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Cashflow through deal structuring.
I beseech thee... if you learn one thing, learn to structure deals.
Nothing else has made me more $
WARNING: This is technical - but I'm not here to entertain you, I'm here to mutually grow.
Let's go to school eh?
I beseech thee... if you learn one thing, learn to structure deals.
Nothing else has made me more $
WARNING: This is technical - but I'm not here to entertain you, I'm here to mutually grow.
Let's go to school eh?
EVERYONE IS OBSESSED W/ The VALUE of a Business.
OMG - how much did @TheHustle or @MorningBrew sell for?
I guarantee that # is less interesting than the terms.
Devil is always in the deal details.
Know how to work the details, you'll own the deal.
OMG - how much did @TheHustle or @MorningBrew sell for?
I guarantee that # is less interesting than the terms.
Devil is always in the deal details.
Know how to work the details, you'll own the deal.
Remember this:
Every deal has two aspects Price & Terms.
My saying, "You can have your price and my terms, or my price and your terms... but you can't have both.
Every deal has two aspects Price & Terms.
My saying, "You can have your price and my terms, or my price and your terms... but you can't have both.
SECRET: Always default to controlling the terms.
The price is what amateurs focus on.
The terms actually control the price. Let's workshop this:
The price is what amateurs focus on.
The terms actually control the price. Let's workshop this:
Ratchets, Warrants, Options, Oh MY!
I bought into a cash-flowing small gym biz.
I'm the money, a friend was the operator.
Biz does $350k in profit annually. Roughly $1M purchase price
Used SBA loan through local bank w/ down payment of 14%
I bought into a cash-flowing small gym biz.
I'm the money, a friend was the operator.
Biz does $350k in profit annually. Roughly $1M purchase price
Used SBA loan through local bank w/ down payment of 14%
Seller REALLY wanted biz sold for 7 figs... so had fun structuring:
- $140k, down payment
- 40% equity
- accelerated distribution schedule of 50% until loan paid off
- 40% profit distributions after
- Initial $ repaid in 18 months
- addtl $50k to personal guarantee 40% of loan
- $140k, down payment
- 40% equity
- accelerated distribution schedule of 50% until loan paid off
- 40% profit distributions after
- Initial $ repaid in 18 months
- addtl $50k to personal guarantee 40% of loan
What did this mean for me?
- $175k cashflow year 1 (50% of $350k profits)
- downpayment recouped in 12 months
- addtl $50k paid out for loan guarantee
= $225k payout year 1
By year 2 I've made enough profits to cover the entire loan if I have to pay it out.
- $175k cashflow year 1 (50% of $350k profits)
- downpayment recouped in 12 months
- addtl $50k paid out for loan guarantee
= $225k payout year 1
By year 2 I've made enough profits to cover the entire loan if I have to pay it out.
Operator:
- made $175k+ year
- became 60% owner in biz for $0
- took on only $430k in debt
- after year 3 will start paying off loan
= He'll start making $210k w/ NO growth year 3.
- made $175k+ year
- became 60% owner in biz for $0
- took on only $430k in debt
- after year 3 will start paying off loan
= He'll start making $210k w/ NO growth year 3.
Keys;
- I don't want to operate, I was the $ so the operator can do the work.
- I negotiated 1/2 of $ to me monthly
- I call this a $ for time structure: Your $ works for you, while your time is yours.
*All #'s changed a bit for those who know what co this is :)
- I don't want to operate, I was the $ so the operator can do the work.
- I negotiated 1/2 of $ to me monthly
- I call this a $ for time structure: Your $ works for you, while your time is yours.
*All #'s changed a bit for those who know what co this is :)
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