7 Ways To Buy A Business With No Money Down, With Roland Frasier

You're listening to Business Lunch with Roland Fraser. This is your seat at the table. Hey guys. This is the producer of the show, Darren Clark. And if you've been listening in, we've been sharing some awesome content from Roland Fraser's epic challenge recently. Today's show is an eye opening 8 minute episode on how you can buy businesses with no money down. You'll hear Roland's essential strategies, but also the power of talking to people and finding out their needs and wants so that you can configure a truly win win arrangement. If you're enjoying the show, would you consider sharing an episode on social media? We appreciate your support. Okay, let's get stuck in.

So it's amazing the companies you can buy. Why don't we talk about how you can get them without having to pay any money out of your own pocket for them. That's one of my favorite things. The easiest is simply straight from the real estate world. So it's seller financing. Just let them carry the paper for you, do a offer, no money down and then some fixed stream of payments. Any way you want to fund that, that's as creative as you want to be. That to me is the simplest is let them carry it for you. Don't put anything down out of pocket. The second would be through credit card cash advance. So and a lot of these stack together. So you do credit card cash advances up to quite a decent amount of money in terms of a down payment on something. So use your existing credit to get the down payment to buy the thing that you want to buy and then pay your credit because your credit card is usually pretty expensive, but then pay that back. So this is a way if you need some money to come up with a down payment, you can simply do cash advances to do that and then repay it back. A next step kind of thing would be an earn out. So an earn out typically happens when you can't agree for whatever reason on the purchase price now because you're too far apart. But it also works if you just don't want to. If you're cheap like I am and you just don't want to pay anything out of pocket, then offer them an earn out so that there's some formula that they're going to get paid over some period of time based on the performance of the company. When you're trying to negotiate a deal, if you find out what they want the money for, what they're going to do with the money, then it tells you a lot. It tells you specifically how much cash you need to figure out how to put together. So Brad and I were talking about a deal for a company, and this guy was doing a few million dollars a year in revenue. And Brad and I talked about it and we said, you know, well, what are you going to do with the money? Because he's like, you know, I want $2.5 million cash or whatever. We said, what are you going to do with the money? And he said, well, I got this invention, you know, I want to put that together and kind of get going. I need the money to do the molds and stuff. And we said, well, how much are the molds? And I think it was, that's 200 grand. That's 90% less than he said he needed right off the bat. So I think that if you ask that question and dig deep as you can and if you engage them in it, like, obviously that guy was really excited to tell us all about his plans for this new thing that he wanted to do. And so in listening to him, in addition to it being interesting, we found out that we didn't actually need to come up with $2 million. We only need a couple 200,000. So for. For a lot of sellers, finding out what they're gonna do with the money is really important because it opens up the opportunity for seller carry. So the next thing that you would ask that person is, well, for that entire thing, you only need a couple hundred grand. Well, I need some extra money for this and that and the other. Great. So maybe you get to. I need a million, right? Well, a million's less than two and a half million, so that's a really good start. What are you gonna do with the other million and a half? I don't know. You're going to put it in the bank, I guess. You know what banks pay? I'll pay you 6%. So you can frequently offer on, sell or carry a higher interest rate than they would be able to invest the money for with no risk because you're securing it with the assets or the stock of the company that you're buying. So the worst case for them is they get their company back plus whatever cash they got out of you before you defaulted. After you work on the deal, let some time go by. Six months, 12 months, and then go in and offer them cash to take them out completely. And almost always you'll get a discount. Earn in. Earn in is you have some sort of skill or competency or access to some market or something else of value that the seller would like to have. And you're willing to bring that in. And that can be as simple as the fact that you are, it's your bright shining face and you're going to show up and start helping. Or it can be that you have access to a whole network of cool things or relationships they want or whatever. But earn ins I've found to be amazingly valuable. I mean, we've had 50% of $20 million company earn ins just because we come in with the skills and the connections and the resources that we've got. And that's a really easy way we call those equity deals. Then you've got sweat equity, which is you're simply coming in to do specific work.

So that's different to me from an earn in.

An earn in is I'm going to come in and I'm going to bring this value and we're going to agree on performance milestones. And then as I hit those milestones, I have earned into the equity of the company. Sweat equity is I agree that I'm going to come in the company and actually do specific services. And regardless of what happens, you're not having to pay for me. I cost a lot of money or my team, and therefore I'm going to get this much equity as a result or options for coming in. Okay, and then you've got my favorite thing in the world, the deferred down payment. I love the deferred down payment. It is the most amazing languaging that you could ever imagine. The first time that it occurred to me was in a conversation with William Shatner because I could not figure out how to come up with the half million dollar advance that he needed. He said, well, I get a half a million dollar advance because we were doing a book with him. And I said, I don't know how I thought of it, but just without missing a beat, I said, that's okay, Bill. I said, we do this as a deferred advance and so you'll get your half million dollars based on the first half million dollars in sales. And he was like, okay. Since then it occurred to me, I was like, well, if you can have a deferred advance, which literally doesn't exist and that works, then why can't you have a deferred down payment which is also known as financing, right? So when I talk to people now, I talk about the deferred down payment. It's like, okay, so what do you want for the company? Well, I need a million dollars. I need 20% down. So $200,000 down. And then we're willing to carry the rest over, blah, blah, blah. And it's all right. That's totally cool. So we'll do the 200 as a deferred down. We'll pay that 90 days into the deal and then blah, blah, blah, blah, blah. And you would be amazed. Okay, almost every time. That languaging is just really magical. So don't forget the deferred down payment. What's awesome about it is that means that you don't have to come up with a down payment. So you can then pay for the company through the earnings that it generates after you acquire swaps. So if you have an existing business, you can swap equity in your company for equity or assets of another company, or you can swap assets that you've got for equity or assets of another company. So if you think about it, cash is just an asset. It's one of a bunch of assets that can exist. And so typically we exchange the asset of cash for the interest in the other company to acquire it. But we can also exchange equity. We can exchange anything that's on the balance sheet, which includes equity. And equity can come in as many flavors as you can create. Warren Buffett's stock has 200 votes to every vote of everybody else, and Zuckerberg's has 10 and so on and so forth. And how all these people. Phil Knight NAT Nike has 9 out of 12 of the votes on the board. Like, you're only limited by your creativity and how you do this. So any asset that's on the balance sheet, any equity that you've got or things that you don't have, because you can also swap. I've swapped connections like, hey, I really want to get a relationship with this person in this company. Awesome. If I can make that happen for you and put that deal together, will you give me this division that you're not doing anything with? Yes. Right. You're only limited by the number of ways you can think to do this stuff.

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