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How I leverage 6 Strategies to Acquire a US$1M Venture for US$150.000

Author

Sven Milder
October 17, 2023

Reading Time: Approximately 4 Minutes

How I leverage 6 Strategies to Acquire a US$1M Venture for US$150.000 & Target 16X Return under 24 Months

Hi, how is your week going?

Today I want to talk about the mystery of buying a business for a 85% discount.

My goal is to inspire you to do one day the same.

If you ever need help, you know where to find me :)

Before we jump in todays newsletter, stay tuned for Thursday’s mail as I’m sharing a ridiculously great offer with you for the beta-launch of my best program ever.

Anyway lets jump in.

A bit of back story, I'm in the process to buy a 4 year old business doing $200.000 in profits annually .

This acquisition will be the 1st of 6 others of a roll-up under a holding company that i plan to leverage as a cash flowing asset or maybe even list

But how do you buy a business worth US$1.000.000 for US$150.000?

𝗔𝗴𝗿𝗲𝗲𝗺𝗲𝗻𝘁𝘀 𝗼𝗻 𝗔𝗰𝗾𝘂𝗶𝘀𝗶𝘁𝗶𝗼𝗻 𝗣𝗿𝗶𝗰𝗲:

Like Codie Sanchez advocates and I do agree with.

T͟h͟e͟r͟e͟ ͟a͟r͟e͟ ͟2͟ ͟m͟e͟t͟h͟o͟d͟s͟ ͟t͟o͟ ͟a͟g͟r͟e͟e͟ ͟o͟n͟ ͟a͟c͟q͟u͟i͟s͟i͟t͟i͟o͟n͟ ͟p͟r͟i͟c͟e͟.͟

1. We give the buyer what she/he is asking, but on your terms

2. The buyer accepts our price, but her/his terms

The difference between these options is the 𝘴𝘱𝘦𝘦𝘥 𝘵𝘩𝘦 𝘣𝘶𝘺𝘦𝘳 𝘳𝘦𝘤𝘦𝘪𝘷𝘦𝘴 𝘤𝘢𝘴𝘩 𝘢𝘯𝘥 𝘺𝘰𝘶 𝘺𝘰𝘶𝘳 𝘳𝘰𝘪. I love the latter.

In this case I buy the business for 5-times EBITDA:

So 5x US$200.000 = US$1.000.000

In theory this results to a 20% return p/year based on profits versus the enterprise value.

That is when the company keeps performing in the same fashion.

Now off course, we want to grow this baby and optimize its cost.

𝗧𝗵𝗲 𝗧𝗲𝗿𝗺𝘀 𝗼𝗳 𝘁𝗵𝗲 𝗱𝗲𝗮𝗹 𝗱𝗲𝘁𝗲𝗿𝗺𝗶𝗻𝗲 𝘆𝗼𝘂𝗿 𝗥𝗢𝗜:

Now how do we buy it for $150.000 while its worth $1.000.000

We are getting creative with financing, assets, negotiations.

• 𝗥𝗲𝘃𝗲𝗻𝘂𝗲 𝗯𝗮𝘀𝗲𝗱 𝗳𝗶𝗻𝗮𝗻𝗰𝗶𝗻𝗴

The business has recurring revenue. Voila.

We can finance 60% of the $400.000 recurring revenue. That is $240.000.

I agreed on a $150.000 financing with a debt provider.

• 𝗦𝗲𝗹𝗹𝗲𝗿 𝗙𝗶𝗻𝗮𝗻𝗰𝗶𝗻𝗴:

The immediate cash need for the seller was $300.000

I agreed to finance $250.000 of the acquisition.

• 𝗦𝗮𝗹𝗲𝘀 𝗼𝗳 𝗔𝘀𝘀𝗲𝘁𝘀:

The company own 4 cars worth $130.000.

We sell the “old cars” and take out a lease for just 2 new cars.

Good deal right. $130.000 in the pocket.

• 𝗥𝗼𝗹𝗹𝗲𝗱 𝗢𝘃𝗲𝗿 𝗘𝗾𝘂𝗶𝘁𝘆:

The (old) owner loves our future business plans.

so we roll over 17% equity for future owner benefits.

Rolling over equity can be a great method to get paid twice as seller. One is the immediate cash. Two, the buyer will grow the business, so another cash out is on the horizon

• 𝗢𝗻𝗯𝗼𝗮𝗿𝗱 𝗡𝗲𝘄 𝗜𝗻𝘃𝗲𝘀𝘁𝗼𝗿

We created a 24 month business plan. Went out to Pitch our growth trajectory

and will sell 10% of equity for $150.000 to a new investor.

Not only the value went up, but also we earn along the way

𝗧𝗵𝗲𝗿𝗲 𝘆𝗼𝘂 𝗴𝗼, 𝘆𝗼𝘂 𝗮𝗰𝗾𝘂𝗶𝗿𝗲𝗱 𝗨𝗦$𝟭𝗠 𝗳𝗼𝗿 𝗨𝗦$𝟭𝟱𝟬.𝟬𝟬𝟬,-

If you have any questions about this post, please click here to visit my linkedin post and ask your question.

Talk to you on Thursday -!-

PS: If you are ready, I’ve some great product to life your business game