Jim and Ace go through Ace’s life as a business/buyer & seller starting in his college days. Ace gives a great tutorial on what to look for when buying a business and how to bring that business to its full potential using an example of one of the businesses he bought.
Main Questions Asked:
➢ When you went to college did you major in business?
➢ Let’s dig into the spa deal you did? What led you to buy a spa?
➢ How did you find the transaction?
➢ Did you buy the business with the expectation of an exit?
➢ Did you plan to sell in 6 months? Did someone just walk in and say I want to buy it?
➢ Was the buyer a customer that just liked the business?
➢ How did you determine the value?
➢ What kind of advice do you have for entrepreneurs?
➢ When you have done a “bonehead” deal, what was the mistake you made?
Key Points made:
➢ I was a political science major so one chance opportunity changed my whole life. (2:40)
➢ We want to find deals where there is a motivated seller. (3:30)
➢ This was a really strong business but there was an urgency to sell. (4:00)
➢ I didn’t have to put any money into it up front. (4:35)
➢ The spa deal came through a referral. (5:00)
➢ I wasn’t interested in being in the spa business for a long time. (5:38)
➢ I like to buy businesses that have been around a long time. They have brand recognition in the community. (6:17)
➢ They had a database of 15,000 customers. Not just leads, but people who had used their services. (6:30)
➢ I asked the seller how often do you contact these people? The seller said “never”. (6:48)
➢ I knew that was a huge opportunity. (7:15)
➢ You walk into a business and see that the employees or doing homework and not upselling. (7:33)
➢ A lot of people don’t see that as an asset that is being underutilized. (7:42)
➢ We ended up tripling the revenues in a couple of months. (8:10)
➢ We sold that business within 6 months of purchase. (8:15)
➢ Most people look at the broken elements and say it’s broken, the smart people look at it as an opportunity. (8:40)
➢ If you can go in and improve something, then sell it, it’s easy to sell. (9:45)
➢ People are afraid that they won’t know what to do. (10:25)
➢ I put a couple of employees to work creating an SOP (Standard Operating Procedures). (10:50)
➢ We ended up with a large notebook, similar to an SOP if you bought a franchise. (11:32)
➢ You have everything you need to not only keep it going but to grow the business. (13:10)
➢ It is easier to sell an asset than a job. (14:00)
➢ As an entrepreneur, it’s easy to get in the mindset of being a martyr and slaving away in the business. (14:13)
➢ I took the most recent 3 months average, and annualized that average and sold at a multiple of the net EBEDA at 2.5. (15:00)
➢ If you can buy something that has been around a long time and have good terms. (17:40)
➢ Go out and create a SOP and show your buyer that they can take the business and grow it to the next level. (18:13)
➢ Sticking to the rules you come up with is important. (20:01)
➢ It had terms, but if it goes to zero, your down payment is gone. (20:25)
Resources Mentioned
Thank you for listening! Please subscribe to the podcast in iTunes and if you enjoyed this interview, leave a 5 star rating and review!
Tennessee Valley Group
Latest posts by Tennessee Valley Group (see all)
- Enterprise Value Includes Asset Value - July 25, 2022
