Jonathan Jay first sold a business in 1999 and first bought a business in 2006, it was only until 7 years ago that he showed other people how to do it.
After buying a group of companies from a private equity fund for £1 and selling them 11 months later for £1m+, more and more people asked him to explain to them how they could do it too.
And so he did – and that one-off event became dealmakers.co.uk, one of the world’s leading training companies for people who want to learn how to buy a small business without cash or risk.
Episode Highlights Here:
Jonathan
We do this with absolutely every single business that we come across. No, we can’t, we have to pick and choose. But if you want to buy a business without using any of your own money and use other people’s money, then you have to look a little bit harder. But there are plenty of deals out there.
Brett
Jonathan, what is that number one secret to buying a business using other people’s money.
Jonathan
So everyone thinks so when you buy a business, you go to the bank, you find out how much money you can borrow, you give your your house your your the property that you live in as security, and then you go and give all that money to the owner of the business, they hand you the keys, wish you luck. And that’s how a business purchase is done? Well, it can be done that way. But I think it is a terrible way of buying a business because there’s just so much risk, you’re borrowing all this money with effectively a personal guarantee, leant over your real estate. And as a result, if something goes wrong with the business, you are still left with the loan. And for me, that’s way too high a risk. So what I always say to people is when you’re starting out, when you’re new to the world of business buying, you need to risk the acquisition. And the way we de risk it is to partially not use our own money to get our corporate structure, right, that’s going to be different around the world in different countries. But the key thing is, we don’t want to spend our life savings, we don’t want to borrow using our property, our real estate as security. And that means that you’ve got a far lower risk transaction. So what we do is we look at different ways of financing the acquisition, depending upon the type of business it is, whether it sells to businesses, whether it sells to consumers. And interestingly, larger businesses are easier to finance and smaller businesses. Now, why do I say that’s interesting? I say, it’s interesting, because usually, when people think about buying their first business, they go quite small, they go for a business that has annual revenues of a few $100,000, it’s kind of in their comfort zone, they can get their head around that number, because it’s the same value as that, as that real estate. So I always say go bigger, go for the businesses that have annual revenues of millions of dollars, because those are far easier businesses to finance. And we can finance using asset finance if the business has fixed assets. So plant equipment, machinery, we can use invoice finance, sometimes we can use cash flow finance. And we can combine this with vendor finance, where we pay the owner of the business over a period of time. And when we put these pieces together a little bit like a jigsaw, we start to see the big picture. And the big picture says you’ve got 100% financing to buy this business. Now, can we do this with absolutely every single business that we come across? No, we can’t. We have to pick and choose. But if you want to buy a business without using any of your own money and use other people’s money, then you have to look a little bit harder. But there are plenty of deals out there. And I’ve got people all around the world buying businesses in this way.
Brett
Excellent. Okay, so it sounds like the number one secret is to first of all take the bigger approach of de-risking the acquisition. And that goes to a corporate structure and making sure that’s correct. But also not putting up your life savings and or leveraging it against your personal assets or something that can really hurt you personally, as well. Think bigger, right? Instead of buying something small, which is more difficult to finance and prop it problem maybe hasn’t it’s not as healthy or as it’s scaled the way it should be. By simply it’s already skilled. It has bigger revenues than a bank can even give you a better LTV. Is that a fair summary?
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About Jonathan Jay
Jonathan Jay, a seasoned businessman with a host of successful business purchases to his name.
With more than two decades as CEO of The Dealmaker’s Academy, Jonathan not only has the experience and skills to masterfully handle acquisitions but the know-how to teach it. Finding someone with business acquisition track records as successful as our teams is extremely difficult. And finding a team that also have our same level of experience teaching the tips and strategies behind our successes is an even greater challenge.
With The Dealmaker’s Academy, you are getting the best in acquisition and merger knowledge, and strategies from people with real-life experience delivered that also understand how to effectively and cohesively teach their methods.
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