Have you ever heard of this dream?
It sounds too good to be true. And often what is too good to be true is wrong.
But this may be something you’re capable of. I have no particular experience with this, YET but I’ll give you some resources to learn more.
Today, one can live the life of their dreams by owning a vehicle in which funds their lifestyle without the trade for hours.
I see there are at least two ways to do this. One being faster than the other, but assuming debt to do so.
Either can work, just depends on your risk profile I suppose.
- Buy an existing company with debt and favorable terms
- Create an online company and out source the day to day
I’ll dive into each on and give additional resources to learn more…
We’ll start with #1. Buying a company that already works is something anyone can do.
Using seller financing and commercial debt combined, ie junior and senior debt, one can buy a company with little or no money.
Let’s say someone wants to live on 100K a year. Well, to reverse engineer that salary it goes like this.
100K % 0.6 = 167K
This accounts for the salary necessary (after taxes) yet accounting for debt service.
In this example we are considering 40% of EBITDA of acquisition will go to debt service both junior and senior for acquisition.
167K % 0.7 = 238.5K
The above formula accounts for Taxes and leaves us with a 238.5K EBITDA necessary to carve out a 100K salary.
So, in simple terms, to make 100K annually one must look for a company with 225-250K EBITDA.
Depending on the industry, this acquisition will cost probably at least 2-3X EBITDA or 450-750K depending on multiple.
For this example, let’s use 2X EBITDA on a 250K earnings basis.
To make 100K one must acquire a company at 500K. Depending on how the deal is structured this could cost as little as 25-50K
For example, with an SBA loan at 10% down for full acquisition price of 500K, just 50K makes the purchase possible.
But let’s make this a little better. Depending on the deal structure, one can buy a company and create terms where the owner must stay on as GM for an extended period of time.
So let’s say the deal is structure 50% seller finance with 1 year of GM staying on plus 50% SBA loan as Commercial debt
Well, one could make this acquisition at 25K down and force the owner to stay for a year.
But the best part is that the owner runs the business, so you can travel!
Similarly, after the year is up a new salary can be carved out of existing EBITDA for a full time GM.
That’s it for the first example.
The second example would be to create an online website that makes 100K a year with very little time.
How does this work in theory?
Create a website that brings in traffic and converts a percentage of those viewers to customers.
The math is…
5 products at $20,000
10 products at $10,000
20 products sold at $5,000
100 products sold at $1,000
200 products sold at $500.00
500 products sold at $200.00
1000 products sold at $100.00
Any one of these combinations hits the goal!
As long as this product is independent of location (ie online) one can travel and enjoy their life and outsource the rest!
Let me know if you enjoyed this post. For more resources check out
- Buy then Build for for Buying Businesses
- Danpena.uk for Buying Businesses
- The Four Hour Workweek for Lifestyle design and building an online website