🎙 Passive Cash Flow Podcast EP.195 | From $4M to $8M: How to Scale a “Boring” Business
In this episode of the Passive Cash Flow podcast, host Aaron Fragnito sits down with business buy and sell expert Paul Lajoie to explore the world of acquiring cash-flowing businesses. Paul, a CPA with 25 years of experience, shares his journey of buying and selling over 20 companies and discusses why he prefers “boring” industries like home services and light manufacturing over following personal passions.
Connect with Paul:
Website: bizbuypro.com
🧠 Topics Covered:
00:00 Welcome to Passive Cash Flow
00:13 Introduction to Paul Lajoie
00:24 Paul’s Background & First Business
03:31 Deciding Which Business to Buy
05:09 How to Find Opportunities
06:11 Working with Business Brokers
08:12 AI and Home Services
08:58 Passion vs. Economics in Buying
11:42 The Due Diligence Process
16:11 Creative Financing & SBA Loans
18:34 Structuring Earnouts
19:10 Investor Returns & Scalability
23:36 Paul’s Services & BizBuyPro
24:37 Tax Strategy & Legal Entities
27:54 Strategies for Passive Ownership
28:43 How SBA Guarantees Work
30:39 Buying vs. Starting from Scratch
32:34 Advice on Franchises
33:21 Closing & Contact Information
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⚠️ Disclaimer:
This is not a solicitation for funds, tax advice, or legal advice. This is not intended to be, and must not be construed to be in any form or manner a solicitation of investment funds or a securities offering. Peoples Capital Group LLC is NOT a United States Securities Dealer or Broker nor U. S. Investment Adviser is a Consultant/service provider and makes no warranties or representations as to the listener or viewer. All due diligence is the responsibility of the investor.
Transcript:
00:00:00:07 – 00:00:24:04
Unknown
All right, ladies and gentlemen, welcome back to the Passive Cash Flow podcast. I’m your host, Aaron Frag. Neato. And we have a business buy and sell expert here on the show. We have Paula Joy. How are we doing today? Paul. Hey great Aaron. Thanks for having me. Super excited. Absolutely, absolutely. You know, I got an email from your team there and explained, all the businesses you bought and sold over the years.
00:00:24:04 – 00:00:41:05
Unknown
And I thought to myself, you know, this is a space I find really interesting. And I’ve always looked at, I get emails from brokers on, like, laundry mats and things like that. I’ve always liked the idea of owning a nice cash flowing business because I raise money and buy buildings. I figure out how how much different could it be to raise money and buy a business.
00:00:41:05 – 00:00:59:14
Unknown
And hopefully you can, help, help shed some light on my ignorance here. And, but before we get into it, my friend, just to our listeners, if you’re enjoying the content we created here on the Passive Cash Flow podcast, be sure to share with a friend like and subscribe on YouTube. We’re also on all major podcast platforms.
00:00:59:14 – 00:01:17:18
Unknown
I think we’re up to episode 195 or something like that at this point. We’re doing this about five years now, and we have, incredible guests here. And today our guest is going to explain to us how we can underwrite businesses, finance them, buy and sell, and make the ideally the right decision when buying a business. How’s that sound, Paul?
00:01:17:20 – 00:01:46:05
Unknown
That sounds great. Without a doubt. I’m ready to go. All right, cool, man. Let’s make it happen here. So before we get into how I’m going to buy my first business, and or how to select the right business to buy, ideally, how did you get started in this space, ma’am? Good. Good question. I’m a CPA from an education standpoint and kind of did big six accounting right at a school and did some corporate accounting for about another eight years in various roles.
00:01:46:07 – 00:02:05:04
Unknown
So I kind of got a numbers background and we just kind of had a life event in, in the family getting ready to have our second kid wife is going to stay home. So we kind of started looking for a business to buy that she could manage part time. Why she stays home with the kids. We ended up finding a much bigger business to buy that replaced her income.
00:02:05:04 – 00:02:26:08
Unknown
And I lost my. I left my W-2 after about six months. So. And it was, it was a, hardwood floor company that had been around for about 25 years. Wow. And we loved it. We loved everything about it. And we just that was the first company we actually looked at. And we bought it. So it was it was it was kind of interesting.
00:02:26:08 – 00:02:52:23
Unknown
And I kind of look at, what my life would have been if I did make that decision. It just been drastically different. So I’m very glad that I did do that. Interesting. And why did you decide to buy that company man I don’t know. I mean it’s just like I mean you know how you when you look back you think you’re smart in some point in time and then you look back ten years from then.
00:02:52:23 – 00:03:13:16
Unknown
And I was like man, I sure was stupid. So it’s kind of I didn’t know anything about what I was doing, and I wasn’t scared about what I was getting myself into, how that good if it went wrong, how life altering that was. I looked at the numbers and the numbers made sense. And and I loved everything about the company.
00:03:13:16 – 00:03:31:17
Unknown
So that’s why we just bought it. Yeah. Yeah. I wasn’t looking for a foreign company, I wasn’t looking for any type of business. And that one just made sense and the numbers made sense. Okay. Interesting. Interesting. So I’ve always like I said, I’ve always been interested in owning businesses. I majored in entrepreneurship at Rowan University.
00:03:31:17 – 00:03:54:17
Unknown
I recently wrote and taught a course called Real Estate Entrepreneurship there. And, you know, definitely I, I had a little landscaping business, through college, in high school, and I now I own a real estate investment firm and, you know, so I, I’ve always looked at those emails, like you said, of the, the, the different businesses that are for sale, but, like, how does someone go about deciding what’s the best business for me to own?
00:03:54:23 – 00:04:20:11
Unknown
And, how do I go about, you know, even finding that opportunity and making the right decision? Which kind of business you like? Like, I personally like right now, home services. I like light manufacturing and anything. And med spa, you know, anything and medical. Not not a doctor’s office or anything like that, but, anything in that space.
00:04:20:11 – 00:04:44:08
Unknown
I really like right now. So what I’m like, a year from now could be something completely different. Now, I like all space spaces because of what I was doing to, to a bunch of businesses right now. So I don’t feel like I will touch any of those. Right. I mean, when your dishwasher goes out and need it repaired, you know, you can’t replace that with AI or if you need new flooring or new roof or your house painted or anything like that.
00:04:44:08 – 00:05:09:10
Unknown
So that’s why I really like that. And same thing with light manufacturing. I don’t think that can get replaced by AI. And like manufacturing is to me is very messy and therefore the big dudes don’t get in those spaces. Okay. So that’s that’s what I like. And to answer your second question is how does somebody get involved in that manages just dive off that into the deep end, right.
00:05:09:10 – 00:05:31:03
Unknown
And just come home like you’re trying to exit your W-2 and you don’t know what you’re doing, or maybe you’re in your real estate, but you want to diversify or, there’s there’s going to be local brokerages and whatever city you have just look it up, you know, business brokers near me. And there’s a bunch of national databases as well, Best Buy, sell.
00:05:31:03 – 00:05:52:09
Unknown
And I mean, it’s there’s Kumo and there’s, there’s a gazillion of them. And if you want to spend a little bit of money and hire somebody to go find a business for you to so you can, you can get somebody under retainers like, man, I want to I want an Hvac company in Dallas, Fort Worth, Texas. And it’s probably give him 5 or 10 grand and they’ll go find one for you, maybe even off market that nobody else is looking at.
00:05:52:09 – 00:06:11:13
Unknown
So that’s kind of how you just jump in. Yeah. Now, is that worth it, you think to hire a business broker and give them a retainer generally or. I’ve, I’ve done that before. Yeah. When I’m looking for a, for a very specific company, to just complement stuff I already have and yes, I will do that. In fact, I just talked to one this morning.
00:06:11:15 – 00:06:27:05
Unknown
The other thing I’m going to hire and it’s going to cost ten grand, okay. For me, but but then that’s going to be most likely going to be off market. And I’m the only person on that, which is great because I’m not negotiating against anybody. Yeah. And that could save you a lot more than ten grand. Yeah.
00:06:27:06 – 00:06:47:09
Unknown
Yeah. I’d imagine any business I know there are like almost a business like MLS, right? Like websites you can go on and find businesses for sale. I’d imagine those businesses probably have competing offers on the table and there’s a whole, you know, pressure, just like any real estate. Right? The best real estate deals I buy are off market deals no one else knows about.
00:06:47:11 – 00:07:10:06
Unknown
And I’m buying a deal right now, and I’m paying a broker $185,000 at the closing table, you know, so. But she brought me a deal that no one else knows about. I’m buying exactly. The thing about even real estate or small businesses that are on market. Yeah. Is. And what what my, sense is, you know, if there’s ten people competing, nine are going to offer the same, same amount, right?
00:07:10:06 – 00:07:29:09
Unknown
Right, right. Yeah. They’re intelligent. And then there’s one always outlier, or let’s call him an idiot. Yeah, yeah. He’s got a he’s got to overpay for that. And this is it’s same small business as it is in real estate. And that’s super frustrating with that. Yeah. Well Paul I’ve been that idiot before. So, I’m proud to say I’ve learned, I paid the stupid tax for sure a few times.
00:07:29:09 – 00:07:50:12
Unknown
I think so, hopefully no more stupid tax. But, yeah, a good broker will guide you on price and so on. And and they’ll say, hey, you’re overpaying. You’re getting excited about this. You know, hit the brakes. A good broker will, right. Most probably town. But I’m a good buying broker okay. So similar to real estate, you can kind of hire broker to go out there and source what you’re looking for.
00:07:50:12 – 00:08:12:18
Unknown
But it can be a little different in this case. It’s actually pretty far, far different than real estate really in a lot of ways. But, and then I want to pivot a little bit to, also like you said, like manufacturing and home, services, which I agree 100%. I mean, I hire plumbers, electricians, and the appliance breaks and we pay through the nose for these guys and contractors.
00:08:12:18 – 00:08:34:00
Unknown
And, you know, there’s always a shortage of contractors, or they’re giving us a ridiculous price. I’ll get a quote for 100,040 thousand to renovate the same apartment. And just so it seems like a very interesting business. Now, I would push back for a second because Elon Musk is going to make these Android robots, and they’re going to be coming out pretty soon.
00:08:34:00 – 00:08:49:21
Unknown
And we’re going to, you know, they’re going to be fixing your dishwasher. But I think you probably have a good ten, 15 years. We’re there. So who the heck. Yeah. Yeah, without a doubt. And if androids take over, we got all sorts of other problems. Yeah, yeah. Like every manual labor job is shot, so every, every job’s gone.
00:08:49:21 – 00:09:06:05
Unknown
Yeah. Pretty much we’re going to riot and like push back so that you’re right. So then yeah it’s going to be a pretty interesting society. Yeah I worry about that later. So all right. So then, you know, you find a business you want to buy. Now, what about following your passions? I love motocross, I love ATV being and skiing.
00:09:06:10 – 00:09:28:02
Unknown
I play the piano. I always want to own a powersports company. Okay. Or like a motorcycle company. Should I go follow my passion or should I more? So look at the actual meat, potatoes of the business and the economics and the market, and make a decision based on that when you first thing it came to mind when you said that as.
00:09:28:04 – 00:09:55:06
Unknown
Yes, that’s good. But my problem with following your passion is you just said it a second ago, as your emotions and your ego is going to get into that purchasing, decision and you’re probably going to overpay. Yeah. You guys, you like it, right? So it’s it’s a powersports. It’s worth $3 million, but you love it and you’re going to pay three and a half or four or the red flags that you, you see during the due diligence.
00:09:55:08 – 00:10:21:00
Unknown
Yeah. That’s okay. Not that big of a deal. So your emotions then your ego is going to get is going to muddy the water if you’re following your passion. So just be super careful about that. And the way I get around that is yeah, I do the upfront negotiation. But all the due diligence and closing process, and maybe even a secondary, reevaluation during due diligence, I take myself completely out of that.
00:10:21:02 – 00:10:38:18
Unknown
Okay. Interesting. Right. So if, if I hired an accounting firm to do the due diligence and they’re going to say, pull this, this, this and this this. Yeah. Don’t buy it. Right. Or yeah. It’s not worth three. It’s worth two and a half. Versus me going in there like yeah yeah yeah I love it, I love it you know and all that sort of stuff.
00:10:38:18 – 00:10:53:23
Unknown
So be super careful about that. Following your passion on these things, I would just rather just buy just a boring business. And then what you do is you make a shitload of money on the boring businesses, and then you go buy a bunch of shit that you’re passionate about. Yeah, I like that more. Right? Because what caused by all the toys?
00:10:54:01 – 00:11:24:22
Unknown
Yeah. Right. I have my own little power sports, garage, basically. Right. And so. And you’re absolutely right. And the thing about also like I fear to you, you have such a passion for something, and then you own the power sports store, and then it’s like a headache and you’re losing money on it. And now you’re passionate, almost like, might suffer, you know, for this thing that now you look at it through a different lens, like if I bought a power sports store and I lost $1 million on it, I might be like less excited about power sports stores and motorcycles, you know, because, like, now I look at it, I’m like, oh, I
00:11:24:22 – 00:11:42:13
Unknown
lost $1 million owning a motorcycle shop, you know, I should have just bought that, you know, home improvement company. And then, like you said, make a ton of money and then go buy myself, a number of motorcycles and, dirt bikes. That sounds good to me. I like that plan. Yeah, yeah. So let’s go through the process here.
00:11:42:13 – 00:12:00:07
Unknown
Sounds kind of similar to real estate, so I, I maybe I hire a business broker or they go out there, they find me, you know, the company I’m looking for. And then I, I like the company and then what do I do? I put down a deposit and there’s a due diligence period. How do I actually go into completing my due diligence and acquiring this business?
00:12:00:07 – 00:12:19:10
Unknown
So typical. Let’s say something’s listed for sale off market is, is it’s kind of different. It’s a different animal. But something that’s listed by a business broker, they’re just going to listed on a website. It’s going to have just a little bit of information. Let’s, let’s say in the Hvac space. Hvac company does $4 million a year in revenue.
00:12:19:12 – 00:12:38:12
Unknown
It makes it makes $1 million of earnings, and it’s listed for sale for five, 5 million. So it’s five multiple. Okay. And it has a little bit. It’s been been in this area for 30 years and you know has 1000 customers and 50% referrals whatever. So it’s going to list a little bit of information now. Oh okay.
00:12:38:12 – 00:12:58:19
Unknown
Piqued my interest I want more information. So I contact the broker. They’re going to send me an NDA. Super easy. Just just sign it. Send it back I mean it’s it’s just yeah. They’re not going to see you just sign and send it back. Right. And then they’re going to send you what I call an offering memorandum or a confidential information information memo a SIM.
00:12:58:21 – 00:13:19:16
Unknown
And that’s going to be 70 pages long. Wow. Okay. Okay. So it’s going to have three years of panels, three years of balance sheets, probably three years of tax returns. And it’s going to have, you know, a Q&A. It’s going to have all the employees, how much they they make. And when was the last time they had a raise and an equipment listing and all that sort of stuff.
00:13:19:16 – 00:13:39:17
Unknown
Everything about the company. Right. So now so now, you know, okay. And then from there the next step would be, okay, I like it. And just you’re going to, you’re going to, give them a two page letter of intent. Yeah. With a price. I like it at 4.5 million. Don’t go into a whole bunch of detail. Maybe a little bit.
00:13:39:19 – 00:13:59:20
Unknown
You know, I want a 10% seller carry at an 8% note for ten years. And this is subject to financing. And I want to exclude seven day period for 45 days. If you accept my offer, you know, just whatever. Just a typical Loi. Yeah. Okay. And let’s say they accept it okay. From there. Now now you’re going to start kind of getting into the dirty stuff.
00:13:59:20 – 00:14:22:24
Unknown
Right. So from there, you’re mainly then you’re going to ask for more information, you’re going to create a due diligence list and then maybe asking for 50 more documents. Yeah. Wow. Right. Like I want to I want a listing of your last 12 months of revenue by month, by customer. Wow. Okay. With gross margins on it. Right.
00:14:23:01 – 00:14:40:02
Unknown
You know, so you just going to go into a lot more detail and then you’re probably going to do a two day due diligence on site. Where you going to ask questions. You’re going to interview the seller. Are you going to interview hey, who’s your top two you guys? Are you going to interview them separately from the seller and just, you know, just going to go through that process.
00:14:40:02 – 00:15:05:13
Unknown
And when you do due diligence, 90% of the time you’re going to have a purchase price adjustment, you’re going to find something and then you don’t like. So that’s why I’m like, don’t just lock in on that. That initial purchase price of 4.5 that you put on that letter of intent. Yeah. Because if you find something through due diligence or whatever, and there’s always a, you know, from low way to closing, let’s say it’s four months.
00:15:05:15 – 00:15:19:17
Unknown
I mean, they could have lost a big contract, they could have got a big contract and now they want 5 million. They’re not going to take your 4.5. They’re going to back out of the deal. Right? Right. But if you find some stuff, I’m like, hey, man, I just you haven’t given your anybody a raise in four years.
00:15:19:19 – 00:15:37:15
Unknown
I’m going to have to do that. And that’s going to cost me an extra 100 grain. And I gave you a five multiple on that. So now now I’m going to offer you 4 million. Yeah. Yeah. Yeah. Right. So it’s, it’s and it can fall apart in multiple phases. So it’s super important you stay highly engaged during that 3 or 4 month process.
00:15:37:15 – 00:15:54:24
Unknown
If you’re getting a loan from, guaranteed by the SBA or anything like that, you got to stay engaged. You don’t fall apart, without a doubt. Yeah, yeah, we call that a re trade in real estate. You know, some real estate. You know the deal. Yeah. So that’s very common. We always end up kind of doing a little re trade, especially on the bigger deals.
00:15:55:01 – 00:16:16:22
Unknown
It’s part of the process generally. And, so we, we know the deal there. Okay. And then as far as structuring the debt and the equity. So what’s interesting about, buying a business, you can get a lot more creative than real estate. You know, you have inventory you can borrow against. You have seller carry, like you said, they can hold a note that’s very common as well.
00:16:16:24 – 00:16:35:09
Unknown
You can have different scenarios where the earnout for the seller is over a period of time. You know, sometimes the seller wants to stay in the company. They’re a a major kind of part of the business, you know, and they want to remain on payroll for three years or something, actually doing something, maybe not doing anything. Maybe they remain on payroll for three years and they don’t really have to do anything.
00:16:35:09 – 00:16:52:15
Unknown
And that’s part of the the caveat, you know, they kind of the incentive for them to sell you a better price. Right? So there’s a lot of, it correct me if I’m wrong, you know, leeway there, a lot of flexibility and creativity. You can come in with any of the SBA loan, and they can lend you, what, up to 90% of 90 purchases, right?
00:16:52:15 – 00:17:19:05
Unknown
Yeah. That’s freaking phenomenal, right? 90%. So you don’t if you’re buying, you know, a $4 million business like the scenario here, you ideally, you know, can get what, a basically $3.6 million in the SBA. And then you could say to the seller, hey, can you hold back 400,000? I’ll pay you over five years or something. And you take the revenue from the company and pay that note down, and maybe you give them a 6% interest rate or something.
00:17:19:05 – 00:17:35:01
Unknown
On his note, maybe you throw them a little salary on the side, you know, or something like that, to make it worth his while. Right. But you can get pretty creative there. And this and that scenario, you’re essentially buying a business. No money down. Is that correct? Yeah. Under under that scenario, the seller can only hold five.
00:17:35:01 – 00:17:54:18
Unknown
You got to come in with five. Got it. Now when I say you that could be anybody. So you could have an investor coming in with that other five. But the seller cannot carry all ten. He can carry ten. But you still got to come in with five. Yeah. Yeah. Right. So therefore the the financing would just be 85%.
00:17:54:20 – 00:18:12:09
Unknown
Right. So yeah you can still do no money down it just in an investor. And we do that a lot especially in my community where where we got investors that let’s say they come in with the entire 10% down payment and that investor takes 20% of the equity. Yeah. Yeah yeah. And then they go get then the buyer.
00:18:12:09 – 00:18:34:04
Unknown
This is great because in the buyer go gets an SBA note. And they’re a guarantor for the entire note. Right. Right. So the investor has zero risk other than their money. Right. So yeah. So you can go all sorts of different directions you through an earn out in there. And for people don’t know what Earnout is. It’s like I’m going to give you 4 million but I’m going to give you an extra million if you help me grow the company.
00:18:34:06 – 00:18:54:12
Unknown
Right from 4 million in revenue to 10 million in revenue, if you make if you if you do that of the two years, I’m going to give you another million dollars. Right. So get them to stay on, incentivize them things like that. Yeah. Without without a doubt. Super. Yeah. But super a number of ways, to, to be able to finance this thing without a doubt.
00:18:54:14 – 00:19:16:18
Unknown
Yeah. I love that creativity. You know, that’s really incredible. And as an investor, what could you expect to earn in this scenario? Right. Let’s say you bring in the $200,000 to buy this business. You get 20% ownership in the company. I mean, what is a business in passive investor potentially earn on an investment like that? Like what’s the market return for something?
00:19:16:18 – 00:19:39:04
Unknown
I mean, give me what I’m getting. I’m getting a 10% profit on that. Right. Before before there’s any any participation from that 80% owner. Now, of course we’re going to give that owner a market value for their salary. Let’s just call it 150 grand. So one thing I do, and this is a deal killer for me, if I if I’m the investor on this, I control that.
00:19:39:04 – 00:19:58:03
Unknown
Even though they’re an 80% owner, I control their salary. Oh okay. Right. So so it’s like you know, just throw it in to be fair, right? Like, hey, I’m going to pay you a market rate. We can go. We can get hired a consultant to tell you what market rate is for your services. Right. So, they’re not they’re not going to get cheated out of anything.
00:19:58:03 – 00:20:14:10
Unknown
But at the same time, you know, if the company makes 500 grand and we’ll just bonus themselves 400 grand, and I don’t know if you get a penny as a 20% owner. So you got to make sure you control that without a doubt. And you know what. It’s just like okay then you know what. You come up with the 400 grand.
00:20:14:12 – 00:20:32:05
Unknown
All right okay. Now no matter what you saying come back. Come back. Right. Yeah. So you got a little bit of leverage there or a lot of leverage to be able to negotiate something like that. So like a 10% profit and then just control that salary. And then you’re, you’re going to split it 8020 on whatever those profit distributions are.
00:20:32:07 – 00:20:53:02
Unknown
So you could probably do better than real estate in a lot of ways investing in businesses. Because a company like this that’s you know net revenues $1 million a year, you get 20% of that. I mean, you’re looking at essentially making back your $200,000 investment in a year, right? Or something roughly. Is that. Yeah, within a year.
00:20:53:02 – 00:21:13:24
Unknown
And the other thing, too, I like it about is and I love real estate, I own four pieces of real estate myself. So when I say this, just, you know, is I loved real estate over the last 15 or 20 years when all of this got extremely rich. I still think real estate is still a great play, but I don’t think the numbers exist anymore like they did before.
00:21:14:01 – 00:21:36:05
Unknown
Okay, that that buying something for $4 million and flipping it two years later for eight. Yeah, those days are gone. Right. But but getting a 10 or 15 or maybe even a 20% annualized return in real estate is still in play, without a doubt. But why? I like small businesses, or at least as as part of your portfolio from a diversification standpoint is you can scale it.
00:21:36:07 – 00:21:51:15
Unknown
Yeah, because outside of value add in real estate, which is really hard to find. Now I can buy a business that does 4 million in revenue, and I can end. If I know what I’m doing, I can turn it into 8,000,000 in 2 years. Wow, you can’t do that in real estate, right? You can’t do that in real estate.
00:21:51:17 – 00:22:15:06
Unknown
And the other thing good about small businesses, as you grow topline revenue, your multiples increase. Okay. So if I bought it at A3X multiple on that net income, and I’ve taken it from 4 million of revenue to let’s, let’s say 50,000,010 years down the road. Yeah, I’m going to sell it for an eight multiple. Wow. So the net income’s just gone crazy.
00:22:15:08 – 00:22:41:19
Unknown
But then I’m selling it for three x from a multiple perspective on what I originally bought it. Just because a company has 4 million revenue can go to zero. It can be. Doesn’t 50 million can not go to zero. It’s impossible. Right. So that’s why I love small businesses. Because your ability to scale it and when I and I bring that up is if you’re going to have an investor bring in smart money.
00:22:41:21 – 00:23:02:21
Unknown
Don’t bring in dumb money. Yeah. And what I mean by that is you know if this isn’t I got an oil and gas company I’m buying. Let’s say go find an oil and gas investor. Yeah. So he knows people in the industry. He can help you run it right. Don’t get by somebody that’s you know all they’ve done is real estate.
00:23:02:23 – 00:23:25:00
Unknown
Yeah. Because they’re not going to add any value to your business. Yeah. There’s other than give you the down payment. So definitely try to find smart money too. If you if you try to find an outside investor. Sure, sure. Okay. And so as far as your services are concerned do you help with all that finding the right business broker, putting together the the structure of the deal, doing the due diligence, raising the capital.
00:23:25:00 – 00:23:41:22
Unknown
Like what what are your services offer someone who’s looking to buy a business I do everything and by the way, we haven’t mentioned I’ve bought and sold about 2020 businesses. I’ve started five from scratch over the last 25 years. So I’ve kind of lived in this space for the last 25. So that’s what kind of sprung me the last few years is to start.
00:23:41:22 – 00:23:59:20
Unknown
Best Buy Pro is like, I’m getting on age and and I don’t need any more money. I still like money. And when it more money to come in. But I feel like I’m at a point in my life where I want to pay it forward, right. And teach people the path that I that I created for myself over the last 25.
00:24:00:01 – 00:24:17:05
Unknown
Yeah. And for the first ten of me owning businesses, I’ve made so many mistakes, it’s not even funny. And that’s why I wrote the book. You can see it, right? My tech back there. The exit plan is just kind of my journey over the last 25 years. All the mistakes I’ve made and things I recommend and how to set up your legal entity properly.
00:24:17:05 – 00:24:37:21
Unknown
And because I’m a CPA, I’m going to help you with all the taxation stuff. Yeah. Because I really think not paying taxes legally, of course not. Paying taxes is one way to become wealthy, right? The tax code is there for you to use. Everybody gets mad at all these billionaires, Trump and Elon Musk and Bill gates that they pay 5% of their income in taxes.
00:24:37:21 – 00:24:53:03
Unknown
Will God bless him, right? Right. They’re not doing anything illegal. I mean, God bless him. I mean, God bless America, right? Right, right. I mean, they’re using they’re using the tax code to their advantage. And I do the same thing. I don’t take I don’t pay more than 5% of my income in taxes. Yeah, I paid no taxes because.
00:24:53:03 – 00:25:12:08
Unknown
Right, I mean real estate did real estate crazy and that and that space. Yeah. So yeah, without a doubt. Which is why the reason why? Because of the four properties I own, obviously, I take advantage of that. But so I created that community kind of just it educates him on everything that you will ever need to know about buying a business.
00:25:12:08 – 00:25:25:09
Unknown
And yes, I will help you with the entire process. I won’t do the due diligence for you just from a liability standpoint, but I’m going to teach you how to do it. I’m gonna hold your hand and come ask me questions if you’re stuck on something. But with that said, I’m I’m going to tell you to hire somebody external anyway.
00:25:25:12 – 00:25:43:00
Unknown
Yeah. But I’m going to help you set up your LLC properly. I mean, you think it’s easy? It’s not you. There’s four boxes to click when you’re setting it up. You click when I’m wrong and you’re going to screw up your tax situation, right? Right. So yes, I help you through all of that sort of stuff.
00:25:43:02 – 00:26:00:07
Unknown
How to talk to the seller, which is super, super, super important is how to talk to that seller and how to befriend them and things like that. Because then when you when you rerun the numbers through and due diligence, now you’re having a conversation with a friend, right, right, right. Not your enemy. Right? So yes, I help them do all that stuff.
00:26:00:07 – 00:26:16:11
Unknown
Without a doubt. Yeah. I mean, because someone who spends a lot of times their most of their life building these businesses, you know, and now that’s they’re finally selling it like, this is, this is their baby, you know, think about that Hvac company. You know, this guy built it from the ground up, right? And now here he is finally exiting his company.
00:26:16:11 – 00:26:40:04
Unknown
This is a big moment in his life, and he’s proud of his company, what he’s built, he’s worked to get it prepared for sale. Now, it is an emotional journey for them, I’m sure. So befriending them is extremely important. And people want to do business with people they like, know and trust. Right? At the end of the day, too, they’re selling you their business, so they want to make sure you don’t run into the ground, you know, because their name might be on the side of the trucks or whatever it is, the reputation, you know, the end of the day.
00:26:40:04 – 00:26:55:02
Unknown
So they want to sell someone that’s going to actually take that business to the next level. And I and I will throw this out there, since we’re talking about passive income on this is there’s an opportunity for you to find a business and hire a great general manager. And you step back and you work it a few hours a week.
00:26:55:08 – 00:27:20:07
Unknown
Yeah. So that’s that’s definitely an opportunity here, without a doubt. What are some businesses that you may suggest for that? You know, where you can be more passive in the ownership of the company and hire that general manager? I mean, some are going to have that ability more than others. CPA firms. And anything professional like that, I think you can buy and have the absentees.
00:27:20:09 – 00:27:40:10
Unknown
Laundromats is massively huge right now. So obviously that can be absentee or just run in a few hours. And I mean really anything can be run absentee. I just, I just, I am scared of true absentee ownership is working there zero hours. Yeah. If you’re not involved in the company a few hours a week, people are going to steal from you.
00:27:40:12 – 00:28:02:20
Unknown
Yeah, without a doubt. Sign two checks at a minimum. Sign the checks. Got it. Come in. Sign the checks. Yeah. Come on Tuesdays and Thursdays and sign the checks right there. Yeah, I get it, I get. Okay. Nice. Roll up my Ducati, sign the checks Tuesdays and Thursdays and then just do whatever. Yeah, exactly. Yeah, exactly. That’d be a great impression on your employees that you’re making 15 bucks an hour.
00:28:02:22 – 00:28:23:06
Unknown
Yeah. Yeah, yeah. Oh, God. Okay, I’ll trade it for the Yamaha those days. Yeah. Cool. Very interesting. All right, Paul. And then how about even the finance of the SBA loan and all? You probably help kind of walk people through that. And connect us with the right people to the due diligence and so on. Do you help with that as well?
00:28:23:12 – 00:28:43:17
Unknown
Yeah, SBA, I got several people on my network. I mean, I just open up my Rolodex to everybody. Yeah. I got I got my insurance brokers, my real estate brokers, my commercial insurance, I mean, my attorneys. I got everybody, and I open that up, that Rolodex out the SBA. Super easy. And you don’t have to have a great credit score anything mid six hundreds and above.
00:28:43:17 – 00:29:01:22
Unknown
You’re going to probably qualify for an SBA note even though you’ve never owned a business. Yeah. And how the SBA actually works, SBA actually doesn’t give you the money that guaranteed a debt. Okay. So you go to a local bank. Well, let’s call Wells Fargo. You’re going to go to Wells Fargo, Bank of America, and they’re going to have an SBA lending arm.
00:29:01:24 – 00:29:25:16
Unknown
Yeah, okay. And let’s say they’re lending $1 million, right? Okay. The SBA, because a lot of the small businesses is just blue sky. It is just fluff. There’s no there’s nothing that can’t be collateralized. From maybe they got a forklift worth 30 grand and 30 grand worth of inventory. And the rest is just fluff. Yeah. Yes. So nobody’s going to lend on that, right.
00:29:25:16 – 00:29:45:14
Unknown
So the federal government stepped in and realized that that a long time ago, this started 50 years ago, that the only way to sell a small business a long time ago was 100% seller financing. Right. Or you just ran it into the ground and took it to the grave with you? It was the only way. So they created a market for small businesses to actually sell.
00:29:45:16 – 00:30:06:07
Unknown
So what they’ll do of that million dollar loan that Wells Fargo is they’re going to loan, they’re going to guarantee 75% of that loan. Okay. So if if I go declare bankruptcy on that business I just bought, Wells Fargo in the on online for a million, and then they’re going to call the SBA and like, hey, you guys owe me 750.
00:30:06:07 – 00:30:24:22
Unknown
SBA is going to get Wells Fargo check for 750. Got it. So that’s how that actually works. So no no different than than the regular loan. Maybe a little bit more red tape because you’re dealing with the federal government. It may take you a little bit longer, but it’s a pretty easy process. Yeah. Yeah. You know Paul this is really interesting to me.
00:30:24:22 – 00:30:39:04
Unknown
You know I I’ve always that’s why I want to have you on the show here. I’ve always loved the idea of owning businesses more on the passive side than the active. Obviously on my own. I’ve been running for many years. I recognize how hard it is to start a business from the ground up, so I know I’ve done it.
00:30:39:04 – 00:30:59:05
Unknown
And the value to me of buying a business that’s already up and running is huge and and beautiful as well. Without a doubt. So just let me throw in a couple numbers there. So of all the businesses that I’ve bought that were existing have 92% success rate. Okay. There you go. Of the ones I started from scratch, I have a 25% success rate.
00:30:59:08 – 00:31:17:09
Unknown
Wow. Yeah. And and if you look at the overall statistics of that I mean it’s pretty rare right. What do they say. Like nine out of ten businesses don’t make it beyond ten years or something like that. And then like like eight out of ten of those don’t make it another ten years. I have to look up the stats again, but it’s pretty dismal.
00:31:17:09 – 00:31:39:01
Unknown
I would encourage you not to start a business, you know, so the idea of buying an existing business, we already had that momentum, is smart. And what about franchises? Do you advise people buy a franchise, 5050 on franchises? You find the right one. It’s a good purchase, number one, because everything it’s a plug and play. Yeah.
00:31:39:01 – 00:31:56:17
Unknown
You don’t got to think at all. Yeah, right. I mean all the systems are there, but I don’t like I don’t like scalability on those. Because they’re like I mean, if you buy a McDonald’s is, can you take it from 2 million to 4 million sales? No. If you buy an Hvac company, yes, you can. So you can scale it.
00:31:56:17 – 00:32:16:04
Unknown
Right? Okay. But you can buy McDonald’s number two or number three, so you can scale it that way. So I buy additional acquisitions. So I’m kind of 5050 on space or on on franchises. I mean, so yeah I’ve, I’ve never bought one. I’ve looked at a few and gotten close, but then I kind of just backed out.
00:32:16:06 – 00:32:31:12
Unknown
I hear you all right. Great. So how could people get in touch with you and learn more about, teaming up with you and possibly buying a business? Yeah, the website is Best Buy Procom. And then I’ll just give you my email. Just email me about any any questions you got, free advice. I mean, I love doing this.
00:32:31:12 – 00:32:50:12
Unknown
It gets me out of bed. Is Paul at Best Buy? Procom send me an email and if you send me an email, I’ll send you a free, audio book of, audio copy of my book. Yeah. And we have the links to your, book there. We’ll put that in the show notes as well. And, so our viewers can and listeners can, check that out.
00:32:50:14 – 00:33:02:21
Unknown
I’m going to actually, I think you gave me that link to your, the PDF of your e-book there. So I’m going to look at my sent it. Yeah. PDF do and it’s on Amazon if you want to spend seven bucks or eight bucks or whatever. Yeah. If you want to read it. Yeah. There you go. There you go.
00:33:03:00 – 00:33:21:19
Unknown
I like I said, I really like this space, you know, and it may be something I look more seriously into, especially upon some liquidity events over the next three years. You know, it’s real estate guys. You know we we love those liquidity events. And then yeah. Exactly guys usually I just buy more real estate. But you know, maybe I’ll I’ll give Paul a call here and, see what’s going on in the business world.
00:33:21:19 – 00:33:50:02
Unknown
So, now, a really interesting stuff. So. Okay, that’s Paul at biz buy Now.com. Is that right? Is my pro biz bi pro biz bi pro busy bi procom. Right. Yep. That is it. Got it. Okay. Excellent. We’ll put that in the show notes. And to our listeners, if you’re gaining value from our episodes here, we just learned how to basically go from A to Z and buying a business, doing the due diligence, financing it and so on, finding a hopefully a good business that fits for your needs.
00:33:50:02 – 00:34:08:23
Unknown
And also our the guests we have on tax professionals, investment professionals, real estate operators and professionals, you know, share these episodes with people in your network that you think would also get value of the Passive Cash Flow podcast here. We have a new episode every two weeks. We’re on all major platforms. Be sure to like and subscribe.
00:34:09:00 – 00:34:16:02
Unknown
We’re also on YouTube. You can check out a lot of our content there and shorts as well. And, thanks so much, Paul, for coming on the show. Really glad to have you here.
00:34:16:04 – 00:34:17:02
Unknown
Thanks, Aaron. Appreciate it.
