In this episode, I asked Ace questions like:
05:25 Why is buying a business more profitable than building a business from scratch?
08:15 How can someone buy an existing business with no money down?
13:30 Ace describes his revenue sharing model with his clients
14:20 How can you grow a business, then sell it for maximum value?
17:00 What's one of the biggest mistakes you've ever made buying or selling a business?
Resources mentioned in this episode:
-The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses by Eric Ries
-Alvin's Favorite Books:
Why Should White Guys Have All the Fun?: How Reginald Lewis Created a Billion-Dollar Business Empire
Ace Chapman Links:
-Ace Chapman on Snapchat: Ace.Chapman
-Ace Chapman email: ace[at]acechapman[dot]com
-Ace Chapman on: Instagram/Twitter - @acechapman
-YouTube: search - Ace Chapman
Ace Chapman's Bio
Rescuing small businesses is all the rage on television. Whether it's Jon Taffer with Bar Rescue, or Tabitha Coffey's Salon Takeover. Despite the fact that none of them do it, these TV shows are fueling interest in a new trend. Move over Real Estate Flippers, Ace Chapman is building a nationwide group of business flippers.
Ace bought his first business at 19 with some savings from a summer job and caught the business buying bug. He leveraged $3,000 he saved working the summer before college into buying a business for $70,000. Over the last 16 years he has bought 40 businesses. Everything ranging from a Mortgage Company to a Clothing Retailer.
And right now he is seeing an explosion in the market for businesses under $2,000,000. "There are millions of Baby Boomer business owners who will bring their business to market in the next decade so they can retire. During the recession, many baby boomers wanted to sell their company but decided to hold off until better economic times."
At the same time many entrepreneurs are realizing the risks associated with starting from scratch are too high and are deciding to buy an existing profitable business instead.
Business sales saw a spike in 2013. While we saw a 68% increase in 2013 according to BizBuySell.com, business brokers expect 2014 to be even bigger. And while private equity firms are well positioned to take advantage of this increase in inventory, very few are paying attention to what Ace calls the Micro-Private Equity Market.
Ace began working with first time business buyers of business buyers and helping them find, do due diligence, and finance small business acquisitions. "I have had a lot of people who find me and ask to invest in my deals. I'd rather show you what I am doing than take your money and have to split my returns."
Since starting his network of business buyers, he has helped members close deals all over the country. From 2 Sylvan Learning Centers in Seattle, to a software company in Pittsburgh and from a fitness gym in Huntsville, to a Catholic retailer in South Dakota, these were all deals done in recent months by the network.
Business buyers are attracted to buying a business instead of starting one for obvious reasons.
It's easier to get financing to buy an existing business than to start a new one. Bankers and investors are more comfortable in dealing with businesses which already have proven work results.
Starting a new business requires investments in a period of 3 to 6 months, and many entrepreneurs never get to the period of earning. When buying an existing business you have an idea of what your salary is going to be on day one.
Business buyers do not have to go through hiring and training new employees, developing operation systems, and marketing plans. They start day one improving the business instead of building each department from scratch.
Still Ace says buying a business is risky, especially if you do not know what you are doing. "Whenever you are buying a business you are looking at the past, there is no guarantee that those numbers reflect the future", says Chapman. "You should find a business broker or advisor who has your best interest at heart. The more experience you and your advisors have, the easier it is to find the hidden landmines in any business.