How to Buy a Business for $0 in a Week? Possible?

This is the richest guy in India. This guy is the richest guy in Latin America. And this the richest man in the world. What do they all have in common? They bought businesses to build their empires. But you guys are probably thinking, I don't have cash. How could I buy a ton of businesses? That's what we're going to break down for you. How do you buy a business for $0 in one week? I spent the last more than 10 years on Wall street at Goldman Sachs, getting an MBA from Georgetown, all obsessing on really two things, finance and making money. And what I realized is there was one skill set that changed my life more than anything else, and that was the ability to figure out how to get other people's money to make me money. Or what's called creative financing. That's what we're going to break down in this video. This is what I'm calling the Venmo Challenge. Ooh. But before that, we're almost at a million subscribers. We've been obsessing on making you videos that actually make you money, not just entertain you. Although I cringe looking back at our very first ones. So do me a solid. Subscribe to the channel. Help us hit a million. Help you make a million. That's the goal. I so appreciate you guys. So the question you have to ask yourself always starts with, if you want to buy something, what do you have to do? First you have to figure out, where do I go to buy it? And the answer to that is, where you're going to buy is where you spend. You're going to pull up your Venmo or PayPal, you can really use either. And you're going to look at where you spending cash consistently with small businesses that you can get to the owner of. Then I put it in an Excel spreadsheet, and I list who do spend. Revenue, value add. What do I mean by that? But if you look at the spreadsheet, this who column here, Grisel, Susanna, Oscar tells me who they are. Then the what do they do? Tells me, well, one's my cleaning lady, one's my handyman, one's a property manager. The next is my monthly spend. How much do I spend with him a month? My cleaning lady, because I'm a dirty girl, I spent about 2K. Property manager, 6,500amonth, and Oscar the handyman, about 500 bucks a month fixing random things. Then I list the total revenue of their businesses. How much money do they make? You can see Griselle makes 150 all the way to Oscar, who makes 1.1. Now, I list my value ad all the way to the right. What are all the things that I could add to their business? If theoretically, I bought Grisel's cleaning business or part of it, or Oscar handyman business. Well, Griselle doesn't have a website, employees, a name for her company. She doesn't market it. She doesn't have social media. All of these things I could add to their individual businesses. Or you could add. Now, you're not going to know all this up front, and I'm going to tell you how you're going to speak to these people about it. This is Renan. I wanted to show you guys someone who has actually bought a business using this exact same process. This time last year, you were an employee. Then you came into unconventional acquisitions, and for some reason, you got this crazy idea to buy a business. Right. Your story of the business that you bought is pretty wild. So why don't you tell people first, what was your deal and how did you structure it?

The first deal was I was looking at frozen yogurt. I was looking at music and arts. I got real serious about a dry cleaner. While I was going through that process, I had a VA going off market. For me, they found an $8 million business doing 2 million in cash flow, EBITDA. And that was way beyond my mindset, way beyond my scope. I was like, no way. But curiosity, you know, like, you want to see what a $20 million home looks like, you do the open house. I mean, this is free. I get to go in and see what an $8 million business looks like for free. I went in and I fell in love. This is awesome. Profit margins are great. So I saw nothing but opportunity. And that's when I realized I need to figure out a way to purchase this. It would have required 20% down, which is 2.4 million. Didn't have that. That's where my dumb deal calculator came up, you know, because I got to do sensitivity analysis and see what works, what doesn't, and came up with 100% seller financing, presented it to him. After I built the relationship, I didn't hit him with that.

Day one.

This was like two months into it. And he saw the vision. He saw the vision. We signed, and we're about to hit a year with that company, and we're growing it, and everything is wonderful.

So basically, the conversation goes like this. I go, griselle, how's it going? Normal. First intro to a conversation, and then I'm like, griselle, you know, I've never talked to you about this before. You have a cleaning business, obviously. Do you clean other people's houses? Oh, yeah. You do? Okay, cool. Do you have other employees? Yeah, you know, I do or I don't. And then I said something like, griselle wondering, I actually sometimes invest and help small businesses grow. And what that might look like is, for instance, right now, I don't know if you have like a website, social media? No, no. Do you want to grow your business at all? Well, I don't know, but what I kind of do is I come in and I help people like you grow their business, and I take a piece of the business, I take some equity, and I also get a distribution, AKA part of the total sales you do each month in the business. Would you have an interest in growing your business and kind of talking about something like that? At which point, normally, because these people work for you, they're going to say, like, yeah, okay, I'd be open to having a conversation, something like that. And as you tease out the conversation, you're really curious about their goals and their desires. And eventually you say, I know this is kind of a personal question, but how much money do you make in this business year? What's the total revenue of the business? And Griselle might say, Well, I make $150,000 a year. And I go, cool, let's look at this. Let's write down some numbers and see how much you charge per hour, how many clients you have right now, what your capacity is in your business to take on more clients. And if I can help you get more clients, maybe I get a percentage of the business only if I grow it. So, for instance, let's say her business right now makes $150,000. Let's say that she charges $1,000 an hour. So she's working 150 hours a year to make $150,000. Spoiler, she's not. But again, this is YouTube math. If she does 150 hours with $1,000 an hour, and I can double her hours for her to end up working 300 hours a year, then she has a business that's doing $300,000. Ro say that that means she's only working at 50% capacity. So in any given week, she has half of her days filled and not the other half without her adding any employees. Anything else? I could take her business from 150,000 to 300,000 if I increased her clients to X. So then I'd go, well, how many New people. Would I have to refer Griselle to for her to get those another 150 hours? Well, maybe it's. I need to refer her two clients a week. And can I come up with a process to refer her for two clients a week? Oh, yeah, I think I could. So if I am right, what I would say to Grisel Brazil is why don't you keep all of the revenue on your first 150,000 that you already make this year? As long as I can look at like your payments. I could even just look at your Venmo or your tax return and make sure you really make that. And then everything you make over 150,000, I want to own 25% of. And what that means is if I help you get another $150,000 that you're not making right now, this year at all, I keep 25% of that 150,000. So that means that I keep $37,500 of $150,000 for work that I do once in the beginning to set up Grisel because people usually use their cleaning people every single week, and I get to cash flow on throughout the rest of the year. Now, it's a win win for Griselle because she's not making that money right now. And it's a win win for you because you've used $0 to acquire 25% of the business. And that's how this works. It's what's called a sweat equity deal and a distributing equity deal. Sweat equity means you're gonna do some work. You're gonna help by telling all of your friends, hey, I have this incredible cleaning company I use. Oh, by the way, I created a website for her. So here it is. Here's her website, here's what she charges, because you're probably gonna just increase the cost a little bit on an hourly basis. Most small businesses are under priced by anywhere from 30% to 3X. So 300%. So you're probably gonna increase the prices. You're gonna go find her some new clients and you're gonna increase her business by 2x and you're gonna take 25% of that.

I remember being deathly afraid to sign the paper for that business. I didn't want to go. My business partner, I called him that morning. We're driving in to sign the paperwork, and he's like, how do you feel? I said, I don't feel good. He goes, neither do I.

It's.

It's the weird. It's paradoxical I wasn't expecting that, because if I'm going to do something, I'm going to do it right. So I'm in there learning the business, learning the people, just kind of understanding what it is that I'm doing. There were a lot of scary nights, you know, where, like, what do I do next? Where's payroll going to come from? Even though we're doing all right, I don't have that safety net of corporate anymore. And then once I started getting comfortable with the uncomfortableness of everything, it is joyful in a weird way. I work a lot of hours, but it's all, like I said, for a purpose, for a mission.

Here's the Venmo Challenge in five steps. Step one, you're going to go to your Venmo. You're going to look at what you spend on. Step two, you're going to take the ones that aren't Amazon, Walmart, big companies, and you're going to put them in a list where you can get to the owner. You actually know them and you know it's a small business. Step three, desire to own. Do you actually want to help Griselle increase her cleaning business? Do you maybe want to instead help Oscar increase his handyman business? Oh, it's your daughter's ballet studio that you pay. Would you want to own part of that ballet studio? This is where you gut check. Then it goes to owner conversation. That's where you shake hands and kiss babies and have that conversation I just told you about with Griselle. And then finally you make an offer, which is what we were doing at the end. How about now that I know how much revenue you make, what your goals are, AKA to increase your revenue, and what I can deliver to you, you deliver an offer to them. Five steps to buy a business with $0 in one week. And the only risk is your time. As long as you do this a few times. I found the Venmo Challenge works. In fact, check out this clip of me speaking to a group of random strangers where I told them about this exact same thing. And one guy bought in a business that does exactly this. What is the business that you might buy based on what you spend on Venmo or PayPal?

Five star sitters.

Great. And this is a babysitting company for your kids?

Yeah, it's at home babysitting. Nanny placement service. And you can do drop off childcare first.

We want to make sure a couple things. Do you know the owner of this business? Yes.

I'm smiling so big because I learned about this in one of your posts. And then I did it the very next day for this person.

So yes, I know her.

So it works. Success. Okay, we have a quantitative analysis of one that says statistically, this works every time. Here's where people are going to have some naysaying on the Venmo Challenge. You might be asking yourself, why would they give me part of a business? This is where you need to make sure you understand their desires. Desires usually fall in three buckets. They want to make more money, they want to do less stuff, they want to do the things they do smarter. So can you help them make more money, AKA bring in more revenue, increase prices? Could you help them do less stuff, which might be hire more employees? Or maybe you actually operate the business. And the third is they don't like their business. They don't think it's a very good business model. So you're going to come in and say, huh, what if instead of offering cleaning services, we actually use third party contractors to come in and cleanse? Those are the three things that are going to help you drive value for you to get part of a company without actually giving them any money. The next thing I'll say is, what's your hit rate? So how often is this going to work? You probably need to go to 20 different providers, go through this process, get your pitch really dialed, and after you do that 20 times, my guess is you will likely be able to execute on this. But comment below and let me know if that's reasonable or unreasonable. You went from a W2 making six figures, smart, capable, top performer in your field, top performer in military as well, to a year end, buying a business that did $2 million in EBITDA for an $8 million valuation without using your money, but instead using seller financing. Fast forward one year later. It's been a win for both you and the small business owner.

Oh, absolutely. Yeah. He loves the partnership. It's great synergy. I did it again. Also, we're signing this week $12 million business in Pennsylvania.

What? Where's my term sheet, Renaud? Like, where am I? How. What am I getting into these deals? And you have your operator for that one too.

It's the previous owner. So he's staying on, selling contracts and getting the business running it. And he's added to the portfolio as of this week.

I thought I'd go over one more way to do this with you guys. How did I buy nearly 50% of a podcast production company called Strike fire Productions for $10,000 when that business was doing more than $150,000 a year in revenue. The process is 10 damn similar to the Venmo Challenge. This is just the 2.0 to the 1.0. I call it the personal P and L review. This is step four in COTI's hierarchy of deal structures. So what does this mean? It's really easy for you to open Venmo and look at what you've spent. The next level is you open up your credit card, your debit card and your bank account. Then I want you to download the transaction report on all of them where you can pull all of the transactions you've had. Start easy the first time and go the last 30 days and put it into an Excel spreadsheet. I know YouTube, Excel spreadsheets, but I want you to put it into an Excel spreadsheet. Then once you have your list over the past 30 days, you're going to get rid of all the big boys. So Amazon, Walmart, Target. You're going to need to look for businesses that are small, that you know the owner could get to the owner and that you have the ability to actually be valuable to them. So now you've got your list. This is all the places you spend on. The next step is I want you to think about desire in a different way the first time for the Venmo Challenge, I just said, would you want to help Griselle grow her cleaning company? That was it. Now I want you to take it to the next level and I want you to have what I call the desire trifecta. You basically have talents, skills, strengths, and in the middle is your zone of genius. You're looking for businesses that align to your zone of genius. Because now we want to go from a business that might be able to make you five figures, six figures, to a business that could make you seven figures if you do it right. Every single business has six components to the business. They are this. Sales and marketing, finance and accounting, operations and it, product, distribution and logistics, customer service. Those are the six components of every single business. You're going to think of those like the six skill sets. Let's say that you are an accountant, you're really good at accounting, you love it. Then you might want a business in which finance and accounting could be really useful for them. You're going to find your zones of genius, plus the things you like to do, and you're going to start looking for businesses not just based on could you get to the owner, but are they aligned for you. Now you're going to go back to that Excel spreadsheet I talked about. And you're going to list it just like we did last time. Who? What do they do? Monthly spend, total revenue, value add, Same process. This time, your businesses are probably a little bit bigger, because these businesses, you can't pay on Venmo or PayPal. Usually those are for smaller businesses. Not always, but gross generalization. So here I have Strike Fire Productions, that podcast production company that I told you about. I was spending something like, let's call it 3 to 5k on them a month. And when I got to the owner of the business, I realized they were doing $350,000 in revenue, but, like, $150,000 in profit at that time. Back then, I had this podcast. Don't listen to it. It was awful. It was costing me, I don't know, $3,000 to run this podcast a month. I also was running a private equity portfolio at the time where a bunch of our companies wanted to have podcasts. And so I went to the owner, Jonathan, and I was like, jonathan, you know, what's your biggest challenge right now in business? Like, what's really hard for you? And as most business owners would say, he said, it's just sales. Like, I hate sales. I hate selling. I hate calling people. I hate trying to close. And I was like, turns out I'm really good at sales. And I know a lot of people, Jonathan, that would like a podcast. What if I helped you grow that podcast? Do you think I could earn, like, 49% of this company through making a small investment and then also bringing you a bunch of additional clients? And he was like, I don't know. Let me think about that. Then the next day, he called me up and said I might be open to it. I was like, jonathan, how about I do this? I'll put down $10,000 to own 49% of your company. I can have the $10,000 straight. So $10,000 as a percentage of what we value your company at which, at that point, we valued it at 1x. So $150,000, 1x. The profits of the business. My $10,000 would be worth about. Let's call it 7% of $150,000 business. That means, Jonathan, that I would have 10% equity in your business, and also I would take a distribution of 10% of the profits of the business. So if Jonathan pays himself $150,000, I get 7% of the $150,000. You with me? That's just straight. No matter what you get that, that's the current Value of the business today. But what I'd like to do is if I can double your business, triple your business, I want to earn into that next 49% of the company. Would you be open to that? And he said yes. And so we structured a deal. If I took his business from 150,000 to $300,000, I would earn 49% of the company because I double his profit level. And I already gave him the $10,000 as a down payment. Now, that was cool. And we ran that for like, two years. Then at a certain point, that business was making me probably eight to $15,000 a month. And given all the other ways I was making money, that wasn't that meaningful to me as a business. So we decided we could have an option for him to buy back the business. And the cool part about that is, what that means for you is the deal that you do today, as long as you structure it right, you don't put down a bunch of cash, you don't get in a situation the business could bankrupt you and the business cash flows. The first deal you do does not have to be the last deal you do. And that's how the personal p and l review works. If you could go back to corporate renown, the peak of your career but not fulfilled, what would you tell him now?

The message wouldn't be received by corporate renown because corporate renown didn't believe it was possible. The mindset wasn't there. So the first thing I would try to have to unlock is the mindset and really say, hey, look, man, you're doing really good in corporate, but why? What are you trying to achieve? What is it that you're looking for? And then once I realized that, then the mind is unlocked, I could sit there and tell the corporate, hey, look, you're going to run a private equity fund. You're going to do this doesn't mean anything. Because it's like, oh, yeah, that's not for me. I have to unlock the mind, get him to understand what is he doing and why. And that's it.

So true. Definitely starts with you believing in yourself, which is so funny because everybody always thinks that that's the touchy feely, squishy part. And it's not. It's so important. And the tactics we can teach you. But if you don't believe in you, nobody can do the hard work for you. So it's so good. Here's the truth. The only thing nobody can take from you is ownership. The rich speak in contracts. They speak in the things they own, not the things they rent. Now, you guys are probably realizing by now what you need to know, how to ask these questions after you find these people, and what your unfair advantage is. Also, we have an entire world of resources on contrarianthinking co, including a newsletter called the Boring Business Newsletter that has a bunch of strategies on this. And of course, if you want to learn how to buy businesses. Also, if you need to build that foundation, hit up this video. How to get rich in 2023.