The Shortcut To $300,000/yr

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Hey, Hey! 👋

In this week's issue, I want to break down one of the fastest ways to make $300,000+ per year in cash flow while working only 5-10 hours per week.

There’s a $70 Trillion tsunami coming at you - the baby boomer generation, who own 40% of all businesses, is retiring. The businesses they’ve built are big, profitable, and up for grabs.

Buying a business is the fastest way to increase your net worth. Most people don't realize that acquiring a small business is achievable if they just have a framework to follow.

Buying Your Way To Generational Wealth

In 3 minutes, you’re going to learn:

• The 10-step process to generate cash flow by acquiring businesses

• How to use financing to buy your first business

• The best way to hire talent & take yourself out of the business

• How to scale your portfolio from 1 to 5+ businesses fast

Ben Kelly - Buying 5 businesses in 2 years:

Ben Kelly cut his teeth as an army commander & banker before going full-entrepreneur.

In just 2 years, he’s:

• Acquired 5 cash-flowing businesses

• Gained 23k followers on Twitter

• Grown a software business Fit Pro Tracker to 25 employees

• Helped many people buy their own cash-flow business

The key to his ridiculous leverage?

Systems

Ben has 7+ businesses across his portfolio and manages them with weekly or bi-weekly calls with the CEOs he has installed.

Let’s get into it!

10 Steps To Acquiring Your First Cash-Flowing Business

Here’s the step-by-step process to get started:

1. Sourcing & research

2. Pick the business that you want

3. Design the lifestyle you want

4. Be prepared with lenders

5. Make a ton of calls

6. Send an offer

7. Structure the purchase

8. Diligence the deal (heavily)

9. Have a 90-day plan

10. Close!

Let’s dig in!

Step 1: Sourcing & Research

There are over 100,000 businesses for sale across the United States.

And unless you’re an expert on small businesses, the best way to start is by getting familiar with what’s out there.

Ben recommends www.withkumo.com

There are many business marketplaces and brokers (e.g., Bizbuysell, BizQuest, QuieLiight) - Kumo aggregates them all.

You’ll spend a lot of time here, so let’s get familiar with it.

You’ll need to create a filter - try this one:

• Location: Austin, Texas

• Businesses: Services Business

• Price filter: $500k to $1M

• EBIT/SDE: $100,000 ($10k/mo)

This gives you a list of 250+ businesses.

Spend some time explaining these listings and getting familiar with the valuations, cash flow (SDE), and industries.

Ok, you can find deals. Let’s future out what business is right for YOU.

Step 2: Picking The Right Business

Looking for the cheapest business with the most cash flow is tempting.

But don’t do this. You could imprison yourself in a business you don’t care about.

Not all businesses are great buys. There are some specific questions you should research to help you land the exact type of business that is right for you.

Ask yourself:

1. Are there strong headwinds ahead that hurt this type of business (e.g., More competition, decreased demand)?

2. Are there industry tailwinds that help grow this business (e.g., More demand, lower interest rates)?

3. Does it have a long-term competitive advantage? Here are a few good ones:

   1. Licensing requirements (e.g., Plumber, Accountant, Insurance)

   2. Specialty skills (e.g

   3. Government contracts (e.g,. Road painting business)

4. Does it interest you? You will get into the weeds to operationalize a business and drive efficiencies. You must enjoy it.

Step 3: Lifestyle Design

Be intentional about the lifestyle you want.

This model has a lot of flexibility, but your ideal business could change based on your goal.

Ben’s preferred path is to hire a General Manager to run the business. This enables him to focus on building systems, growing revenue, and buying more.

With the suitable systems in place, you can run a business with just a few hours per week of your time.

Step 4: Talk To Lenders

Now it's time for the most important part - how do we pay for this thing?

Ben recommends doing this before speaking with any sellers - with your financing in order, you can move much faster.

There are a few common paths to buying a business:

• Your money - Maybe you’re sitting on a few million in cash. If so, that's awesome. But if not, no biggie! There’s a lot of other options.

• Seller financed - Sometimes, the seller will offer seller financing. Essentially you’d pay the seller in installments instead of a traditional loan.

• Lender - This is the most common path. You can purchase a small business (up to $5M) with a small business loan (SBA).

• Investor - If you’re open to sharing in the upside, bringing on an investor is a great idea.

If you are going the lender route - your goal is to get a pre-qualification letter.

The best way to get a pre-qualification letter is to come prepared.

Ben has a few lessons to share:

1. Come to the call knowing the type of business you’re looking to acquire and WHY. Instead of coming to the call without a plan, try this:

2. Come prepared with the last 3 years of tax returns and W2 paystubs.

3. Prepare a Personal Financial Statement that lists all of your assets and liabilities.

This is how you start ahead of the pack.

Step 5: Make Calls

With your prequalification letter in hand, it’s time to start making calls.

Jump back into www.withkumo.com and start booking meetings.

At this point, its a numbers game.

You’ll have to speak with many businesses before you find one where the numbers work.

There are a few key principles to remember during this process:

• NEVER get emotionally attached during the acquisition process. You are never obligated to buy the business.

• ALWAYS get the financials reviewed by a diligence professional.

When it comes to diligence, you shouldn’t cheap out here.

On the low end, it might be $2,500 per month in a retainer-based model.

Ben regularly spends $10,000 to $20,000 for a trusted partner to get this done. But this could save you big time in the long run.

Here’s an example of a company I just found in Austin:

Here’s the deal:

• They’re asking $1.7M

• Revenue $1.35M

• SDE: $686k

Is that a good deal? I have no idea.

Luckily, Ben shared a chart to help better frame valuation.

With SDE at $686k and a multiple of 3-4, the business should be valued between $1.5M to $2M. We’re within a fair value band with a 2.48 multiple and a $1.7M price tag.

Step 6: Make An Offer

There is an art to the offer, so it is a good idea to work with someone like Ben to get the first one right.

But let’s say you notice that SDE has fluctuated for the past few years, with SDE averaging $600,000.

Take that 2.48 multiplier (from step 5), and you get a price of $1,488,000.

You round down and offer $1,400,000.

And after some back and forth, you land at 1.5 (a 2.5 multiple).

Step 7: Structure The Deal

Now it's time to structure the deal.

You’ve agreed to purchase the tax firm at $1.5M.

You‘ve shared it with the bank, and they’ve approved it.

But now they want the 10%. The bank requires 10% down - that’s $150,000.

There are a few paths forward here:

• Option 1: You fork over $150,000

• Option 2: An investor invests $150,000

Let’s explore Option 2.

Because they funded 10% of the deal, you’ve agreed to give the investor a percentage of the business (10%-20%). Let’s go with 20% for round numbers.

The business generates $60,000 per month in cash flow.

After paying the loan, you’re left with $32,000 per month.

The investor gets $6,400 monthly (a great deal at 50%+ cash on cash return).

With the remaining $25,600 you hired a General Manager to run the daily operations at $9,500 per month.

Leaving you with ~$16,000 per month to take a distribution & invest back into business growth.

The real win is after you operationalize and scale the business. These numbers can become significant.

Step 8: Structure The Deal

This is a critical step in the process. You’ll want to:

• Work with a great diligence partner ($10k-$20k)

• Speak with key employees

• Review business reviews & online presence

• Speak with other professionals in the same field

Spend the time here flipping every stone.

Step 9: Have A 90-Day Plan

Ok, everything looks.

Now things get operational.

Ben recommends a 90-day post-close plan.

Now…there could be endless things to plan for here.

This is why expertise in a specific type of business can be invaluable.

Spend some time thinking about the first 30, 60, 90 days:

1. Transition tech & passwords

2. Review employee contracts

3. Update stale technology

4. Get to know the team!

Step 10: Close The Deal!

And…you’re done.

You’ve got a business generating $10K+/month in cash flow straight into your pocket with a team in place to scale it.

There’s a ton of room to grow it and generate even better returns:

• Improve operations

• Invest in marketing

• Get a modern tech stack

The best part is that you can rinse and repeat this model (like Ben) by yourself or with partners until you have a portfolio that pays you a meaningful monthly income.

Money Guide: Ideas to grow your wealth & income

Business idea 💡- Risk-Free Renovations

Find people who want to sell their homes but would benefit greatly from a quick remodel to sell them at top dollar. Offer to renovate the house with no upfront cost and pay with the proceeds from the sale.

Ben has run the numbers, and you could see a 2-3x return on each flip. Opendoor offers this service to its clients - you’d do it for everyone else.

Here’s the process:

Find an established team of contractors with experience flipping projects.

Protect your investment by securing a lien on the home and a guarantee to sell the property within a defined period.

How To Grow It:

Identify the zip codes where homes sell quickly and make relationships with realtors in those zip codes.

Nicer homes sell faster and earn realtors a better commission. No realtor wants to sell a sh*tty house. They’ll source endless deals for you.

The best part is, usually, when you do renovations, you have to make the client happy who has a personal design preference.

In this case, the seller will not live in the house, and the new buyer is taking the property as it comes.

I hope this got you thinking. See you next week!