Buy a cash flow business?
Seems easy enough right? Well I can provide some perspective on how it went for me so far.
First off, I want to be clear that this is something I believe will bring me closer to FI (Financial Independence) if I am able to achieve it, but I want to put out there how easy some of these folks that have already “made it” make it sound. Here is an example of a tweet I saw this morning, “Buy a business for cashflow, then use the profits to fund a diversified portfolio, and then swing for the fences or lay on a beach.” Great, that sounds super great and I am going to go do that now… Okay, where do I even start? Here we are back at this question again, so many ideas and “just go make it happen quotes”, yet we are all left here going, “whats wrong with me?” or “I’m trying but this is seeming a lot harder than I anticipated.”
Back to my experience on beginning this process. About a year ago, I started looking pretty aggressively around my local area for a business for sale. Something local because I know I do not have the resources to be flying around and meeting with folks to try and secure a deal, plus I do not want that kind of stress of not being able to help the business if needed on any moments notice. I also wanted to make sure that this first business is in my field of operations and since I have a background in restaurant management, that is where I put my focus. Is this probably the most difficult one to choose, I think maybe, since they do not always succeed, but more on that later, I just want to try and get something going. I found a couple of coffee/cafe style places that were up for sale and at a reasonable price. I reached out to the ownership and asked for a meeting, I have to admit I was getting pretty nervous and anxious, mainly because I didn’t really have very much money to put down and I wasn’t sure of the process. I just googled a bunch of questions that I should be asking them and looking at my notes from what I had been seeing and hearing in books and podcasts about acquiring a business. Also, it should be pretty easy right? I just ask them for seller finance or get an SBA loan with 10% down and we are good to go… Yeah, not that easy. But this is how a lot of folks make it seem.
I went and met with the owner of this cafe and we hit it off, they were very excited to have someone interested in their business and happy to hear that I wanted to make sure I kept it how it is and just helped it grow, and that I would absolutely keep the staff that was on site. So, first part done and I couldn’t believe how easy it was and how natural it felt, what could go wrong now!? I did ask them in that meeting if they would be open to seller finance, but they were more looking for a cash buy-out acquisition, they seemed a little uneasy with the thought of getting paid over time. I knew my next move was to now secure an SBA loan since I had a little more than 10% down for their asking price, my credit is good and I had a long background in this field, I was amped about this prospect. Long story short, I got sent away by every credible bank who I thought would love to move on this deal. I even started an LLC to show how committed I was. The commonality I heard was, an SBA loan is hard to secure when trying to acquire a business and they like to see at least two years as an LLC before they lend SBA loans to you. I was blown away that no one talks about this. All I keep hearing on all these podcasts, tweets etc…“acquire a cash flow business, get an sba loan, start an llc, do seller finance, make it happen, it’s as easy as that!”
Again, I don’t want this to sound like I think they are all liars or full of it or misguiding us, and the reality is, those things are possible, they just are not as simple as they make it seem. This is one of the main reasons I started this blog, I wanted to be able to meet others that are looking for help as well, where we can use each others stories to help avoid some things that might slow us down or make us feel like it’s too hard and give up. I want to help talk through what went wrong and find a way to move forward and get back on track, so we don’t miss opportunities.
Unfortunately, yesterday I saw that the same cafe I was looking to acquire got picked up by someone else, now they are closer to their dream and I am feeling like I gave up and missed an opportunity. Luckily, opportunites are all around us and they come and they go just the same.
I am hopeful to hear from more of you and hear about an experience you may have had that made you feel like you missed and opportunity and what was learned so we can do it differently next time.
Until next time, thanks for being here and sharing!