Not only does Ace Chapman have a really cool name he also does something really cool for people looking for businesses that produce cashflow. He connects them with businesses up for sale that are right for their goals. He talks to us about micro-private equity funds, greed, the criteria involved in buying and selling businesses, and a whole lot more. Ace had an interest in business early on, getting his first taste for it when he sold his Kindergarten pictures at church. From there his passion for business grew. He learned to listen for problems he could solve for sellers (sound familiar?) and how to raise capital to purchase businesses. His first deal came when he was in college and learned what “LBO” meant and why it’s so important. (It’s a Leveraged Buy Out and it is a critical concept when buying businesses.) Ace hit plenty of walls, but he kept going. He knew that if he could buy this first business it would change his life. He was right! It put him on his current path, helping lots and lots of other people do the same as he has done. He didn’t focus on what he did or didn’t have; he didn’t focus on what other people were saying. He focused on solving problems he could solve in the market. He had to shift his mindset, too. This is an incredibly interesting Cash Flow Diary podcast episode, because Ace does similar things in his market as what I do in mine, but there are lots of differences, too. He even had to learn how NOT to listen to those in his life who wanted to “protect” him from making his initial decision to buy that first business. You’ll enjoy listening to Ace as he speaks from the heart about his path and passion in business and life. You will be amazed by the choices he had to make to reach his entrepreneurial goals. Listen Now.
On this episode of The Cash Flow Diary J. interviews Ace Chapman who is a successful equity investor. Ace’s first foray into entrepreneurship was selling his kindergarten photos to people at his church. Today he helps people buy existing online and bricks and mortar businesses. If you’ve ever wanted to know how to buy an existing business then you absolutely must listen to this podcast!
6:00 Ace’s ‘origin’ story
9:24 LBO (leveraged buyout)
10:42 Don’t let what you don’t have stop you
14:06 Family and entrepreneurship
17.12 The ‘shut up’ check
18:11 Walking in fear or greed
19:40 The average business buyers
22:52 Analysis paralysis
25: 29 Apply for free one-on-one breakthrough session plus J’s weekly insight
27:44 Removing emotions from the business buying process
30:59 Brick and mortar business vs. online business
33:16 Indicators a business is worth looking at
39:21 The micro private equity fund
42:29 Characteristics of success and investor identity
50:41 Becoming an entrepreneur
Main Questions Asked
- What is your origin story?
- What is LBO?
- Talk about not letting what you didn’t have not stop you
- What happened when you revealed your first real entrepreneur deal to your parents?
- When someone is looking to buy a business what are the common things they go though?
- How do you overcome the perpetual analysis paralysis?
- What has been your secret in removing emotion from the business buying process?
- Why does your brick and mortar business analysis have 34 steps and online business have 92 steps?
- What are indicators a business is worth considering?
- What are some of the red flags in buying a business?
- Give us some high and low price examples of business purchases and seller financing
- What is the Micro Private Equity Fund?
- What are the characteristics of people most likely to experience success when it comes to buying a business?
- What do you want to share with someone who wants to become an entrepreneur?
Key Lessons Learned
- An LBO is a leveraged buy out which in real estate is essentially providing a small down payment to get a mortgage
- In business a LBO is more complicated and involves putting together different layers of financing
- If you really want something then what you ‘don’t have’ wont stop you
- If you are an entrepreneur talking about making bold moves remember that your family will always want to protect you
- A ‘shut up’ check says to your conscience (and family) to stop doubtful thoughts and ‘shut up’ as this (the check) is proof your business is real
- As an entrepreneur you are either walking in fear (acquisition) or greed (selling)
Buying a Business
- The average person looking for a business closes after looking at the sixth deal in detail
- The decision in choosing a business for the average person comes down to gut instinct
- To overcome analysis paralysis you need to get a clear picture of what you want and what you want your life to look like
- Sometimes people have to go through losing deals before they pull the trigger and purchase
- Removing emotion from the business buying process relies on the ability to take your time
Analyzing a Business
- You have to have a system that you trust when buying a business (step-by-step analysis)
- Ace has 34 steps for a brick and mortar offline business but for online there are 92 steps
- Affiliate and e-commerce business have different steps that apply to each system of analysis
- It much harder to fake a retail store than it is an online business
- Focus on how long the business will be around 3, 5, 10 years from now
- Price-Ace generally looks at business for $2million or less as the multiple is better
- Multiple-The price divided by the cash flow (how much money you will get as a return.)
- Ideally look with something that has a two multiple.
- Example: Is business is sold for $500K if it is sold as a two multiple the cash flow would be $250K per year
- Red flags–Someone not wanting to offer seller financing. The person looking to scam you will want all cash
- Capital-The toughest thing about raising capital is that most people think they can’t do it and don’t try
- Baby Boomers – A lot of baby boomers will need to sell their businesses in the next 5-10 years. This is considered low hanging fruit and could be a great opportunity.
Characteristics of Success
- Matching the person with the deal is key
- Alignment avoids ailments
- If you buy a business you have an 85% chance of succeeding which is much higher than starting your own business which has a 10% success rate
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Links to Resources Mentioned
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