I wanna buy a business, but where do I start???

Good Q since: 91% of ppl with a net worth of $5M+ own their own biz

BUT - Sometimes it's better to start with what not to do.

Here are the most common MISTAKES in M&A & how to avoid them:
1) Don't listen to your Mom, not all Debt is bad

Leverage. I like to try to shoot for a similar to a mortgage.
10-20% cash down in cash, rest “seller-financed"

For example, a biz makes $100k profit, and they're usually valued at 2-3x profits
So you buy for $200k let us say bc you my friend r a killer negotiator.

- $20k down (20%)
- $80k paid end of year 1
- $100k end of year 2
If you fancy, u use profits from biz to pay for the purchase.

Rule #1, Don’t Buy with Cash. Rule #2, Don’t Forget Rule #1.
2) Don't Overpay

(No sh*t Codie)
- There are more complex modeling techniques than patagonia vests on Sandhill Rd
- but on your first deal, save some headache...

Small businesses are worth 2-3x their profits on average. Period.
3) Use Milestones & Earnouts

When negotiating, you have two big levers: Price & Terms

Our saying is you can have your price my terms, or my price and your terms. I tend to prefer my terms and their price

EX: Protect the downside AND only pay the price if milestones are hit
4) Don't Build A Business When You Can Buy It

Not buying a business is the single biggest mistake I made.
Most people really just want revenue and financial freedom in their careers.
They don't want 80 hour weeks & world-changing ideas

BUY, don't build
It boils down to efficient use of capital:
Hire 2 employees, spend $20k on a startup OR use that capital to acquire a relevant business and close with a couple $100k day one.
5) Don't Buy Too Small of a Business (Buy a Job)

Strive for at least $100k/ yr in profit. Why? So you can hire a decent operator

If you want to buy a job, those deals are EVERYWHERE.
What takes more looking is one you can buy with an operator and get cashflow without YOUR time...

Holy grail. But there are. a lot more than u think.
If you leave with one thing today I hope it is this:

No such thing as a free lunch.

It's hard, things get ugly, parts don't work, employees don't show up.

But it is possible.
If you like this... you’ll love our free weekly newsletter.

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More from @Codie_Sanchez

13 May
I want to own a passive cashflow business!

Ok - then you need an operator my friend.

How we've hired 100+ operators (some amazing some spectacularly bad).

A 🧵
How to find this elusive human who will do all work while we cashflow?

Stop, no free lunches, expect skin in z game.

I started as an operator. Like a RE property manager.
They took $ risk, I took time risk.

Done right. You are giving only path to REAL wealth... ownership.
THE BEST PARTNER OR OPERATOR.

Always is one of two things:

- Potential talent - someone you know and trust or someone
OR
- Proven talent - who has done the job before
Read 14 tweets
11 May
How to get free $Money?

Stop. No such thing.

Well, except I think the SBA loan programs are pretty d*mn close.

A thread on OPM from the good ole' US government:
SBA loans... a quickie 😜
- Can get loans up to 90% of your qualifying biz purchase price
- Govt backs a portion of your loan
- Max usually $5M
- Loots of new benefits during Covid to read up on
They're basically copies of what big PE firms do with their partner lending firms.

Assets + Cashflow Potential+ Leverage = PE
Assets + Cashfow Potential + Leverage = SMB buy w/ SBA loans
Read 8 tweets
10 May
3 Rules for Deal Making that'll Teach you More than ANY PE MBA

Speak finance and earn finance like $ w/o the IBanking like hours.

I did the Goldman thing... believe me, you don't need to. A 🧵
📏 Rule #1: Cash Isn’t King, Cashflow Is

I optimize for making $’s on my deals day 1.

When I close a deal personally (not through our VC funds), I want that deal to pay me that same day.

Greedy, maybe? Possible, unequivocally.
📏 Rule #2 @ycombinator Term Sheets are for Amateurs

- Most sign term sheets straight from Y-Combinator.

- Have to when deals are super hot (theoretically).

But if I’m optimizing for cash flow, not potential 100x’s, no thanks. Instead...
Read 7 tweets
9 May
Cashflow through deal structuring.

I beseech thee... if you learn one thing, learn to structure deals.
Nothing else has made me more $

WARNING: This is technical - but I'm not here to entertain you, I'm here to mutually grow.

Let's go to school eh?
EVERYONE IS OBSESSED W/ The VALUE of a Business.

OMG - how much did @TheHustle or @MorningBrew sell for?
I guarantee that # is less interesting than the terms.
Devil is always in the deal details.

Know how to work the details, you'll own the deal.
Remember this:
Every deal has two aspects Price & Terms.
My saying, "You can have your price and my terms, or my price and your terms... but you can't have both.
Read 10 tweets
8 May
My boring businesses make 10x+ more than my angel investments.

😶 None of this "It's like Uber for X" nonsense.
⌛No waiting 10 years to MAYBE become @Jason w/ 8 fig exits
🔥 No seeing all ur $ burn on next BIG thing
💰Payouts day 1 for private deals
What if we create a fund/syndicate... to invest in cash-flowing boring businesses.

Ya, I'm going to do that.

It's basically PE. But usually, PE is for people who look like this...
Instead, it's for us.
I'm working on a syndicate, or rolling fund (structuring 1st deal so we'll see).
It will be focused on CASHFLOW. Not binary potential upside.
Read 5 tweets
7 May
New faces here so:

Who the F am I & lessons from running 3 funds w/ $1Billion+ in AUM:

1) If you want:
- ideas on boring $ businesses
- roadmaps for investing unconventionally
- pushback on idiocy

We might be buds, a 🧵:
2) I sit on the board of a $200M Cannabis fund & am a partner (EEC)
- Done 67 deals to date
- Truth: cannabis is HARD. Not a fast way to make $. Need great operators and lots of oversight. We do deals $10-50M+ in ARR.
Lesson: They really do let anyone get featured 😂
3) On the board of a $6.5B+ HF (I'll keep 'em private bc ya know WallStBets)
- These guys are so smart it's painful
- Why I don't play public markets... if I have to compete vs them, no shot
Lesson: Don't play other people's games
Read 7 tweets

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