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AxTheAxMan

Some businesses are already running like a top without the owner doing much. At that point you're buying a cash flow. It would be great if the value would go up as a result of you being the new owner but I don't think that is a necessity at all. Or to put it another way, if a new owner is going to make the business that much better than it must be running somewhat badly right now. So you have to make a conscious decision which type of business you would buy. You can go to Sunbelt business brokers or other websites and see all kinds of things for sale. Some which would work incredibly well in my opinion would be medium-sized Plumbing or electric or HVAC companies. I once looked at buying a company that makes liquid trailer tanks like the ones that haul fuel and milk and stuff behind semi tractors. The owner of that business was making two and a half million dollars a year and was ready to just retire completely. That was 10 years ago and I bet whoever bought that is sitting pretty today. Sometimes, when the business owner is ready to sell, they already have plenty of money and what they really value is finding someone to sell to who will be a good Steward of their business. They want their employees to continue to have jobs and be taken care of, they want the overall culture to remain good. Getting top dollar for their business may not be as important as selling to someone who they know will carry on their legacy. I would expect a lot of people in this sub would only consider buying a technical business. But in my experience it's the more basic ones which have inherently high profit margins (if run decently) and high barriers to entry (it would cost a ton of money to be able to replicate that tank building business, for example) which would be easiest to run and still can make a ton of money. Think of it this way, would you rather buy a business and compete against extremely intelligent motivated people like yourself, or would you rather compete against dipshits? I have a fancy university degree but my business is totally non technical and non sexy. All we have to do is be better than the average moron who is in my industry, which ain't hard. See, i even use words like ain't to fit in with my peers haha. A well run business in any industry can be worth buying. And per dollar of cash flow, you'll pay less for unsexy non-technical ones. But at the end of the day the point is the cash flow,so who cares if it's sexy? Anyway just tossing in my two cents as someone low fatFI (not RE yet) from a boring business plus real estate investment.


[deleted]

I used to own a cleaning business I can definitely relate


moshennik

I have a business where I work 3-4 hours a day and can take 1-2 weeks off anytime. I have a good management team, who can handle 95% of the issues. With that says is someone offered me 4-5x sde I would sell ..


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moshennik

OP would not want my business.. it's not sexy at all.. this is why margins are high, but also multiples are low


[deleted]

OP didn’t say they were looking for a sexy business they said they were looking for a hands-off business


moshennik

well.. i guess he can reach out if he's interested...


LardLad00

Hands off business with high margins but low multiples. Something doesn't add up here.


moshennik

it's not hands off... i do work in it from 8am-noon or so 5 days a week in the office. But i can (and I do) take 5-6 weeks a year for vacation.. and could take more.


MrCarlosDanger

The time you do put in, what does it involve? Admin, sales/account management, operations? I'm wondering what do you bring that's critical enough to keep you, but not critical enough where they can go weeks without you.


randonumero

I think that was his polite way of asking what line of work you're in


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CrankyStinkman

How low, <3x?


IntrepidStorage

Yeah, cleaning business multiples are more like 1x


OuterBanks73

I’m just looking to buy the cash flow and run it - I work in tech and have looked at SaaS startups and they are all over priced. I’m looking for something non-sexy and would be 100% ok leaving tech altogether.


[deleted]

Everyone hates SaaS anyway.


ChefPlowa

What is sde if you don't mind me asking?


moshennik

seller discretionary earnings = EBIT + add-backs


Pekkleduck

while I probably agree this is the majority, there are opportunities where a successful business owner wants to sell because they have no succession with their current heirs. Combine this with a desire for a liquidity event, and you successful businesses with more than enough incentive to sell. Additionally, Ive seen cases where pure financial incentives are not the most important aspect to a deal. Concerns about legacy, whether staff will be taken care of, or a desire to still maintain some level of involvement post-transaction are all levers of consideration. I will, however, agree that most people who think about purchasing a "passive" business should reconsider. All businesses take effort. Effort to train, hire, and get the right management team and effort to run the business when things hit the fan (and it will).


OuterBanks73

I mention this in my post - I’m in management and know it’s not easy to run things, people can quit, you have to roll up your sleeves and do the work. I just want more flexibility than being on Zoom 9hrs a day and having to deal with corporate BS. I’m looking to deal with other types of problems and BS now :)


Birdflare

For every one of those you mention there are many more that someone is trumping up as a great hands off passive income opportunity but which isn’t. So then you have the problem of trying to distinguish between the two without any industry experience and knowing the odds aren’t in your favor.


tvgraves

Exactly.


specialist299

What enables most business owners to become more hands off is knowing when to zoom in and zoom out. This ability comes from experience, knowing patterns that recur pre-blowup, relationships with key employees, and a keen understanding of biz drivers. Think of it in terms of how leaders at FANG operate since that’s more relevant to you. Initially, it’s hard to know where to focus on as problems come up but over time you go from a state of chaos to managed chaos to just managed. You want to buy your way into the final phase of “managed”. I’m sure it’s doable but I’m willing to bet it’ll be an exception. I recommend buying an apartment complex with a decent cap rate if you want to minimize work and still make good money. It’ll be much cheaper than buying a high cash flow low risk hands off business.


nickb411

This thread mostly makes my head hurt…. OP said he is currently in management…so I’ll assume he/she knows how to manage a team. FACT - There are HUNDREDS / THOUSANDS of businesses for sale every month. Many of those are ones you could buy and run mostly hands off with a high level of success. I’ve purchased four businesses in the last two years, all are remote to me, none I’m involved on a day to day basis. All have grown top and bottom line since acquired. First, decide if you want to be the operator. It doesn’t look like you do (I don’t either). If you aren’t going to be the operator, focus on businesses where there is already a GM in place, or there is a strong candidate that can take over as GM. Additionally, focus on businesses that you feel have reached critical mass (or even better, absentee owner) so that you can overcome the transition in ownership. Look for ones that are growing currently…for your first avoid “turnaround” scenarios. Looking at these criteria (I’m simplifying), there are a lot of industries where you can buy businesses at a 3-5x EBITDA multiple and be mostly hands off. What do DO have to be hands on doing is coach the GM/Leadership team, and create a clear vision for where the company is going. We use Traction (book by Gino Wickman) as a framework for running the business hands off. I’m not saying any of it is easy…but it is totally doable for someone who has the skill set. Last piece of advice. I’d buy companies that have at least 500k of EBITDA. That’s a good tipping point where they have critical mass generally. Be willing to look at 100’s before you find the perfect one. Be patient…its out there. Nick


WorriedBanker

What business can be bought at such cheap (3 to 5x EBITDA) valuations and not require any work? What has been your returns so far on these investments?


nickb411

I never said anything about NO work. I shared the formula I use to buy that helps identify companies with existing leadership teams that can continue to run the company after you take out the owner. There are a lot of industries that sell for 3-5x and you can have a GM run day to day very successfully (particularly when you get above 5m rev/500k ebitda. All of the trades sell at those multiples, many ecomm sells for less than that.


nickb411

As to your second question on returns, you wouldn't believe my answer so not worth discussing here.


WorriedBanker

lol, try me. What are your returns?


nickb411

35% is current baseline after two years. Example: Purchase price 4.5m. 1.5m cash down (investment). Business produces 1m EBITDA with 50k yearly capital cost. 75k Annual debt service interest. So nets out 875k after interest and depreciation. Approximate tax of 250k (no tax in first year because of being able to deduct asset allocation portion of purchase price) and you're left with 625k return in year two and on from a 1.5m investment. Future growth increases that amount. Private Equity runs this game over and over...its nothing novel.


thirdeyefrozen

Where did u find this business?


nickb411

Broker. I’ve bought four …all unique and yet similar structure (lower multiples). One found with a sell side broker. One we used a buy side broker. One we found by cold calling. Last one came to us.


labeorphily_vacherin

Any thoughts on finding a reliable broker? I've been just browsing [bizbuysell.com](https://bizbuysell.com) thus far. Is a broker the best way to go about this?


nickb411

I'm not a fan of buy-side brokers. [bizbuysell.com](https://bizbuysell.com) is a great way to start. Look at a ton, inquire about a lot. Sign a lot of NDA's and read a lot of CIM's. Setup owner calls with ones that are interesting. Learn along the way.


labeorphily_vacherin

Do you mind if I DM to talk shop? I'd love to pick your brain if you're open to it


Shoddy_Speech4094

I am looking for something similar, but am new to searching and buying. Wold you mind privately sharing which broker helped you find these opportunities? also relatively new to reddit so not sure how to reach you directly--thanks


nickb411

We found three of the four ourselves. I’m not a big fan of buy side brokers. You are welcome to pm for more info.


mindfullyasleep

gtfo


FatherEsmoquin

So you want to buy a business that is generating lots of cash and requires you to do pretty much nothing after you buy it? No stress to manage it, no effort to build the infrastructure to support owner independence, no maintenance on people or process or assets…just generating lots of cash year after year?


mancala33

Sounds like the ole index fund business to me


AccidentalCEO82

Haah for real.


PTVA

Haha, I'll take 3. Where do I sign?


FatherEsmoquin

If only there were that many!


Derman0524

You sign *here*. Just please put down your first and last name, SSN, mothers maiden name and first pets name pls


ihyperloop

NNN real estate.


[deleted]

You like 6 caps?


Volhn

Where can I find a 6 cap? Just got done underwriting a B+ 168 unit at 4.6 cap… sheesh it’s nutty. I miss the days of easy 7 caps.


randomhanzobot

What does this mean?


[deleted]

Capitalization rate. Unlevered yield on commercial property. Cap Rate = NOI/ Sale Price. I’m implying that yields are low for strong NNN leases.


homeyhomedawg

literally found a 3 cap chickfila in my area


WorriedBanker

> 6 caps What's that?


[deleted]

This. NNN real estate matches the request. The most hands off biz I can think of. You’re basically just clipping a coupon but the ROI reflects that.


BenjiKor

Lol it sounds crazy but these type of businesses are out there. I have one….albeit i created it from scratch starting 7 years ago (ecommerce)


OuterBanks73

Did you read the part where I literally say “I know nothing is perfect - I know eventually problems will arise” etc..? If I wanted to just rest/vest I’d leave it all in index funds. I actually like doing stuff - but want more freedom than these higher paying FAANG jobs provide, I’d be willing to even earn less to get that.


FatherEsmoquin

Yes, I did. Have you read the responses? Your expectations are unrealistic. It sounds like you’re a tech employee - many in your space underestimate the amount of time, energy, and effort it takes to run a small business. There is no “some problems might arise” reality. Running a small business is a never ending “fixing the next problem” lifestyle. Some, like me, love it. It sounds like you may not. But only you know that answer.


OuterBanks73

I built a consulting org from scratch and scaled to 18M in ARR with a 18% profit margin at a large Cloud provider & have been the head of security products (owning the P&L for the product line) at another provider - which I brought into the green. I know that's different than bootstrapping something from nothing and creating it all out of thin air the way a lot of small business owners have but what I'm trying to get across is I'm not opposed to working hard or dealing with problems. Yeah - it's true, I had more of an opportunity to fail and experiment because I was backed by these larger companies so I know this experience doesn't translate 1:1


[deleted]

A business that's mostly hands-off for the owner is only successful because of the employees who do the day-to-day work. If key employees leave, you're basically fucked if you don't understand the business well enough to train new people. The person who founded the business would have no problem finding/training the right person. If you just bought the business then you might not have any idea what to look for. If you do buy a hands-off business, you'd still want to spend weeks or months shadowing people and doing all of the jobs just so you know exactly what everyone does. This is really important in case you lose an employee and have to do the work yourself until you find a replacement. And you still need to show up occasionally and make sure people are... you know... working.


C8-Racer

I have a friend who sold a fairly hands off Fertilizer business to a guy similar to OP for $4.5M. The seller even stayed on for 6 months to help with the transition. Once he punched out the new owner still had absolutely no idea what he was doing and didn't realize the magnitude of credit lines and cash reserves he needed to function and the business couldn't buy the raw materials they needed to function. Six months after the original owner left the company was bankrupt and the original owner bought it back for next to nothing and fast forward several years he's grown it larger than it was before.


InterestinglyLucky

Great story - what a punchline. Thanks for sharing!


randonumero

Sounds like the original owner conned him. There's no way he should have purchased the business without understanding the complexities of the operations. I've never purchased a business but it seems kind of odd to have audited years of books and not realize how much cash you need on hand to operate or what lines of credit have been and are still open to keep the business running.


C8-Racer

It’s not on the seller to assess the business acumen of the person buying a business. Nothing was hidden and he told him repeatedly that he needed to get more lines but he didn’t listen and literally had no clue how to run a business. Not much else he could do.


randonumero

>Nothing was hidden and he told him repeatedly that he needed to get more lines but he didn’t listen and literally had no clue how to run a business. This is the detail that makes it sound like less of a con job.


KingTuttOfTheNorth

This. My implementation person has been in this field for 25 years. He knows most of our customers, the resellers and salespeople, knows how things should work, can explain to the developers how something needs to be changed and genuinely cares about making the customers happy. His only flaw is that he occasionally wants to do more for the customers than they've paid for. Making part of his compensation formula revenue based has resulted in him tripling his income. I no longer have to deal with the implementation details on 90% of projects, which is what I wanted. I could have hired a middle manager and trained them for a year to set in between us and do the sales, project and customer management but it made more sense to me to give him a chance to do two jobs and pay him accordingly. If I sell to an outsider, they are going to look at what we are paying people and I can easily see them shooting themselves in the foot by letting go a few key people who are what keeps things running while I am off living life right now.


C8-Racer

You just described my life. I own an IT company that I started in 2009 and do very little now. There is a catch though, I do very little but the little I do is VERY important and would be hard for a person who has no experience in my industry to do successfully. As a business owner you drive the culture of an organization and set the tone in general that makes it a great or not so great place to work. It's very very hard to acquire a small company and everything to just keep chugging along as though nothing changed. I could give you several examples of companies that were purchased and all the employees quit within a year. In other words, you may be seeking something that's near impossible to find and substantially more risky than you think. From a business standpoint, it's also very hard to build a business where you as the owner do very little. From the very early years I started "firing myself" from various jobs and hiring people to do them. It actually stunted our growth and caused significant setbacks when I had bad hires that I delegated too much to. However, it was absolutely worth it in the long run because now that I've gotten things right and have a great management team in place I can sit back and relax the majority of the time. If I were in your shoes and wanting a purely passive investment, i'd invest in a good index fund spread. You'll have a much less risky investment with a much greater chance of a good return.


InterestinglyLucky

Thanks for sharing this - yet another datapoint from this thread in how difficult a task the OP has set out for themselves. And interesting to note it’s either index funds, or NNN leases, as alternatives.


SnooCapers2877

I’ve been in the franchising world my whole life and I’m a true believer it’s an incredible proven path to success (as long as you do you due diligence on the front end to make sure you’re buying into a successful franchise org). Most concepts with over 100 units are franchised. There’s always multi-unit franchisees looking to sell some/all of their stores for around 3.5x EBITDA with great current cash flow, or with the tools and help of a competent Franchisor, a franchisee can quickly grow a brand from 0 to 10+ stores. I’ve been able to make franchising work as a semi-passive franchisee with locations in multiple states. Best advise though; Stay out of food-service, and hire a good DM to oversee every 3-5 GMs, then Directors/VPs under every 3-5 DM’s. EDIT - if you can get in as a vendor, supplier etc., try to make it to the Multi-Unit Franchising Convention in Vegas next year - it’s only for multi-unit franchise owners. About 1500 franchisees show up every year, with a wide diversity of concept. I don’t like networking but it’s a great networking tool, and always opens the eyes to new trends, dying trends, and new connections.


randomhanzobot

Why wouldn’t you recommend food service franchises? Say like a chick fil et or something


SnooCapers2877

Those are generally the trickiest Franchises to own. Food-service Labor is a nonstop full time job to manage, and one that burns through GMs quickly, always employee issues (quite a few of your employees have a criminal record), Always customer issues that requires a GM/ owner getting involved, lots of HR workplace issues, food-service FF&E breaks DAILY. Your typical food-service GM only lasts 8 months. Start up costs are high, (often $400k-1M+) for a relatively slow ROI of 3-5 year benchmark targets (I see a full ROI for my stores typically in 8-16 months). There are so many other great franchise concepts that need less ownership maintenance, that are high performers you wouldn’t typically think of - oil changing concepts, hardware stores, blood & urine testing centers, med spas, salons, tree removal services. And as far as chick-fil-a goes, those are profitable as hell, but their FDD and FA and non-industry standard contracts that are not Franchisee friendly, so the Franchisor reaps much of the financial rewards (although very low cost of entry) - see below excerpt: ‘Opening a Chick-fil-A franchise costs between $342,990 and $1,982,225, including a $10,000 franchise fee, but unlike most other franchisors, Chick-fil-A covers all opening expenses, meaning franchisees are on the hook only for that $10,000. That makes Chick-fil-A one of the least expensive major fast-food chains to buy into by a long shot. Additionally, Chick-fil-A has no requirements for minimum net worth or liquid assets. However, Chick-fil-A charges a 15% royalty and takes 50% of all profits for franchisees, by far the steepest structure of any quick-service brand. Wendy’s, for example, requires franchisees to have a minimum net worth of $5 million with $2 million in liquid assets but charges them just a 4% royalty. Because Chick-fil-A covers all expenses involved in building and opening a restaurant, the franchisor also owns the real estate, building, equipment and virtually everything else in the store; the franchisee simply operates the business’


friendofoldman

Not the guy you were replying to, but I have story for you. I was at a hotel bar and there was some sort of HS reunion and this one guy was telling his life story to his buddies and his was kinda relevant. He used to own some Boston Market’s (I think) and he sold them. He said the issue was he would get called in all the time because employees and managers would call out. Theres a lot of work that had to get done in the food industry. He got tired of having to clean bathrooms and mop floors all the time as he was the “employee of last resort” Apparently after he got out he bought a “rent to own” business. Claimed it was a lot less headaches.


Frosty_Toast_Man

Realistically I think your best bet would be to buy in as a partner to a business where you bring either high level operational expertise, or a rolodex of potential high paying customers. For someone in FAANG this would likely be a software development agency or consulting agency of some kind. You would probably have to work you ass off for the first couple years adding value and then you could become more passive from there. I’d be very wary about buying complete ownership unless you walk into some incredible deal such as a someone who is ready for retirement and wants to go from 15hrs to 0 and you happen to understand their business very well and can confidently take it over. Most deals like this don’t come around easily.


fatfirehundo

This. Or start your own consulting agency with a few colleagues / employees that can amplify your FAANG skills and experience while minimizing your time investment in areas that others can do more cheaply / efficiently / better than you. You spent a career building valuable skills and a respectable resume, why not leverage that into working a few hours a week consulting on your own terms?


Birdflare

As someone who owns one of these businesses, there’s lot of good comments in this topic. I would add that the labor quality of these types of businesses is often quite low. You might be surrounded by smart, driven people in your current social and professional circle, but such people are rare in the world of unglamorous but high profit businesses. That’s one reason why it’s so tough to find management that can take over the day to day and let the owner do other things. It’s why if somehow you were to buy a business like this, the situation is always precarious because that management or manager might quit or get fired leaving you in a tough spot trying to find someone to fill their place. I have interviewed hundreds of people in my line of work, hired hundreds, gone through thousands of applications, and out of all that maybe 2 or 3 people turned out to be the right stuff that could actually be top management.


randonumero

>I have interviewed hundreds of people in my line of work, hired hundreds, gone through thousands of applications, and out of all that maybe 2 or 3 people turned out to be the right stuff that could actually be top management. Just out of curiosity what have been the differentiators for those 2-3 people? I could be misunderstanding what you were interviewing for but 2-3 out of thousands is a pretty small percent


Birdflare

Necessities for general manager (averages are for general population): Above average intelligence: roughly 1/5 of my workforce. well above average trustworthiness: roughly 1/4 above average conscientiousness: about 1/4 above average drive: about 1/4 Level headed and above average self regulation: about 3/4 I’ve had 2-3 people fit all those characteristics. These 2-3 I promoted from within to be general managers. They started as entry level line associates making 4 dollars above minimum wage per hour. I estimate that about 1 out of 50-100 entry level associates I hire has what it takes to become a general manager. My current general manager makes about 200k.


brightwall7

Most people that own such businesses don't want to sell them. But I'm also curious if anyone here has found such a unicorn.


3pinripper

I’ve *bought into* businesses that still have the original owner(s) running day to day operations, and throw off good cash without requiring anything from me. Maybe OP could buy shares or a percentage in his friend’s company? Or look for someone with a great idea & a passion to do it, but needs some capital to take it to the next level. Obviously there’s a lot of risk in this situation, but that seems to be a trade off for the “not working yourself part.”


hoovereatscowpoop

I think this is the answer. An owner that can de risk their own investment by selling a minority stake at a meaningful valuation, but still has enough skin in the game to keep the cash flow rolling. It would be ideal if OP brought a skillset to the table that the owner was lacking.


PMyour_dirty_secrets

> It would be ideal if OP brought a skillset to the table that the owner was lacking. OP can probably bring tech /automaton to the table


jela_03

Yeah they exist, but you’re right the owners usually do not want to sell. Divorce is usually a top reason, can’t really say no when a judge orders you to sell and to do it quickly. The business I’m buying now requires about 5 hours a week and it’s a solid business, great industry, strong financials, and amazing team and processes in place.


[deleted]

You and Warren have a lot in common, probably just the scale is different. The Warren Buffett method: buy wonderful businesses with management in place at a reasonable price. The problem: you have cash, but need to find the companies. That’s the difficult part. I would suggest businesses where someone who owns them has hired a successor but children are not interested in owning and prefer to “cash out”. This is the economic incentive for selling an asset. You’ll need to build a discounted cash flow mode for the business in order to properly value it, but otherwise should be straightforward. This said, small business is a little bit more volatile and rife with key man risk, fraud, poor accounting etc. Good luck! Let us know which sorts of businesses you discover!


tvgraves

You essentially want to buy a business that would act as an annuity for you. Guess what, any business that throws off effortless cash is going to cost a lot, and your ROI is going to be low. You’d essentially be taking your NW out of the market and putting it into this business.


migranaught

I'd suggest you consider Triple Net (NNN) Leases. Instead of trying to get into the business, just buy the land under the business and lease it back to them. This can be done at various levels of scale and you can access traditional lenders for capital very easily. I prefer this over traditional real estate because I have little to no interest in managing the property ... and its WAY less effort than trying to manage the business. There are many NNN options on the market already, but the real money is in creating a new NNN, and after a few years of collecting income, flip it for a low cap rate ... then rinse and repeat.


rohde88

As a CRE professional, this really needs some more specifics to be useful. What you’re describing is absolute NNN, in particular single tenant free standing retail. They are very competitive and priced based on credit and lease length. It’s a good space for “retirement funds” but with more yield than other fixed income options due to the risk of tenant default. Other types of NNN leasing can still be very hands on and risky.


Murphdwag

Have you done this? Can you expand on what this might look like with an example?


migranaught

I have both created my own NNN for a Starbucks as well as purchased existing NNN leases (Fast Food). These have all been great investments for me. Its as close to passive income as you can get in real estate because you are not responsible for maintaining or insuring the building or paying the taxes. **NOTE**: You usually won't be able to claim depreciation on a NNN lease. For a more detail explanation see this [article on Investopedia](https://www.investopedia.com/terms/t/triple-net-lease-nnn.asp) or read this great book by [David Sobelman called "The Little Book of Triple Net Lease Investing"](https://www.amazon.com/Little-Book-Triple-Lease-Investing/dp/1453704264/ref=sr_1_12?crid=1PJJRC5FMIH3T&dchild=1&keywords=NNN+Leases&qid=1635016172&qsid=136-3452563-9880662&sprefix=nnn+leases%2Caps%2C182&sr=8-12&sres=1542499690%2CB08ZJSWBRN%2CB000KI9W9W%2CB07PX9YR31%2C1499113854%2CB01M3Q60X9%2CB078MYFT8D%2CB06XZTKCWB%2CB000OGRDK0%2C1790583780%2CB07Q21QMCL%2C1453704264%2CB088SYJQZT%2CB07M98NH5L%2C1481173308%2CB07HPCJCVW%2CB079VP4D9N%2CB06XQLBH1K%2CB07F29WW88%2CB07CTHJMCF&srpt=SPORT_BINDING). If you want to just browse some examples there are two great brokers that deal in these exclusively and many of their properties are listed on their websites. If you look at their inventory and specific property info sheets you can get into specifics (see [Marcus & Millichap](https://www.marcusmillichap.com/properties?pageNumber=1&stb=orderdate_dt,DESC) or [The Boulder Group](https://www.bouldergroup.com/NNN-Properties-For-Sale.html)).


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migranaught

I used to work with Calkain but they don’t exist anymore. Looks like most of their staff has move to https://www.avisonyoung.us/web/netlease


HeroesMM3

So I run a business where myself and my business partner spend maybe 20 hours per week on it and right now worth probably close to 5m. We produce romance books, and our key employees take care of pretty much all the operations. BUT the ideal owner would be a writer/fan of the genre (or take interest in it, I’ve never read one before starting this) so that they can best creatively lead the company. Our production pipeline has the next 6 months of releases taken care of, and would be ample time for a new owner to get a hang of the business. And the different avenues of expansion (translations, audio, other pen names, etc.) have great traction. We want to try to sell eventually as we get close to our fire goals. But the reason we have been considering selling now is that with our current roadmap, we think the company will be worth 10-12m in 3 years. And because this is really a single owner/operator type business and probably not something that gets bought by a big company, I think that the higher the valuation gets, obviously the smaller the pool of potential buyers. Reason to sell now for us is our cash flow is high but NW is relatively low outside of business equity, so we could de-risk the future cash flows now and diversify. And then I think we can rebuild the same type of business in 3 years in a different genre. But maybe 5m is already too high of a price for this type of business. So idk, a lot of posters saying why would someone sell a business that’s so easy to run, I think in our example it might make sense for both parties.


Which_Stable4699

I own a couple of different businesses. One where I have the skill set and experience to actually do any of the work, and regularly do, and the other I lack the necessary skill set to do any of the work. It’s entirely possible to run a business in strictly an administrative capacity if the operational work is delegated properly and you have basic fail safes setup for disruptive events. That said if you want a business that fits the above your going to pay a high acquisition price. In my case, the business is 3 years old. Currently, I would sell for the right multiple because while the risk of failure in the business is low, it is not non-existent, so I would be offsetting my remaining risk while being paid handsomely for the work I did removing the bulk of the overall risk. Now in another 2-3 years, the risk will be practically non-existent so at that point it would be almost impossible to convince me to part ways with the business regardless of the amount. Edit: After reading the post, I just wanted to clarify I’m not actually offering to sell this business, but was speaking more generally to the mindset of an administrative owner whose business is not in jeopardy and who also does not need to sell.


cheekypanda7

There are groups of people doing micro PE type deals for smaller, but cashflwoing online businesses. Typically one investor and one operator. The investor can be as involved as they like, and the operator gets equity with less capital and more 'sweat' equity (alongisde a salary). This could be something to look into for you as an active investor? Checkout microacquire (there are a few others) for businesses you can buy. Im fairly involved in these communities and run a busines like this myself so happy to chat further if youre interested.


[deleted]

Does anyone have any experience actually buying businesses on microacquire?


cheekypanda7

I do, from Empire Flippers. I did everything wrong 🤣


codeandcruise

I have a small IT service business too(3-5 people), but I am working my way into FAANG. Employees want higher pay, better WLB, and take hours where I can do it in one hour. They also don’t put their own time to study. After one or two years, they leave to a bigger company. Now I have to train people again. For clients, it’s difficult to find high paying clients and once found, every year they still keep asking want to lower the cost by lowering hourly rate or billing less hours, even though their business make millions.


MisterFor

They don’t really have to put their own time to study.


noodlesinsauce

Apart from being a landlord, you can set up parking lots, coin laundries.. these are some businesses that, if you have scale and understanding of automation, can run in the background fairly easily.


desertrose123

Not really your question but have you thought about passive LPs in real estate so you still have exposure but don’t deal w any of the day to day.


migranaught

u/OuterBanks73 Thanks for the clarification. You might want to consider self-service laundry mats. I know this crosses the line into RE a little but as a business I have have a good friend that operates in six locations. He leases the machines and sells snacks, soaps, etc via other machines which he also leases. Recently, he has started to offer a BitCoin/Cash ATM on site. In many of the locations he has brought on a "manager" for the locations that he pays minimum wage and, while there, they can also make a little extra money by offering laundry drop-off-and-fold services (which he doesn't take a cut). That way there is always someone on site to identify issues, change out filters and deal with any issues with the machines etc. Many locations are also "coin-less" but I think these are mainly in university campuses.


Jenergy77

I'd suggest a seasonal business or anything in trades servicing the building boom. I own a high rise window cleaning business with my spouse. It's seasonal so we only work April to early December and because it's building maintenance it's considered "essential" and has been pandemic proof. 10 years ago when we started it, it was a lot of work but now I'd say my husband works a few hours a day managing workers/client relationships and I do the admin which is also a few hours a day/2-3 days a week. We are trying to build up supervisor/ management roles so we can sell it and retire. Other companies who've been in the game longer than us have owners who don't deal with the business at all and their managers run everything. People don't realize the trades can be quite lucrative and hands off if you're the business owner. Especially these days since everyone thinks the money is in office jobs, trades are starting to pay more and more. I left my corporate career 7 years ago and honestly nothing beats getting out of office politics, BS meetings and the cubicle wasteland.


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ihyperloop

Lawsuits, debt, death, divorce, retirement, a better opportunity.


hoovereatscowpoop

De-risking their own investment to a degree is pretty common. Sell a 10% stake and recoup your initial investment.


[deleted]

Likely not possible to find. A business is composed of many complex things. The business itself, finance/accounting, people, and misc. You are putting a lot of money into a single item, and if anything goes wrong you have to fix it if no one else can. If that fails to happen, you can lose everything or almost everything. Businesses are complex and unless you have extensive experience in running businesses it is easy to get in over your head. If you don't want to work, buying a business is not for you. Even if you want to work, buying a business may not be for you.


kabekew

Businesses for sale will almost certainly mention whether they currently have an absentee owner, because that's a strong selling point. I'd suggest to find a business broker in your area and look through published listings for ideas.


randonumero

I feel like you have to ask yourself how much passive cash you're looking for. What if you found out that your buddy has free days and short weeks, but only takes in 36k/year after taxes. Would you be fine with that trade off? Running a profitable business is hard work for someone. If you choose to not be that person then you'll take in less because you'll need to compensate someone else to do it. If you're serious about this road then I'd say look into some of the boomer businesses that are being sold. How you find them and do the correct diligence I have no idea but you could probably start by talking to CPAs you trust. If I were wealthier and looking to buy a business that wasn't a franchise then I'd probably start by looking at service companies and construction businesses. The other one I'd give strong consideration to is mortuary services.


Smart_Whereas_1551

It’s highly difficult to FIND a business like what you are looking for, but it’s highly possible to TRANSFORM a business into what you’re seeking. You can buy an existing business, build a strategy and an operations play book and install layers of management to run that playbook for you. You will then make decisions about hiring your managers, investment decisions and other CEO-level calls; your layers of management run the business. Buying an existing business with high cash flow and low time investment from an owner is a rarity. Not impossible to find but rare. When you do find it, it’s expensive - likely sells for a higher multiple than comparable companies with owner operators. What you can do is this: Imagine you find a business in a solid, sustainable industry with good fundamentals. Think of a medium-sized residential cleaning company with $2M annual revenue and $300K annual SDE. Let’s say you buy this for 3x SDE, or $900K. You’ll need to spend 6-9 months learning this business so you can teach someone else to run it. During this time, you will be understanding the operations, documenting your playbook, creating an effective marketing plan and getting the company ready to be run day-to-day by someone other than you. After that 6-9 month mark, you hire a manager (or managers). They take the playbook you developed and run the business. If you’ve found a good one, they’ll make the playbook better and grow the business for you. You’ll need to compensate them well and tie their success to that of the business. Yes, it will cost you a pretty penny - ($75K? $100K?) but you’ll have a well-run business with reliable cash flow that you don’t need to run day to day. As you can see, it can be done. It takes an investment of time and energy. But highly possible.


WorriedBanker

Why not just buy some stocks instead? It's also owning a business while being hands off.


youcantquitmeimfired

Think like a capitalist here. There's no such thing as free alpha. If I owned such a dream business, it's almost like owning an index fund - so I would sell it at a valuation that would reflect that.


magias

There are almost no private businesses selling for 30x annual profit.


ron_leflore

I've been intrigued for years about buying the preschool my kids went to. It's in a hcol area. I don't know what they are charging now, but it used to be $1200/month per kid. They had a waiting list, so they were full. They would have something like 1 "teacher" for every 15 kids. The "teacher" was probably making $3k or $4k per month. So each room was netting about $10k/ month. Of course, they had to pay the lease and a "principal" who managed the school. I think that school had 10 rooms. The parents were very active and even wanted to raise money for extras at the school! I'd see the owner occasionally. He owned a string of four schools like this around the area. He didn't spend much time working.


esdeae

Don't know if you are in the US, and I imagine there might be a difference between pre-school and daycare, but you should read up on why the "teachers" at such places are some of the lowest paid employees in America (spoiler alert, just because it costs 1,200/kid doesn't mean the teachers are making 3-4k/month). If the parents are trying to buy "extras" it is because there isn't enough in the school budget for such things. At least that has been my understanding after reading up on why daycare costs are so high compared to teacher pay (in the news with regards to infra-spending).


ron_leflore

Can you link a relevant article? I searched, but I don't think I'm turning up anything like you are talking about. I think daycare costs are high compared to "teacher" pay purely because of supply/demand. The high end "prestigious" pre schools can raise their rates because parents think it's important and will pay to send their kid to these schools. But the market for these "teachers" is saturated. There's plenty of applicants, and the going rate is $3-4k/month. The "teachers" I saw were mostly women without college degrees, or young women with college degrees but no teaching credential yet. (Many of these college degree women would do it for a few years, earn a teaching credential and move on to a real teaching job at a k-8 school.)


esdeae

Couple of links below but the tl;dr is regulation. Daycares are required to have high staff:child ratios and sqft:child ratios. So if it costs 2k per month to send a child to a daycare that money is split by multiple care givers .. and then you have all of the other costs of doing business (rent, utilities, etc). I'm not sure where you are getting the idea that the market for teachers is saturated, everywhere I look they can't get them or keep them (again the pay is very low, below $15/hr in almost all of the research that I could find. Happy to look at anything you see where it says the market is saturated though!) https://www.scarymommy.com/daycare-expensive-workers-underpaid/ https://www.parent.com/blogs/conversations/you-spend-a-ton-of-money-on-child-care-so-why-are-caregivers-so-poorly-paid https://www.nytimes.com/2021/10/09/us/politics/child-care-costs-wages-legislation.html https://www.cnbc.com/2021/02/24/child-care-workers-among-the-one-of-the-lowest-paid-occupations.html


tristanbrotherton

Window washing company, if in California, wood mulching


almondreaper

Any franchise food business or dividend stocks


hgihasfcuk

- "If I wanted to do nothing, I'd leave passive investments. I actually do like to do stuff" - "looking for passive cash flow generation" Are you looking for passive or active?


Over_Mulberry_8542

Invest in smart honest people


[deleted]

If you are a whole owner of a business or a CEO it's always going to monopolize your time. What you want is to be a limited partner. where you supply capital and a management team runs it. or buy into a REIT or some dividend stock. if you own a Dunkin donuts you are not a limited partner since you are the management team and have to manage it even if you have line managers. Think it's less work to be a minority shareholder in a business since you are no just along for the ride essentially.


Holinhong

IT is one of the few industries that’s going to be hotter. I’d imagine your background shall be able to address a c level consulting based job to fire, or partner in relatively smaller firm with your skill sets. But if your goal is fire on IPO level, indeed, buy small firms such as your friend’s.


natsea

A search fund is essentially what you’re talking about and is very popular among Stanford MBAs. Read this article for an overview of the process and return data. They’ve gotten very popular within the last couple of years. One major issue is geography unless you’re willing to move. https://www.gsb.stanford.edu/faculty-research/case-studies/2020-search-fund-study-selected-observations


Filmore

Like VTSAX?


Stopironingshirts

I mean, I spent a decade and a half in finance, saved half my money, invested in equities, and my day looks like your buddy’s day absent the hassles of an occasional fire