Two investors compare returns: a deal based on projected revenue can yield 20X returns versus 2X for existing revenue. National chains like Lowe's and Home Depot trade at 5% cap rates, while independent operators face 12-14% caps, which directly affects what you pay for the business.
We heard a guy the other day. Did you— were you paying attention when he said you get more money for revenue that isn't made than you do for revenue that is made?
Actually, he's going to be here any minute.
So we were talking to this really smart dude the other day. He's like, I can 20x something with no revenue before I can 2x something that does have revenue.
Isn't that insane? Off of projections versus reality.
Right. And so on that deal right there, there's— that's 100% projections right there. Seller financing.
See that?
Look at it. At a 5 cap, right? That— who gets a 5 cap? Lowe's, Home Depot, CVS, Walgreens. Those are the people that get 5 caps. When you're, when you're, when you're a mom and pop, no, never done nothing, you're more around a 12 to 14 cap. And you want to know what that is? Go do the math on their, on their proposed block income. And you'll see that you'd say, tell it, make it, make it a 12 cap. And now tell us what the price is. Because remember, when the cap goes up, the price goes down.
