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MINDSET & MONEY | TIME TO BUY YOUR FREEDOM

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It has never been a better or more important time to look into investing in your own freedom. With unemployment rates skyrocketing, it is extremely important to find your financial destiny and hold it in your own hands and not in the hands of your employer. It may be time to buy your freedom. It may be time to buy a business.

Mike Ayala explains why there has been no better time to buy and invest in your own freedom. This episode dives into the benefits of acquiring vital assets from a distinguished business and how this can remove the challenge of customer acquisition. Mike also offers you the opportunity to reach out for discussion and resources on how you can start to buy your own freedom!

“I don’t know if it’s ever been more important to be considering controlling your own financial destiny, owning your own time, and potentially buying a business.”

HIGHLIGHTS:

  • [0:01] Show Introduction 
  • [0:32] Start of the Podcast 
  • [0:42] Is it Time to Buy a Business? 
  • [2:09] Financial Burdens of Today 
  • [4:39] Is it Time to Buy Your Freedom? 
  • [6:36] “Death, Divorce, Don’t Wanna”
  • [8:12] What is Valuable in a Business and When to Buy
  • [9:25] Customer Acquisition 
  • [10:33] Operators Are Tired 
  • [11:43] Why This is the Best Time 
  • [12:35] The Difference in Real Estate and Business Investing 
  • [13:58] Own Your Own Time 
  • [15:26] Blinded to Change 
  • [16:35] Future Possibilities 
  • [17:26] A Tip When Signing the Lease 
  • [18:29] Best Time in Terms of Access to Capitol 
  • [19:01] Closing Thoughts 
  • [20:35] Investing for Freedom Community 
  • [21:04] Outro 

RESOURCES:

Facebook Group | Investing for Freedom
https://www.facebook.com/pages/category/Editorial-Opinion/Investing-for-Freedom-471491206961417/
Contact us! | [team@investingforfreedom.co]

FULL TRANSCRIPTION:

Are you looking for freedom? Freedom from the daily grind and hustle, or just finding a way to live the life you always wanted. Then join us on the investing for freedom podcast. Our hosts, Mike Ayala will help you discover new ways to find freedom. With tips, insights, and interviews. You’ll learn the exact systems he’s used to travel the world and live his best life. True success and happiness are all about freedom. And here’s your roadmap on how to find freedom on your own terms. Welcome to the investing for freedom podcast. Here’s your host Mike Ayala.

Today on the investing for freedom podcast, I’m going to talk to you guys about buying your freedom. I think it’s probably never been a better time or a more important time for us to really look at buying our freedom. And the question that I’m going to ask you today is, is it time to buy a business? So many times I get asked, “Hey, when’s a good time to buy real estate.” And it’s probably always a good time to buy real estate. It’s all about the deal. It’s about finding the deal. And then there’s obviously cycles in life and time where deals are easier to find than others. And obviously the times that it’s easiest to find deals is when there’s blood in the streets, like 2008, 2009, 2010. The problem with those periods of time, is you can’t find financing, if you don’t have a bunch of cash set aside, then you’re going to have a hard time finding deals. So really the people that are, sitting on a lot of cash or have leverage to deploy or have some way to get financing, they’re the ones that win in these downturns or blood baths.

But this is kind of an interesting time with everything that’s happened with Covid. And obviously, you know, we’re experiencing some financial turmoil and I don’t even think we’ve begun to see the beginning of it, but the problem is we’re feeling it on main street. I mean, unemployment by some estimates are, it’s above 30 million people now, which is just insanity. I think unemployment was like three and a half percent in February. And now, some people are saying that we’re pushing 25% unemployment. Those aren’t official numbers. I think the official numbers are saying 16% or 18% or something like that. But with this level of jobless claims and people unemployed, man, things are going to get interesting.

I’ve got a person, a mentor in my life that kind of has an interesting approach to this. And they were talking about how in 2008, the TARP program, that temporary asset relief program, I think it was what it stood for came in and basically bailed out the banks, but the problem was the banks didn’t really necessarily want that money. And I’m paraphrasing all this. I’m not an economist, but it was temporary. And so there was a bunch of restrictions and some banks needed bailouts and some didn’t, but they all had to take the money, anybody that was basically fed chartered. And so it was kind of an interesting time cause that money never actually got into

the system, but what’s happening now. We’ve got all this unemployment and we have all this money that’s being printed by the fed and the treasury. And it’s actually getting spent. So what’s happening here, the loans aren’t crashing, the mortgages crashing, the fed and the treasury stepped in and kind of propping all this up and this has happened quickly, but I’m not sure, I don’t think anybody’s got a crystal ball, but I’m not sure that we’re going to see distress asset prices in the real estate world anytime soon. And so this mentor in my life kind of speaking recently to this, what they were talking about was basically that we may not see, distressed real estate prices. And this might not be at the time of real estate buying like it was after 2008, but what’s interesting, there’s a chart that Bloomberg put out. It was actually done by DB global research and it shows every single time that unemployment, the unemployment rates spiked bankruptcies spiked. And so we saw unemployment rise in 2002 to 2004 and we saw major spike in bankruptcies then. And then in 2008 and 2009, we saw a major spike in unemployment, major spike in bankruptcy. But then you look at this chart and it’s 2020, and you just see this major, like hockey stick of unemployment. And we haven’t begun to see the other part of the chart, the bankruptcies rise yet. And so, some of that’s going to happen on the personal level, but a lot of that is going to be business bankruptcy.

We literally shut down the economy for, 30, 45 days in some respects. Like some places are not even open yet. And so we’re going to see massive, massive amounts of bankruptcy in the business arena, even though there’s all this fed money, there’s the PPP, there’s the EIDL. It’s not going to be enough. And so what I’m going to say to you today is, is it time to buy your freedom? Is it time to buy a business? And you might say to me, well, Mike, I’m not sitting on a lot of cash. What’s interesting, you may not need to. So in a real estate downturn, I’ve bought a lot of real estate on seller carry, which is a conversation for another day. But business owners understand and know that it’s not very easy for, it’s way easier to get financing on real estate than it is on a business, much easier. I’ve had way more financing on real estate than I have on businesses, even though I’ve had line of credit, etc. for our businesses. It’s challenging. It’s challenging because banks like real estate, they like that tangible asset. What they don’t like is a business that relies on people and operators because they can’t necessarily come in. They may be assets there, but typically those assets are overvalued. They’re depreciated. And really the asset is the customer list and it’s the people running it. It’s the operator themselves, or at least somebody who’s in charge or general manager or an operations director. So it’s not been more apparent at least in my lifetime that it’s extremely important to have your financial destiny in your own hands and not the hands of your employer. We’ve all struggled through this. Even as business owners, we’ve had to adjust, we’ve had to shift. As real estate investors, we’ve had

to adjust, we’ve had to shift, but at least we’re making our own decisions. We’re deciding whether we’re going to open. We’re deciding whether we’re going to close. We’re deciding whether who’s going to get laid off and who stays. And yeah, those are challenging, challenging conversations and it’s difficult. We’ve worked so hard assembling and putting together amazing teams and then all overnight something happens, and you have to lay them off. So yeah, it’s still challenging, but the reality is at least our destiny is in our own hand. So with unemployment at 30 million or more, I want to pose the question. Is it time for you to buy your freedom? Is it time for you to buy a business? And again, you might say to me, Mike, I don’t have a lot of cash. Well, I’ve bought businesses, and this is a true story. I’ve bought businesses in the past before with no money down. Literally a business that I had a 30-year customer list and it had inventory and it had equipment and it had a building that came with it and I bought the entire business with no money down, because the owner wanted out. And one of my mentors and you guys have heard me say this before, when it comes to real estate, the 3D’s death, divorce, and don’t want them, if you can find a win, win scenario with a seller, whether it’s real estate or whether it’s a business, it all falls into the same thing. In this particular story that I’m talking about, it fell into a couple of things and it wasn’t death, but it was a divorce. And it was definitely, I didn’t want them cause he was tired. He was wearing out and he was the sole person working in that business. And he had basically almost his entire team go. He was just tired of running the business and also this wasn’t death, but it was health related. The owner of the business had some health issues. And so he knew that it was going to be challenging for him to sell the business. He had even talked to some big businesses from out of state, out of town that, thought they might be interested. But anytime you go through that 6 or 8- or 12-month process, I’ve done this before. We had a huge international firm worth $8 billion, try to buy 50% of my first business. And we went through six or seven months of planning and negotiations. And I mean, it was hell, business owners don’t want to go through that. And so here’s a couple of things that I want to say, and then I’ll pull this all together.

What’s valuable in a business. And when does it make sense to buy a business? It’s just like real estate. Sometimes it makes sense to buy. And sometimes it makes sense not to buy. I have a really successful mentor in the real estate world that when he’s not buying, he’s buying land and holding it. And sometimes building from the ground up because it reaches a period of time where the price to buy existing inventory is higher than the price to build. And so he’s counter cyclical. A lot of times he’ll be buying when nobody else is buying, through a crash he’ll buy existing properties. But then when the prices get so high that he can’t afford, well, it doesn’t make sense to buy them. Then they start building, they can build $20 a

square foot cheaper than what they’re selling for. So anyway, there’s cycles in that. And so it kind of comes along the same thing with business. There’s periods of time, where depending on the cost of the businesses, it’s cheaper to just start your own business. But then if you think about it, what are the assets in a business? It’s inventory, it’s the customer list and it’s the employees and the reputation that you’ve built, right? Assets such as vehicles, trucks, equipment, that kind of stuff as well, but a lot of that’s depreciating. So I would argue that typically when you go out to start a business, one of the most challenging things is customer acquisition. You can go to the bank and you can buy a truck, or you can buy computers. I mean, almost anybody can get a best buy card to go buy five or 10 computers for your company if needed. You can lease desks, you can lease office space, as we’ve learned through Covid, heck we don’t even need office space anymore. That’s going to be a whole interesting other scenario to look at. But the value in the business and starting it up, I would argue that when you start a business, the challenging part is acquiring that customer list. And so in periods of time like this, it might make more sense. You might be able to pick up businesses cheaper and quicker and faster to buy that customer list, to buy those inventory assets, to get that phone ringing. I mean, literally you could buy an electrical contracting company, a service company. You could buy it today and your phone could ring 27 times tomorrow. Whereas if you said, Hey, I’m going to start my own company. It might take you months or even years to get the phone to ring to the same level that it does with that existing company.

The other thing too, a lot of these companies, just like we see in [10:38 inaudible] operators in manufactured housing space. A lot of times these operators are tired, and they haven’t updated their systems or their equipment or their processes in years. And so you literally could buy a customer list and just treat them a little bit better. I saw a story yesterday and this is common when I was in the plumbing and heating service world. Our goal was to answer the phone, get the appointment set, show up and bid the job. And get the check before our competitors even answered their phones sometimes, literally I’m sure most of you guys have dealt with this, but if you can just up your customer service level. So number one, you’re buying a customer list, but then number two, you’re implementing systems and processes that help you perform a better customer service experience. A lot of times you could just, through some efficiencies, you can take an existing business and you can add 1%, 2%, 3%, 5% to the bottom line over the course of 12 to 18 months increasing the value of that business. So there’s so many reasons to be thinking about this, but here’s the main reason why right now is the most important time to be thinking about this.

Business owners are tired. For all the reasons that I’ve just said they’ve worked so hard building their team. And a lot of times small businesses are family. And they’ve just been through this maybe a second, maybe a third time that they’ve been through a downturn and they’re probably just telling themselves; I don’t want to do this again. And I’m not saying that we’re praying on anybody. This is a win, win scenario. When I bought that business from that guy in 2012, that was a win, win scenario. And so these guys might be having cash problems. And maybe you have some cash that you can solve that, maybe you have credit that they don’t have, or maybe it’s just that they’re tired and you’re young and energetic. And that doesn’t even have to be an age thing. Maybe you’re willing to take on another 20 years of business. You could be the same age as that other person, and they’re just tired. They’re done with it. So I would just encourage you. The reason why I’m coming to you today with this is, is it time for you to buy your freedom? Is it time for you to buy a business? What’s interesting with real estate investing, could you get one real estate deal done that allowed you to retire? Yeah, it’s possible. But I often tell people, if you need to create $10,000 a month of passive income, I mean, honestly, and that’s a big number, but that could be a lot of, I mean, that could be a hundred houses that you got to get to. If each one’s putting off a hundred dollars a month, it could take you 10 or 15 or 20 years to retire in real estate. Can you get one deal done that would let you retire? Yes. Is it very likely? Probably not. The reality with buying a business. Yeah, I think you have more opportunity to buy one or maybe two customer lists and businesses that will allow you to if not retire, at least get your freedom. So even in the case of the real estate world, you’re going to have to buy a lot of properties in order for you to get your freedom, meaning you don’t have to work 40 hours a week, but in a business you could potentially buy a business today and set that up to where you only have to work 5 or 10 or 15 or 20 hours, or maybe you want to work 40 or 50 hours and freedom to you is you just want to be able to take off an extra week or go whenever you want.

And if you just put the right person in place at that business, you can do that. So the question is, is it time to buy your freedom? Is it time to buy a business? And I would say the in at least in my lifetime, I don’t know if it’s ever been more important to be considering controlling your own financial destiny, owning your own time and potentially buying a business. You might say, Mike, I’m not an entrepreneur. Okay, but you go to work every day. You’re an employee. So would you rather be an employee for yourself or would you rather be an employee for somebody else? I believe genuinely we’re all designed to work. We’re all designed to give back to our communities. We think entrepreneur, and we think that only entrepreneurs can run and own businesses, but I would argue that an entrepreneur is somebody who goes out and figures out systems and processes and starts

businesses. And a lot of times you’ll see entrepreneurs starting multiple businesses. But literally, I mean, if you could consider yourself being an employee to yourself versus working for somebody else and that’s buying your freedom. I don’t think there’s ever been a better time. So when does buying a business makes sense over starting one? When the cost of acquiring the assets will cost you more on your own than buying it. It’s hard to get financing for a startup. It’s easier for an established business. It could take you years to develop the customer list that you could buy overnight. And when the overhead of that existing business could be reduced by your skillset or your team. That makes a lot of sense as well.

A lot of times existing business owners can’t see change, they resist change and you might be able to step into a business and just see really quickly, a few minor changes that you could make. A lot of businesses don’t know how to adjust and go to virtual. They think it’s not possible sometimes. You might be able to say, oh man, with just a couple of little tweaks, we could eliminate three positions. We could outsource this. A lot of business owners that have been in business for 20 or 30 years. They don’t know how to leverage part time people. Upwork and 1099 contractors and outsourcing a lot of this stuff. They feel like they have to have it all in house. And so there’s a lot of ways to decrease overhead. So when the overhead of that existing business, it could be reduced by your skillset or your team or being able to leverage other people that you’ve worked with. That’s when it makes sense.

So I’ve said this in the beginning, but real estate prices in general, haven’t come down. So maybe it makes sense to buy out an existing company, even in the real estate space that maybe owns 3000 doors. And yet they’re struggling because of debt or lack of operating capital, or you could come alongside of them because you have cash, or a skill set or whatever and pick that up for pennies on the dollar. But I still don’t think we’re seeing that a lot yet. But when it comes to businesses, so with the spike of unemployment, I think you’re going to see a lot of businesses that are going to be for sale at a discounted rate here in the near future. And some of them are not even going to be because of bankruptcy. Like I said, I think you’re going to have operators that are just tired, they’re wore out. And the nice thing about business owners, just like in real estate, a lot of these people don’t want, they literally don’t want bought out completely because of tax purposes. And you need a CCPA on all this, but they may not want bought out completely all at once. Number one, but number two, even if they’re not thinking that way, you might be able to approach them that way and get them some kind of earn out or buy out where the business basically pays them down.

And the other interesting thing, a little caveat add on here, a lot of business owners in certain arenas have acquired the real estate that they operate out of don’t neglect

that. If you’re going to sign a lease with an operator that you’re buying out their business, I would just challenge you to maybe not negotiate overly hard and go ahead and sign that lease because that’s part of their buyout, think of it that way, but then make sure that you get a first right of refusal. And so maybe you’ve got a three-year lease with them and you give them what they want, assuming that you would have to go lease it somewhere else or whatever. You give them what they want, but then you’ve got the first writer refusal. And so when you think about refinancing that business or potentially getting an SBA loan three years down the road, once you’ve taking over that business, you’ve given the owner their down payment, you’ve paid them for a while and then maybe you need to buy them out with an SBA loan or, some kind of traditional financing three years down the road. If you can get that building wrapped up at the same time, you might be able to roll that into the deal and get some special SBA financing, but there’s never been a better time in my mind when it comes to the access to capital right now, the amount of businesses that are going to be struggling. We’ve got a very clear indicator just with everything that just happened with Covid. We don’t have to wait five or 10 years to see what businesses are recession resistant.

You’ve got a really good indicator right now. And so, movie theaters are obviously something you probably don’t want to invest in right now. But that being said, just look around, see the businesses that were essential in your area. And that could be a very attractive investment for you. So let me pull this together. I don’t think there’s ever been a better time to buy your freedom. I don’t think there’s ever been a better time to buy a business. And you might say, well, Mike, the business environment is challenging. Well, that’s the whole reason why it’s never been a better time to buy businesses. I think business owners are tired. We’ve just had our rear handed to us. This came out of nowhere for all of us, really. And people are going to be struggling for cash. You may not even need to buy them out completely. If you’re one who likes partnerships and, and you don’t want to run a business and you’ve got some cash, it might be a great time to consider teaming up with a business that even, maybe you’ve known that business owner for years, maybe they’ve even provided service to you. And you know they run a great company, but they’re struggling with cash. You might be able to go in right now. And for $200,000, $300,000, you might be able to buy 20%, 30%, 50%, 60% of a business for pennies on the dollar today, just because that owner needs cash and doesn’t have access to cash.

Business owners are tired. They don’t want to go through the, heartache and headache of one-year negotiations with the big companies like what I went through. They know they’re not going to have access to certain lending other than

the PPPs and the ideals and all that stuff. And there’s so many strings attached and that’s so unclear we don’t even know what that’s going to look like. And honestly, on the other side of this, a lot of business owners don’t want to bring back some of their employees, some of them, yes, but some of them probably not. It’s a great time to streamline and run efficiency.

So I think it’s a great time to buy your freedom. I think it’s a great time to buy a business. I don’t think there’s ever been a better time. We’re going to be talking about this quite a bit, coming up here in the investing for freedom, Facebook community. So I would just encourage you to go find that on Facebook, the investing for freedom Facebook community, or if you’re interested in any of the charts and graphs or anything that I’ve mentioned, just shoot me an email. Reference, it’s time to buy a business and I’ll send you some charts and graphs. You can send that email to team@investingforfreedom.co. Have a great day out there and go buy your freedom.

If you found value in this episode and you know, someone who’s wanting to start or move further along in their journey toward investing for freedom, I would be forever grateful if you would share this show with them and helped me get this message out to more listeners. Also, if you enjoy what you’ve heard, I would appreciate it if you’d take 30 seconds and leave me a five-star review and share this with your friends and until the next episode, cheers to moving further, along in your journey of investing for freedom.

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