This YouTube segment (by Codie Sanchez) introduces the “bathwater method,” a strategy for acquiring struggling or unwanted small businesses at little to no upfront cost by assuming costs of shutdown or offering future profit shares. The speaker cites U.S. market figures about many small businesses listed for sale and argues owners may prefer a deal that avoids the $100,000-average shutdown cost. The method involves paying transaction fees and offering sellers a percentage of future profits.
Chapters
The bathwater method. This is how you buy a small business for maybe even $0 up front. In the US right now, there is something like 11 million small businesses for sale, except only 1 in 12 of those small businesses will sell inside of any calendar year. That means you have 11 million small businesses that will never sell. At some point, the owners of those small businesses will get tired, will get delinquent on payments, will need to move on. And so they are going to throw the baby out with the bathwater. And this is where you come in. You're going to be able to buy that business for maybe $0, but definitely a discount when you shut down a business. Cost you money as a small business owner. In fact, on average, it costs $100,000 to shut down a small business. And so you are going to say, hey Mr. Business Owner, why don't you let me buy your business for a percentage of the future profits by keeping it open? I will pay the transaction fees to buy out your business. And in the future I will give you a percentage of all profits for a certain period of time. The key here though is how do you find the people who are going to throw their babies out with the bathwater? And that is a company called Biscout. I could tell you more about it if you guys hit me in the comments.
