If you want to acquire a million-dollar company, you don’t need to have millions.
Here’s how to buy a business that pays for itself (9 negotiation tips for seller financing):
Here’s how to buy a business that pays for itself (9 negotiation tips for seller financing):
First up:
What IS seller financing?
Doesn’t sound so nice as a seller… why am I paying for YOU to own my business?
That’s why I sometimes call it “self-liquidating acquisitions.”
Here’s how it works: x.com
What IS seller financing?
Doesn’t sound so nice as a seller… why am I paying for YOU to own my business?
That’s why I sometimes call it “self-liquidating acquisitions.”
Here’s how it works: x.com
Instead of paying cash or using loans...
You agree to pay the seller back over time directly using the profits of the business.
Why would you want to do such a thing? x.com
You agree to pay the seller back over time directly using the profits of the business.
Why would you want to do such a thing? x.com
2 main reasons:
• You pay less out of pocket, and you don't need bank approval for it.
• The seller keeps skin in the game. It becomes in their best interest to give you a business that will continue to profit.
• You pay less out of pocket, and you don't need bank approval for it.
• The seller keeps skin in the game. It becomes in their best interest to give you a business that will continue to profit.
Sounds great for a buyer, but why would a seller ever say yes to this?
• It’s faster than bank loans
• They can ask for a higher price
• They get interest, instead of the bank
• Tax payments get dispersed x.com
• It’s faster than bank loans
• They can ask for a higher price
• They get interest, instead of the bank
• Tax payments get dispersed x.com
The biggest hurdles to seller financing?
• It’s harder than applying for a bank loan
• Sellers need to be “sold” on it
• Many sellers will still say no
So let’s look at 9 ways to increase your odds of seller financing a deal:
• It’s harder than applying for a bank loan
• Sellers need to be “sold” on it
• Many sellers will still say no
So let’s look at 9 ways to increase your odds of seller financing a deal:
1. ALWAYS ASK.
Seller financing isn’t all or nothing.
ALWAYS feel out how much the seller will finance.
Maybe you only get $300k on a $3M deal.
That's $300k not out of YOUR pocket.
Seller financing isn’t all or nothing.
ALWAYS feel out how much the seller will finance.
Maybe you only get $300k on a $3M deal.
That's $300k not out of YOUR pocket.
I’ve seen enough deals get 80-100% seller financing to tell you it is POSSIBLE.
I’ve not seen enough to tell you it is LIKELY, common, or easy.
However, the majority small business transactions do use some amount of SF. Always ask. x.com
I’ve not seen enough to tell you it is LIKELY, common, or easy.
However, the majority small business transactions do use some amount of SF. Always ask. x.com
2. Relationship Is the Foundation
If you DM a broker on a business listing: “Is the seller open to owner financing?”
That broker will ask you to go kick rocks.
Your odds of getting financing increase proportionally with your rapport with the seller.. x.com
If you DM a broker on a business listing: “Is the seller open to owner financing?”
That broker will ask you to go kick rocks.
Your odds of getting financing increase proportionally with your rapport with the seller.. x.com
You can still apply a process here:
1. Meet as many owners as possible
2. Get to know them using the FROG method
This is a way to feel out their motivations & relationship to their business, without asking off-putting questions. x.com
1. Meet as many owners as possible
2. Get to know them using the FROG method
This is a way to feel out their motivations & relationship to their business, without asking off-putting questions. x.com
3. Seller Risk
You’ll get pushback.
Get to the bottom of WHY the seller is hesitant.
It’s often not a no, just an “I’m not so sure”
Find out what will make them sure.
You’ll get pushback.
Get to the bottom of WHY the seller is hesitant.
It’s often not a no, just an “I’m not so sure”
Find out what will make them sure.
4. Your Price, My Terms
This framework makes the happiest SF deals.
Seller wants $250k more for the biz?
Alright, then you get to hold the reigns on:
• Interest rate
• Length of payback period
• & other negotiation levers
This framework makes the happiest SF deals.
Seller wants $250k more for the biz?
Alright, then you get to hold the reigns on:
• Interest rate
• Length of payback period
• & other negotiation levers
5. Presentation
You are PITCHING a seller, so go back to negotiation 101.
Two important pieces here:
• Don’t play all your cards at once
• Focus on where the seller’s head is at & what they need to move the deal forward
You are PITCHING a seller, so go back to negotiation 101.
Two important pieces here:
• Don’t play all your cards at once
• Focus on where the seller’s head is at & what they need to move the deal forward
6. Throwaway Terms
The seller’s mind is running through worst case scenarios.
Most of those scenarios have a .0001% chance of happening, so you can put them in the contract anyway.
These are terms that are immaterial to you but make the seller “feel” better.
The seller’s mind is running through worst case scenarios.
Most of those scenarios have a .0001% chance of happening, so you can put them in the contract anyway.
These are terms that are immaterial to you but make the seller “feel” better.
For example:
Seller is nervous. You ask why. They say, “What if you end up getting in some sort of legal trouble outside the business?”
You could add a term: “In the event I’m convicted of a felony involving moral turpitude, you get the business back”
Matters to them, not you.
Seller is nervous. You ask why. They say, “What if you end up getting in some sort of legal trouble outside the business?”
You could add a term: “In the event I’m convicted of a felony involving moral turpitude, you get the business back”
Matters to them, not you.
7. Fallback Positions
These are backup terms you don’t want to lead with, but would compromise for.
Say you prefer the owner stay on for a 6-month transition period, but it’s not crucial.
You can later “concede” to a 4-week transition, and gain more ground.
These are backup terms you don’t want to lead with, but would compromise for.
Say you prefer the owner stay on for a 6-month transition period, but it’s not crucial.
You can later “concede” to a 4-week transition, and gain more ground.
8. Knowledge vs Wisdom
Keep rebuttals to seller concerns in your back pocket.
But you don’t want to just rattle off a bunch of terms and benefits.
Understand their fear/concern → then propose the solution for it
Keep rebuttals to seller concerns in your back pocket.
But you don’t want to just rattle off a bunch of terms and benefits.
Understand their fear/concern → then propose the solution for it
9. Creative Solutions
Every deal is full of problems. The fun of it is finding creative solutions.
Biz is $1M and you only have $10k cash?
• SBA $700k
• $250k seller financing
• $40k you bring in a partner, use OPM, look for space to negotiate down SDE..
You got options. x.com
Every deal is full of problems. The fun of it is finding creative solutions.
Biz is $1M and you only have $10k cash?
• SBA $700k
• $250k seller financing
• $40k you bring in a partner, use OPM, look for space to negotiate down SDE..
You got options. x.com
Every single person should learn seller financing before traditional debt investing.
Don't let "this is the usual way" stop you from "this makes me more."
Don't let "this is the usual way" stop you from "this makes me more."
Related: You can get live teaching from experts + breakout sessions with like-minded people on:
• Seller financing
• Deal clarity
• Financial analysis
• & the rest of the acquisition process
Details & tickets here:
contrarianthinking.biz
• Seller financing
• Deal clarity
• Financial analysis
• & the rest of the acquisition process
Details & tickets here:
contrarianthinking.biz
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