Brief Summary
This video explores how to use the "buy now, pay later" (BNPL) concept, traditionally used for consumer goods, to acquire cash-flowing businesses through seller financing. It highlights the opportunity presented by retiring baby boomers looking to sell their businesses and explains how seller financing allows buyers to purchase a business with little to no upfront capital, paying the purchase price over time. The video also provides real-world examples of businesses available with seller financing, such as a boba tea shop and a laundromat, and emphasizes the importance of ensuring the business's cash flow can cover the debt obligations.
- BNPL concept can be applied to business acquisitions through seller financing.
- Opportunity arises from retiring baby boomers seeking to sell their businesses.
- Seller financing allows for purchasing a business with minimal upfront capital.
- Evaluating a business's cash flow is crucial to cover debt obligations.
Buy a Business Using BNPL
The video introduces the concept of using "buy now, pay later" (BNPL) strategies to acquire businesses, contrasting it with the typical use of BNPL for consumer goods that depreciate in value. It suggests that instead of using creative financing for items like TVs, it can be used to acquire businesses that generate cash flow and accelerate financial freedom. The video points out that millions of companies are expected to go up for sale in the next decade, presenting a significant opportunity for aspiring business owners.
History of BNPL and Silver Tsunami
The concept of "buy now, pay later" has been around since the 1800s and is essentially an installment loan where you pay overtime. The video explains that BNPL has surged in popularity recently, with providers like Affirm, Afterpay, and Klarna becoming ubiquitous online. It shifts focus to the upcoming wave of small business owners retiring, creating an opportunity for business buyers. Many retiring owners lack successors, making their cash-flowing businesses available for purchase. These businesses are often successful and recession-resistant, but the owners are simply ready to retire.
What is Seller Financing?
The video introduces seller financing, a method that allows buyers to purchase a business by paying the seller over time, similar to a BNPL arrangement. This approach enables the purchase of a business without significant upfront capital. Seller financing means the person selling the business becomes the lender to purchase the company. The buyer and seller agree on a purchase price, and instead of paying everything upfront, the buyer pays a piece of that purchase price to the owner of that business over time.
Buy a Boba Tea Business Using BNPL
The video provides a real-world example of a profitable boba tea shop in San Diego listed for sale with seller financing available. The business is listed for $160,000 and generates approximately $98,000 in annual cash flow. The listing explicitly mentions seller financing, highlighting the possibility of owning a cash-flowing business with little to no money down, paying the purchase price over time. Even if seller financing isn't initially offered, it suggests negotiating with the seller or banker to explore this option. The smart move is to find a business that has the financials and the profits and the cash flow to be able to cover a seller financing.
Buy a Laundromat Using BNPL
The video presents another example, a laundromat for sale at $1 million with the possibility of 100% seller financing at a 10% annual interest rate. It details the calculations involved in determining if the business's cash flow can cover the principal and interest payments on the seller financing note. An award-winning laundromat in New Jersey, listed for $1.1 million with $300,000 in annual cash flow and open to seller financing, is examined. After subtracting debt obligations, the business yields $80,000 in free cash flow, which can be reinvested or used to pay the owner.
Why Would Someone Offer Seller Financing?
The video explains the seller's perspective on offering financing. Owners may offer seller financing because they believe in the business's potential but lack the desire or resources to grow it further. Seller financing allows them to receive a steady income stream without operational responsibilities. It's a form of passive income where they collect profits and interest over time without actively managing the business. The video encourages business owners considering selling to consider offering seller financing to attract ambitious buyers and continue benefiting from the business's success.
