Latest / Financial Survival Network / Benefits of Buying an Existing Business -- Michael Frew #5929

Transcript

Benefits of Buying an Existing Business -- Michael Frew #5929 · Financial Survival Network

• 0:00
  You're typically looking to acquire maybe a business once every eighteen to twenty four months.
• 0:06
  No, my last acquisition was back in the beginning of twenty twenty two,
• 0:09
  and we're now speaking in October twenty twenty three. The financial picture has
• 0:13
  changed dramnically, as we shall have witnessed, and even the way I financed
• 0:17
  the business wouldn't even be available today. You are listening to Carrie Letz's Financial
• 0:22
  Survival Network, where you get valuable information you just can't find anywhere else to
• 0:28
  thrive in today's trying times. You need the Financial Survival Network now more than
• 0:33
  ever. Go to Financial Survivalnetwork dot com and get your free newsletter and gift.
• 0:39
  Financial Survival Network now more than ever ed. Welcome you are watching and
• 0:49
  listening to the Financial Survival Network. I'm your host, Carrie Lotz. Well,
• 0:54
  we're always big advocates here of entrepreneurism, entrepreneurialism, and always say before
• 1:02
  you go start a business, think about buying one, because there's so many
• 1:06
  benefits when you buy an existing business, because you get to see what they're
• 1:10
  doing wrong or what could be done better, You get to improve it and
• 1:14
  hopefully it's not losing too much money. But when you start your own business,
• 1:19
  you know, the old saw is like it's going to take you a
• 1:22
  year to eighteen months, two years to actually see a profit. Well,
• 1:26
  someone who's an expert in this is Michael Fruit. Michael, you've been doing
• 1:30
  this in the software business for years. Just tell us how'd you wind up
• 1:38
  getting into this? Hey, thanks for having me, And yeah, I
• 1:42
  was a corporate warrior like many of your listeners probably and looking for my way
• 1:46
  out. And you know the way that people look at it, it's either
• 1:49
  try and start some passive real estate investing or you try and start your own
• 1:53
  business. And probably, like many of your listeners, I've tried to start
• 1:56
  my own software business dozens and dozens of times. I multiple fail projects and
• 2:00
  finally realized, you know, why don't I just acquire my own momentum and
• 2:04
  buy a business that's already running, already has cash flow, already has marketing
• 2:07
  funnels, has a website as a working product, and you get past that
• 2:13
  ninety nine point nine percent of businesses that fail kind of like you were saying,
• 2:15
  if it takes twelve to eighteen months, a vast majority don't succeed.
• 2:21
  So being able to buy that momentum and start from day one with cash flow
• 2:25
  completely changed my approach to how it was going to go forward in my career.
• 2:30
  Right, and hey, like I do this too. I help people
• 2:34
  turn around the companies that aren't making money, that are marginally profitable or even
• 2:39
  failing, as long as they have a core of a business there, it's
• 2:44
  easy to do. I mean I do. I can turn around just about
• 2:47
  any company in ninety days unless there's something terminally wrong with it where it just
• 2:53
  can't be turned around. There's a lot of turnaround opportunities available in software and
• 2:58
  online businesses well, and boy especially if you're a so you're an expert at
• 3:02
  marketing, and that's what's failing. A lot of the companies I buy are
• 3:07
  built there, you know, the idea comes from an engineer, that're built
• 3:09
  by an engineer. Developers aren't really into marketing, even if they're really good,
• 3:14
  that's not what they enjoy doing. So sometimes you'll see a business that
• 3:16
  gets a little bit stuck and it's just because it's missing out a front end
• 3:19
  marketing piece, and so that's that's not even a turnaround opportunity, But that's
• 3:22
  a great opportunity if that's your skill. Yeah, that's sometimes the turnarounds are
• 3:25
  really easy. And you know the problem is the people, the principals who
• 3:30
  are currently involved in a business that is not meeting expectations put it generously so
• 3:37
  emotionally involved. This is their baby. You know, so many of you
• 3:40
  out there you look at the business of this is my baby, and you
• 3:45
  can't It's like with your kids. You know, you can't be objective with
• 3:50
  your kids. You can't be objective with your business. And that's why you
• 3:53
  need to bring somebody in who can be absolutely And that's an opportunity for someone
• 3:58
  like me, where if you're the entrepreneur that started a business and you got
• 4:00
  it to that point where now you're not the right person in there, there
• 4:03
  are people like me that then acquire a business after you kind of take it
• 4:08
  to that next level and then I sell it off to the people that can
• 4:11
  do it from where I hit my own ceiling, right, So you know,
• 4:15
  it's like dirty Harry Clint Eastwood said, a man's got to know his
• 4:17
  limitations, and a woman for that matter too. But that's a different story.
• 4:24
  So hey, tell us a couple of your acquisitions you've done recently and
• 4:28
  how they're working out. Yeah, so for software, and I'm in the
• 4:31
  SaaS space, which is software as a service, you're typically looking to acquire
• 4:35
  maybe a business once every eighteen to twenty four months. No, my last
• 4:41
  acquisition was back in the beginning of twenty twenty two, and we're now speaking
• 4:45
  in October twenty twenty three. The financial picture has changed dramatically as we shall
• 4:48
  have witnessed, and even the way I financed the business wouldn't even be available
• 4:53
  today. But you really kind of have to roll with how the economy is
• 4:56
  working if you're going to be financing the business acquisition at all. But also
• 5:00
  full pash is an opportunity as well. So when I see a comparison a
• 5:05
  lot between should I be investing in real estate for kind of a low cash
• 5:09
  flow and shooting for tax and mantage and appreciation, or looking to acquire an
• 5:14
  online business where I'm going to get a lot higher cash flow, we also
• 5:16
  get the tax advantage, we also get the appreciation. A lot of times.
• 5:19
  That's where I'm trying to help people be aware that, you know,
• 5:23
  looking at buying an online business which can be global, it isn't restricted by
• 5:27
  your geography, maybe can be a really good way to diverse by that portfolio,
• 5:31
  especially if you already have some real estate holdings. You've already got some
• 5:33
  stock or equity and bond holdings. This is that third pillar of wealth creation
• 5:39
  by having that business ownership. Right. Yeah, and a lot of these
• 5:44
  software companies qualify for a realistic you know, a research and development tax credit.
• 5:50
  They weren't even taking advantage of it, right, You're absolutely correct.
• 5:54
  That is a pretty nice change that happened the last few years as that became
• 5:58
  more stood popular and you can reach out to firms that will help you with
• 6:01
  the R and D tax credit. We qualify actually for quite a few of
• 6:05
  the kind of the tax advantages. Again, same as real estate you have.
• 6:10
  You can appreciate the assets within the business, so whatever is classified as
• 6:14
  an asset with the software that is also appreciated, which was a surprise to
• 6:17
  me when I started. As well as if you make any losses, you
• 6:21
  can write that off in the future. In addition to which advanced tax planning
• 6:26
  strategy. But if you've got a software business, most of your value cones
• 6:30
  from intellectual property or IP, so you can spin your IP off into a
• 6:36
  trust and then the trust will get royalties from the company, which then qualify
• 6:45
  as passive income and can be written off against passive losses in other endeavors.
• 6:51
  Right correct, Yeah, so a lot of advantages here in the software business,
• 6:57
  for sure. What areas do you see great opportunities for that? Maybe
• 7:01
  the market hasn't figured out yet. Yeah. One of the biggest increases in
• 7:08
  activity that I've seen, as well as increase in cash BW, is in
• 7:12
  newsletters around a specialty. So we were speaking a little bit before this call
• 7:16
  of you have a lot of expertise in your area, publishing a newsletter in
• 7:21
  that is just another way to reach your audience, and sponsorship deals with those
• 7:27
  have really increased in the past because you have a captive audience that is really
• 7:31
  they have self selected that this is exactly what they want to listen to.
• 7:35
  And I've started to see quite a good number of transactions in the five to
• 7:40
  six seven figure area around newsletters and publishing on things like stumpstat Really, so,
• 7:46
  uh, you know, we've got a substantial mailing list here. If
• 7:49
  we wanted to get into the newsletter business. Is it a free newsletter with
• 7:54
  sponsors? Do you charge for its subscription? How does that work? There's
• 7:59
  almost every opp that you would like. You can start with a free,
• 8:01
  you can have a premium and a free. You can definitely do sponsorships.
• 8:05
  So it really is up to your own imagination. If you already have an
• 8:09
  email list, like you do, you can you know, this is such
• 8:11
  a chiefs to monetize it without annoying your customers by selling the email list to
• 8:16
  somebody else that maybe isn't the right shit. This is a way that you
• 8:20
  get to speak to your customers again. And yeah, like you said,
• 8:24
  you can do sponsorships. You can put your courses at the end of it.
• 8:28
  You can have a private pay you know, for a little bit of
• 8:31
  an extra with a newsletter each month. It's kind of unlimited and people are
• 8:35
  still figuring things out. It's nice because it's a new industry, so all
• 8:39
  sorts of innovation is happening around it all the time. That's really really interesting
• 8:43
  avenue that's available to many of you out there. You just need Hey,
• 8:48
  what's the minimum sized mailing list for a newsletter? That's a good question that
• 8:52
  I don't actually know the answer to. I wish I did, but you
• 8:56
  know, honestly, start with yeah, I mean, you can start with
• 8:58
  You're right, it depends on your market. If you're a super small niche,
• 9:01
  you really don't need too many people before you're going to get a sponsor
• 9:05
  that says, hey, you found my small audience. You've done all the
• 9:07
  marketing work for me. I'll give you a few hundred bucks just to put
• 9:09
  my name at the top of your newsletter. So I don't want to restrict
• 9:13
  anybody by saying, hey, you have that ten a thousand emails. It
• 9:16
  can really just be a couple hundred for a really targeted market niche. Yeah,
• 9:20
  yeah, Well, you know you could target to people who are billionaires,
• 9:24
  people that own you know, GS six fifties. You know, I'd
• 9:30
  rather have two hundred people who own GS six fifties than to have two million
• 9:35
  people who are living in their seller for the attic of their parents' home.
• 9:39
  Right, yep. The value of that customer and the value of that email
• 9:41
  address is so much higher, very much so. All right, I know
• 9:46
  you guys are going to want to reach out to Michael. You're going to
• 9:48
  want to check out his work. Michael, just tell us how we find
• 9:52
  you on the web, how we connect with you easiest way. I'm at
• 9:56
  Michael Thrum dot com, so that's spelled FRIW for my last name Michael fre
• 10:00
  dot com forward slash fs and you'll land on a podcast page that I've put
• 10:05
  up for this episode. I've got a newsletter from there, I've got videos
• 10:09
  to help people walk through. You know, if I ever wanted to buy
• 10:11
  an online business, what are the questions that I need answers? And you
• 10:16
  can kind of go from there and just reach out and see if I can
• 10:18
  help you with anything. I'm not selling anything, just trying to help people
• 10:20
  figure out how to move out of that corporate career and get into online business
• 10:24
  acquisitions. All right, appreciate that Michael and the link will be in the
• 10:28
  show. That's this interview on Financial Survival Network dot com. While you're there,
• 10:33
  sign up for that free newsletter so I can start monetizing it. Michael
• 10:37
  will definitely have you back on again. Appreciate you stopping by. Sounds great,
• 10:41
  Thanks again, Thanks for listening to carry Lets's Financial Survival Network, your
• 10:46
  solution to today's trying times. For the latest, go to Financial Survivalnetwork dot
• 10:52
  com. Financial Survival Network now more than ever. Cruis