contribute any of you
own money, unless you want to, of course.
Question - Mike, is it possible to take money
out of cash flow, it seems like that might be a
little bit riskier or reserved only for people
who have a whole lot more education?
Answer - You know its sad but true that a lot of
leveraging techniques have that reputation,
unfortunately its not true, and if more people
knew about them many talented would be
entrepreneurs would have been successful in
business a long time ago. Leverage type
techniques only seen in the area of high finance
experts because you only hear of their use on
large scale multi-million or billion dollar deals.
But understand this as an average Joe Schmo or
Jane Schmo you can put these powerful yet
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Chapter Review:
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Chapter Six
LBO and Hidden Techniques for
Buying a Business
Some of my students know that I do a lot of real
estate and paper investing as well as buying and
flipping businesses. I want to relate leverage to
real estate investing. When you buy a property,
you put in a little money and leveraged the rest.
You made a small down payment and used
somebody elses money, like the bank for the
rest.
A leveraged buyout or LBO is using the same
method to buy a business except you very often
use the assets and cash flow of the business to
complete the down payment and even the
monthly installments. A lot of people think that
this is reserved only for multi million and billion
dollar deals on Wall Street and in the movies.
But that is not the case. The business can literally
buy itself and we use the leveraged buyout
(LBO) or the LBO ideas to buy any sized
company without any of your own money.
Now when I go into talking about flipping a
business I want to make a distinction here.
When I buy a business I intend on running, the
owner will probably be out of the business. If I
am looking to flip a business, the owner stays in
the business and we sell it later for a much
higher profit. The owner now receives a smaller
percentage of a much larger deal versus
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Chapter Review:
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Chapter Seven
The Art of the Deal
Most people who get started buying businesses
get intimidated because they dont understand
the rules of the game. And that is exactly what
it is: a game and a very old game. It is actually
very easy to do if you have the right kind of
coaching on the sidelines. Getting the deal to
work in the time frame you want and under the
terms that you want is more or less about
addressing the sellers emotional wants and
needs as it is finding money for the deal.
If you learn to focus with some of the
intangibles dealing with the psychological issues
of what the seller wants versus what the seller
needs will mean the deal will get much easier
for you and you will get a better deal. Newbies
who start out and only focus on the numbers
and the financing of the company lose sight of
some of the personal issues that can be equally
or more important than the actual numbers.
In buying a business is really not different than
buying a piece of real estate. When buying a
piece of property that would rent for more than
it would cost me to get a loan on the property, I
would take a small down payment, buy the
property using a bank loan or private funding to
finance the difference, make a monthly payment
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Chapter Review:
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Chapter Eight
How to Make the Financing a
Walk in the Park
By now you have had some great ideas and
have learned some techniques on how to come
up with the down payments for making the
business no cash down deal but you may still be
a bit nervous on how to come up the balance of
the sale price. That actually seems harder. In
reality it is not harder. It is relatively straight
forward once you understand that money is all
around you to buy that business. There are lots
of people who would be willing to lend you the
cash to help you buy the business. Keep in
mind that it doesnt have to be your cash. This
is all about leverage and learning about how to
get the deal done.
Question - Where do I look first?
Answer - It is as easy as looking around you. In
fact, lets talk about the most obvious source for
getting money for the business. The most
obvious source is the seller.
Lets talk about the seller for a few minutes:
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Chapter Review:
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Chapter Nine
How To Laugh All The Way To
The Bank By Taking Over Sick
Companies With No Cash Out Of
Pocket
I am about to reveal to you one of the best kept
secrets in the business world.
Honestly
speaking, you cant blame the small number of
people who know how to make tremendous
fortunes in this field for not spreading the word.
They are making huge profits while the rest of
the world views the opportunity as an
opportunity for trouble.
They see a sick
business or a business that has difficulty as a
problem. In reality, nothing makes you more
money than taking over a bankrupt or troubled
business. In fact you can create a perpetual
money machine by buying them, quickly
reorganizing them and then selling them for a
hefty profit.
Question - Mike, wouldnt I just end up
owning someone elses problems by taking
over a bankrupt or troubled company?
Answer - In that type of scenario the companys
problems can actually work for you. The
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Chapter Review:
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Chapter Ten
The Art of the Flip
I want to take a moment and talk about the
benefits of flipping a business. Being able to
structure what a business seller is looking for,
sometimes they need cash, sometimes it is an
emotional need, and sometimes they need cash
to grow the business. It is just not growing to the
point they want it to be, or they just dont have
the management experience to take it to the next
level. This is where you can come in and own a
percentage of the business typically 50 percent
or more of the business, turn around and grow
the business using some marketing techniques
that I will talk about here in a few moments and
literally triple the companys profits in 12 to 18
months and then turn around and sell that
business to another company or even a mergers
and acquisitions firm who will pay a much
higher multiple.
Question - Mike, what are some of the key
ingredients?
Answer - The key ingredient when flipping a
business is that the owner is going to stay in
place. You are not going to take over the
business and run the business. That is not what
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Is it a big market?
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Business appraisers.
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5.
LinkedIn.
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Chapter 11
How to Get All the Guidance
You Need for All Cash Deals and
Flips
You have read a lot in this book and by now I
am sure you are pretty darn excited about going
out there looking for a company that you could
do an LBO, or a company that you could
possibly flip. The benefit of flipping a business
is that you have no cash in the business deal,
and you make cash along the way while you
increase its profits, and you get a huge payday
at the end. So flipping the business is really the
best way to go. Now I know that some of you
who read this book will be interested in buying
a business no money down and that you will be
happy running. I encourage you to look at the
business that you buy as a business that can be
flipped. Why not have three or four businesses
that you own the majority of ownership in
rather than having one business that takes up all
of your time to run. If you own three or four
businesses that you have majority ownership.
Somebody runs it day to day who is already
familiar with running the business, and you
dont need to step in and figure it out. You just
did more to increase the profitability of the
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Chapter Review
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Wrap Up
I want to thank you so much for taking the time
to read by book. I hope it has enlightened you,
surprised you and maybe even more
importantly motivated and inspired you. If you
are truly serious about finally tasting the fruits
of independence, and about being your own
boss at last, and not having to take gruff from
anyone anymore, and about finally being the
master of your own destiny. Instead of
wondering what the future may hold in a job
that could be snatched away at any moment.
Take the next step toward freedom and a true
measure of happiness. Attend one of our live
events, find a business, flip that business and
start making the money that you know you
deserve. Good luck, happy hunting and let us
know of your success!
126
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