Welcome to The Boomer Business Owner. My guest today is Ace Chapman. Ace is an honorary Baby Boomer and a small business buyer who has purchased 15 offline business and sold 13 of them. He has bought close to 20 online properties, the first of which he bought and flipped 14 years ago at the age of 19. Each year, he mentors 24 people and helps them acquire an existing profitable business using little to no money. Hey, Ace. Welcome to the show. Glad to be on with you today. For the benefit of our listeners, maybe you could just describe in your own words, in layman s terms what you do, what s your business, what your company does. The easiest way is to start and kind of continue that story that you mentioned of me purchasing my very first business. At that point, I was interested in business. I came across the opportunity to buy a business that really needed a lot of help. It was an online stock market simulator when that was still fairly new. I could tell that the owners weren t sure about how to market it and what to do with it, and they had gone on to other products. I went ahead and bought that business, and ended up growing it from under 10,000 users to over a quarter of a million users. Really enjoyed that process. The unfortunate side of that story that I had to go through and glad I experienced now, but it was tough at that point, was that I sold to late. I ended up selling the business for 1/10 th of what I could have sold it before the internet bust back in 2000 that we all remember. Page 1 of 15
It got me really curious about that whole process of buying, and growing, and selling business. That s what I ve been doing ever since. I m sure that the majority of our listeners understand the concept of buying and selling a business. You can go to a business broker in the newspaper for crying out loud, XYZ Drycleaner, or restaurant or something like that is for sale, people kind of get that. I have to admit the whole concept of the online commerce, online buying and selling or I should say buying and selling of online businesses is a relatively new thing for me as well. I d like to just focus on that a little more because for those who are listeners who may want to do something online, but perhaps don t feel like they have what they need to start from scratch, this could be a good way for them to get in the game. Absolutely, it s just a lot easier. I ve gone the path a couple times of investing and been a part of a startup. It s really, really tough starting, especially an internet business from scratch because you have so many options. One end, the benefit of an internet business, you have all these different ways to grow the business and bring in customers. Even when it comes to the backend software, you have an endless number of options and merchant accounts; all of these things that tie together to make an online business work. One of the benefits of buying an offline business is that that person has figured all those things out. When it comes to internet business, it s even more valuable because they ve gone through the process of figuring out First of all, before we even Page 2 of 15
start to spend money on advertising: what s going to be the most optimized way for us to bring traffic? Is it going to be Google? Spending money on AdWords? Is it going to be Facebook? Is going to be spending money on social media or SEO? Literally, the list is absolutely endless. You multiply that with each area of the business. It s just immensely valuable just to have something that is proven, they know where to go to get their customers, they ve proven that it s profitable. That s a powerful thing to leverage, to not have to go through starting something and figuring out all the stuff for yourself. I get that part of it, but we re running an online business. If I went down the street and bought a local drycleaner and they had a couple people working for them and I became the new owner. I could probably walk away for a year, not do anything and nobody s going to know any different. Just so long as the people keep on taking good care of the customers, we re cool. With an online business, are there other nuances though? Can I really buy an online business today, kind of walk away for several months, not do anything and have that continue to work or do I have to know something about online business to, as you say, learn new ways to generate traffic to the site or whatever? There are different levels of businesses and there are different types. One of the things that a lot of people figure on the internet is that everything has to be complicated. Just like you mentioned, the drycleaners. You have drycleaners that are pretty simple to run type of business offline, and then you have very complex offline businesses as well. Page 3 of 15
It s the same when it comes to internet businesses. One of the more simple types of businesses We are doing a deal right now on a business, it s just an ecommerce site that does sports memorabilia and that kind of thing. It s a very simple business. The business was actually started by an older guy. Actually another story that I will kind of latch onto that is the case where we were looking at a deal that sells tile. A 70-yearold guy started the business. He had a little help from his son who was a Baby Boomer, but this guy was an older guy, started this business, figured it out and now he s looking to actually retire. He went through a first retirement and he s looking to retire and sell. Those types of business are very simple. Are there very complex business where every day you need to be at the top of your game and know what s going on? We ve got a complicated deal that is a software that sits on top of Facebook s APIs and allows somebody to do commerce on their Facebook page. Is that something that the average person who doesn t know a lot about programing and how APIs work and all that stuff needs to buy? Absolutely not. Because you are going to have to keep an eye and know what s going on in that space. For the logo business or the tile business where people are just finding it and buying a product online, very simple business, basically just a retail store that has a website. That s something the average person can take some time away from. There aren t going to be any technology changes that have huge ramifications for businesses in those kind of spaces. To give us an idea, let s say I came to you and I said: Ace, my interest right now is strong, but my needs, my financial need are modest. I d like to stick my toe in the water and I d like to look at purchasing an online business that s Page 4 of 15
going to throw off $500 a month, something along those lines. Do you engage in businesses of that level and can you give me a range of what we would pay for a business like that, that s throwing off $500 a month? I have a site that throws that off. When I bought the site, it was throwing off about $200-$300. I paid $7,000 or $8,000 for it, and it s grown and I have not done anything. I should do more with that, but I ve got a lot going on. I haven t done anything Literally have not done anything with that website, except for getting a deposit into my bank account each month. Now that site is worth $15,000 and it s just a matter of, knowing how, in those cases, to do the due diligence and making sure that the site was built well, and the SEO was done well, and that kind of thing. When it comes to buying something small that just is going to produce a monthly very passive income, those are great. There are definitely those opportunities where you can spend $10,000 to $15,000 maybe $20,000 and have something that s going to generate $500 to $1,000 a month for you. Do you ever engage with your client your client being the person who s buying the business do you ever engage with your client perhaps in a partnership or in a fee for services to help them grow the business? I say to you: Ace, I want to buy this business. You say: Charlie, it s $7,000. It s throwing off $500 a month. Do you ever do a situation whereby I say: Ace, I ll buy the business and I will give you 25% equity ownership of the business and I want you to help me with search engine optimization, or to get more traffic, or to increase what it s throwing off? Or do ever do a fee for services: Charlie, Page 5 of 15
I ll charge you $200 a month and I m going to optimize the site so that over time, it s going to go up from that $500 a month? When we do those kinds of deals, most of the time they are going to be a little bit larger deal and we will do equity and work with people on that basis. We stay away from the fee type services. There are a lot of people out there that you can just go and pay to do that kind of service. We think it s powerful to be partnered with somebody and work a little closely with them. We have people that are like: I don t want to give up equity. I d rather just go pay the fee, so we ll refer them to other people when that s the case. Now one of the neat things that does happen because of that is I ve got equity in a lot of different business and we can keep an eye on what s going on in different industries and get different perspectives from different types of businesses. One of the things that just came up is Google is doing some neat things with their ability to advertise specific products. We had one business that we re working with that s doing some really neat things in that space. We were able to go to the guy actually that s doing that logo that I just talked about. As he s going through the buying process on that deal, we re able to start to project how this new technology is going to affect that business and there is going to be some really exciting things. Actually now that I think about it, that business, the logo business is another business that was built by an older guy. One of the things that s neat with that business, just like you would expect offline, when you have businesses that are using and old technology and just not keeping up with what s going on it can be really powerful. This thing is I don t want to give away too much and say the exact technology, but it s just very built on Page 6 of 15
very, very antiquated technology. The language itself is just antiquated. But he s built a very profitable business. To update those things is going to improve the SEO. Really, the point of that is that we can really take what other businesses are doing and then apply it to your business and that becomes a very powerful thing. We know: hey, this is working. Just to make sure it s clear in my mind and our listener s minds, you provide, I think I read on your website you talked about investment banking. I could come to you. I could call you tomorrow and say: Ace, I d like to by a business. You say: Fine, Charlie, let s talk about what you want to do, how much you want to spend, any areas. You could facilitate that purchase for me. Correct? We start at the very beginning. It s a little different than just providing a business brokering service. What we do is we take a person that s just thinking about buying a business. First, we give him a business buyer s readiness test just to see if this is something that they really want to do. Then if they decide to engage us to help them, we give them personality tests, we give them a skillset test and then we look at their financial situation. We look at their lifestyle goals and their financial goals. We don t start looking for a business until we ve completed all of that and we get some feedback on the industries that are going to be the best fit on how their skills will benefit a business. That can go really deep and it can be very simple. We had a lady that was at Pricewaterhouse, was a marketing consultant. For her, we ended up coming across a deal that was out of California and it was built by developers. They had never done any marketing, but in this industry, they had built such an Page 7 of 15
amazing product that just the word of mouth had turned this into a mid six-figure business. She, of course, is able to go in and start to market that business. The technology part is already taken care of, so she doesn t need that. She can bring her marketing skills to the table to grow that business. Do you personally have a preference in dealing with ecommerce product and service selling related businesses versus information businesses? I like both. Personally, I ve done a lot of different business models. Everything from the information based type business to just AdSense sites to SAAS which is Software as a Service type business. I ve done a lot of different types of businesses. I ve spent a lot of time in that space. For the average person, I like to send them to the more simple business models just because I want them to be able to focus more on growing the business and not just making sure the technology works, and the operations, and that kind of thing. I often ask this question I was looking at my questions the other day and I m thinking: I m really not asking this as much for my listeners as I am for me because it s something, it s just the way I process information. So I m thinking to myself: Okay, I might like to buy a business, but I want to read something about it. I want to read a white paper, I want to read a report, I want to read something that says: These are 10 things that you want to know before you buy an online business. Page 8 of 15
Are there any resources you can point me to online? Maybe there s a course of how to buy a business, maybe it s something that you ve written, a blog, a website, something like that that can kind of educate me a little bit on the buying and selling of online properties. Absolutely. We have a lot of articles on our blog. People can go to www.acechapman.com and read a lot of those articles. We also do a lot of videos. We do a lot of educational videos that you can just go to YouTube and search for Ace Chapman, and learn a lot there. Then as far as book, I would go definitely recommend if you are just thinking and it s one of those things where you re debating: is buying a business right for me? I wrote a book that goes into a lot of the details about the deals that I ve done and kind of my thoughts on buying a business. It s called, The Ace Formula. You can purchase it on Amazon. Excellent. We talked about you mentoring people. I get that you have some kind of a coaching, a mentoring program. Has that changed at all? Do you do one-on-one mentoring as well as maybe group mentoring? What I do each year is I have a couple of groups. I take, at the beginning of the year and then about midway through the year, 12 people through the process. That s a little bit of what I was talking about earlier. The reason that I have to limit it is that it is one-on-one. We do some group calls where people get together. We may have a speaker come on and do a webinar, and that kind of thing. Most of the information and the delivery of the material, we give e-books and a lot of that those types things we go through the process, but each week I m on the phone for an hour. Page 9 of 15
The initial eight weeks walks through the process of creating simple things, like creating the LLC, building credit in the LLC, why it s so important to have a DMB score when you re looking at this process. A lot of it boils down to this. This is something that your listeners can really do on their own without engaging us. The real key is preparation. When someone buys a house, the average person doesn t think about the fact that they ve been preparing for that purchase since they got their very first credit card or piece of credit at 18, and their parents have been telling them: Hey, credit is important, and instilling that. You got to have your finances in order. Make sure your expenses are less than your income. Just of all of these little things. One day you show up and you put an application in at the bank to get approved for a mortgage and you get approved. We don t think about it from a business perspective that very little preparation is done to get our business ready to take over the assets and the income and all of that of another business. We want to just do that preparation, whether it s giving the finances, looking at your personal financial statement and all that stuff. When it comes to even credit, sometimes things, we just had a deal that closed where the address for a guy was different on each credit report. Even just checking out the very simple things. When I speaking to an SBA underwriter, and she was talking about the fact that most They don t deny things because of financial reasons as much as they do small compliance issues. These things can be very small things to us, but most the issues she was saying, most of the applications we get, we don t even make it to look at the financials because we look at the LLC and Page 10 of 15
there s some kind of compliance issue. It s starting with that, getting the deal flow, going through a due diligence system. One of the other things that I ll mention lastly is that when it comes to preparation, literally people prepare more to go to the grocery store than they do to look for a business. The first thing they do is go search businesses for sale and just start looking at things and try of trust their gut. People don t even trust their gut when it comes to walking into a grocery to make the right decisions. We go through a pretty extensive process just to come up with your grocery list of things that you re looking for when you re looking to buy a business so you don t end up making the wrong decisions. Like so many of us do, we go to the grocery store without a list, especially on an empty stomach. Yep, yep. I ve heard it said before that people spend more time planning their annual weeks vacation than they do planning their life. Yeah. Ace, we could have a whole other podcast episode, I m sure, with you telling us dozens, if not hundreds of stories of all the things that you have come in contact with with your businesses and your dealings throughout your career. Can you just tell us two quick stories? One, something that really resonated with you, some really good thing that happened to you over the last number of years, and one that really kind of almost made you laugh or just wasn t a great decision, if you will, in retrospect. Page 11 of 15
There s nothing like having that perfect deal happen. I had a lady up in South Dakota. When she came to us, a lot of business brokers she had talked to just wouldn t really give her the time of time. She had gotten a little bit of money from an insurance type thing. Basically they just told her: Max you can buy is a $50,000 business. There s just no way you can really get anything of substance. She really wanted to leave work and spend time with her kids, and that kind of thing. She came across us. We started working together. Like I mentioned, one of the things that we do is we look at your interests, and your hobbies, and things like that. When my people look and go searching for deals, they have that tickler that: Hey, this is something that may be of interest to this client. This was a client that was deeply religious when it came to And she was Catholic. We were looking at deals in kind of the $100,000 to $150,000 range and we came across this deal that was a $400,000 deal, but because it was in the Catholic space, basically sold rosary beads, and that kind of thing we wanted to at least go down the path and see if there may be something to figure out. We worked through the deal. We figured out ways to get access to a lot of capital, but we still had a certain amount that wasn t there. She was able, because she was so deep in her community when it came to their church, to talk to friends and family and raise that money to get that deal done. It was just exciting for a lot of different reasons. Number one, having another broker tell her that basically she s just too small to deal with and she can t buy a business. I love when I can just show people I ve had brokers that tell me We just put up another video yesterday of a guy that bought, Page 12 of 15
actually this was an internet business with no money down. I have brokers. I won t say a specific person, but I just had an email right before that where broker said: Oh, what you re telling people is wrong, and dah, dah, dah, dah, dah. It s like: But we re doing it. He said: It s not possible for you to do a deal like that. It s not a debate, I ve got the facts; we re doing it. To be able to help somebody that a broker has pooh-poohed and told that it s not going to be possible was a very, very big deal for us and for her because I think she had given up hope until we spoke. Secondly, to have a mom that s able to spend time with her kids, that s just absolutely invaluable. Lastly, to not just get a deal done in our target of $150,000, but to really change just their whole life. She was earning a normal salary, 40,000, 50,000 a year. For them to have this business that was worth $400,000 really just changes their future. Those are the exciting things and the things that just warm my heart, and make me just feel fortunate and blessed to be able to wake up every day and do what I get to do. Got it, got it. To kind of wrap things up, Ace. If you woke up tomorrow morning and the preverbal slate was wiped clean and you had, say, a $1,000 in your savings account and you needed to do something to start generating some income in the next 30 days I don t care if it s $100 or something like that what would you do? One of the things that a lot of people take for granted is as an entrepreneur, it can be a very lonely process. As an entrepreneur, you re growing your business. After a while, your wife doesn t really want to hear or talk about the business and Page 13 of 15
work through things with you. You go hang out with your buddies at the sports bar, you re kind of going over your head and trying to make decisions, but they want to talk about the game; they don t want to hear and talk about your business. One of the things that I started to do years ago was to become kind of a side consultant for small businesses. Small business owners are willing to pay for people that are genuinely interested and passionate about their business. If I had the slate wiped clean, what I would really spend time doing is starting a network with business owners, especially if my goal was eventually to buy a business. Negotiate a small token amount of money, like you mentioned, $100. But more importantly, get some equity in that business in exchange for helping them grow the business. When you own a business, you re time is tied up in operations; it s tied up in managing employees, figuring out who s calling out sick and all these things, managing inventory, the very simple things. To have somebody who s in the business spending a little bit of time kind of getting familiar with the business, then they re also spending time just thinking about: How can I help grow this business? What are some opportunities out there that aren t being taken advantage of? That s a very powerful thing for the business owner. It s also a powerful exercise for the up and coming, or the person that wants to own a business and is serving as a consultant. It ends up being a win-win with a financial benefit at the end of it all. Got it. Ace, what s the best way for our listeners to connect with you? Page 14 of 15
I m on Twitter, @AceChapman. If you go to www.acechapman.com, we ve got our phone number and contact information there. Anybody can feel free to email me at ace@acechapman.com. Excellent. All the fantastic resources mentioned in today s episode will be available on the show notes page at www.theboomerbusinessowner.com. Ace, thanks so much for all of your help; we really, really appreciate it. Thank you. Pleasure being on. Page 15 of 15