How To Buy Multiple Businesses Without Going Insane
The Quiet Light Podcast
Financial Aspects of Buying Multiple Businesses
This chapter discusses the financial aspects of buying multiple businesses, including strategies to make money off the acquisitions, financing options such as SBA loans and owner financing, and the importance of due diligence and bank financing.
Since 2013, Shakil Prasla has bought 8 internet based businesses ranging from smaller 5 figure businesses up to 7 figure enterprises.
Obviously, acquiring and running 8 companies in just 4 years is both time consuming and requires significant capital. In this conversation, we talk to Shakil about both managing 8 companies as well as the capital resources he uses to continue acquiring online businesses.
Rather than try and do all of the work himself, Shakil developed a system in which he hires a business manager before he even closes an acquisition. By doing this, the manager is able to work with the seller and learn, firsthand, how to operate the nuances of the business. Business managers are compensated on a salary and bonus structure with goals oriented towards business and revenue growth.
Shakil has used a variety of funding sources to close deals. While he has done a few deals using SBA loans, he has also managed to secure friendly bank financing on Internet acquisitions outside of an SBA loan. He believes strongly in the power of carrying debt to leverage your overall value.
Episode Highlights:- Shakil has been in ecommerce for 6 years. It took him a lot of time to build his first site.
- He saw a Quiet Light ad and looked into buying a business. He bought his first business for $60,000.
- He was able to make his money back in about 6 months.
- He has now acquired 8 companies from 6 figures to 7 figures in various niches.
- That is buying roughly 2 companies per year.
- Buy smaller and audit. Take less risk, learn, and grow intelligently.
- Save your cash flow for larger acquisitions.
- There is more competition when buying small, but there are more opportunities to grow.
- Larger companies have more complex strategies including having employees and SOPs. The bottom line will be higher.
- When Shakil acquires a company he keeps the previous owner on for 3 months to transfer their knowledge to the business manager.
- He uses a hiring company to find someone with a marketing and business background. They are paid on salary and incentives on next year’s growth.
- Shakil uses agencies for marketing and email campaigns.
- The business manager comes up with high level goals and then they work backwards. They use software and weekly calls to track things.
- Shakil’s time is valuable, so he delegates so he can focus on growing the business.
- Shakil takes on debt and does paid advertising, so he tests strategies and grows the company. He looks at growing the overall value of the business. He is ok with sacrificing short term cash flow. He does want to see an ROI on the new manager.
- He has done SBA, owner financing, owner holdback, and unsecured short term five year loans.
- The bank asks for tax returns and balance sheets. The seller needs to provide the information.
- Making true money through financing.
- You have to have a stable income and high credit score to get the bank financing. Shakil reached out to multiple banks. With smaller banks it is easier to move the process along.
- Shakil looks at about 80 deals a month. He has a set of initial questions. He places one or two offers every quarter.
- Patience is key, don’t rush into buying a business unless it is the right fit.
- Put yourself in the seller’s shoes and build trust with them.
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