Ep 279: Growth by Acquisition & Merging Offline Businesses with Online Businesses with Ace Chapman

Joining in this special episode is none other than Ace Chapman! Ace is one of the pioneers in buying online businesses and has been a major player in the mergers and acquisitions (M&A) industry for over 20 years.

Ace’s story is truly inspiring. He started buying online businesses over two decades ago, back when it was a brand-new concept. Since then, he’s owned 40 businesses, both online and offline. Now, he focuses on creating microprivate equity firms and helps people with strategic acquisitions, mergers, and divestitures within holding companies.

In this episode, Ace and Jaryd will go down memory lane to when they first met and began working together. They’ll share stories about our early days, some of the deals they’ve worked on, and how our partnership has grown over the years.

Ace will also share his insights on growing a business through acquisition. He’ll explain that scaling isn’t just about buying one business—it’s about buying all the businesses that help your main business run smoothly, from operations to marketing. They’ll discuss how merging online and offline businesses can create powerful growth opportunities.

They’ll also talk about important things like how to price acquisitions, understanding multiples, deal structures, and doing proper due diligence. Plus, Ace will explain how you can scale your business by buying the companies that you rely on as clients.

Get ready for an engaging conversation packed with advice and insider tips from one of the leaders in online business acquisitions.

So, let’s jump in and explore the exciting world of growth by acquisition with Ace Chapman!

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Episode Highlights

06:00 Ace’s transition from buying businesses to private equity

11:00 Know what kind of lifestyle you want before acquiring a business

25:00 How Ace manage online and offline businesses?

32:30 Has the deal structure in buying businesses changed?

42:00 Never stop learning!

Courses & Training

Courses & Training

Key Takeaways

Managing larger funds can be complex and demanding. Ace learned that while smaller funds were profitable, larger funds presented significant management challenges and reduced financial returns.

Handling distressed assets is not suitable for everyone; it requires specific skills and a high tolerance for risk and complexity. Both Ace and Jaryd prefer to avoid distressed assets, focusing instead on stable, synergistic acquisitions that align with their lifestyle goals.

➥ Being creative with deal structures can lead to better outcomes. Traditional methods taught in business schools can be limiting. Innovative approaches, such as consulting for equity or leveraging soft assets, can unlock hidden value and create win-win situations for both buyers and sellers.

About The Guest

Ace Chapman is one of the guys who first started buying  online businesses and has been in the M&A industry for over 20 years, Ace previously owned 40 businesses himself and moved into creating microprivate equity firms and consulting on strategic acquisitions, mergers and divestitures within holding companies.

Connect with Ace Chapman

Transcription:

Jaryd Krause:

The way to scale your business isn't about buying one business initially. It's about buying all the businesses that your primary business uses for operations, marketing growth, and all those sorts of things.

Hi, I’m Jaryd Krause. I'm the host of the Buying Online Businesses Podcast. And today, I'm speaking with a good friend of mine, Ace Chapman, who is one of the guys who first got into buying online businesses more than 20 years ago.

He's been in the M&A industry for over 20 years. And Ace previously owned 40 businesses himself, some online and some offline, and has moved into creating microprivate equity firms for people and thus consulting on strategic acquisitions, mergers, and divestitures within holding companies.

Now, in this podcast episode, Ace and I go way back to when we first started working together, how I met Ace, how we started working together, and one of the acquisitions that I made with Ace.

We also talk about how I've grown a little bit and then mostly about how Ace has grown and what he's been doing in the space of M&A (mergers and acquisitions), how he started his microprivate equity firms and helping people build, scale and grow them.

And then why and how he moved into building holding companies for people and companies, and what growth by acquisition actually is, what it looks like, how we can merge the world of online assets with offline businesses as well, and how we can help offline businesses grow and online businesses grow by merging these together.

We also discuss acquisitions, prices, multiples, deal structure, and due diligence. We talk about how to scale by acquiring the people that you use as clients.

There's so much value in this podcast episode. We do talk a lot about buying businesses. So if you haven't got my Due Diligence Framework, make sure you go away and get that at buyingonlinebusinesses.com.

It's what I use and what my clients use. It's what's helped me save millions of dollars and make millions of dollars for my clients as well. So go away and check that out. But now, let's dive into the pod with Ace.

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Ace Chapman is back on the pod. Mate, it has been so long. We're up to Episode 280 or something around that. Yeah. And you're one of the first guests around Episode 37.

But you and I have been chatting in the background a little bit between those, and we still haven't really connected in years. So I'm actually really thrilled.

Ace Chapman:

It's been a long time. Yeah, it's been a long time. I've been able to watch from afar and just see you blow up, which has been beautiful.

But yeah, I mean, I remember when you were kind of starting this whole thing, which was really cool. And yeah, man, but I did not think it was 300 episodes ago. That is crazy.

Jaryd Krause:

Crazy, crazy. So I first connected with you when you were helping me with a deal in 2016 to buy an e-commerce business.

Ace Chapman:

And that was a cool little business, man.

Jaryd Krause:

It was. It was. It was selling hanging egg chairs. I bought that, did really well, and then sold it. I didn't know COVID was coming, but I sold it just before COVID in February.

Ace Chapman:

Oh, see, I didn't know that part. That's unreal. That's awesome.

Jaryd Krause:

Yeah, it was really good. And then, yeah, as you saw, I started helping people and then this sort of flourished. But yeah, not to talk about me; I want to talk about you.

Ace Chapman:

Well, but I do think that that is an important thing because I think that's been a lot of the shift. Back then, in 2017, even when we started working together, nobody was really talking about this stuff. So it's really cool to see that transition.

But I think that what we're seeing now is a much different marketplace atmosphere, and I think that it presents just another set of opportunities.

But yeah, I think about back to 2016 and when we're working together, the strategies that we're using back then, and I think you were a plumber, right? And you're about to do your first deal.

And I think there are a lot of people now who are getting it and who are in the same situation. They want to get into their first deal, and it's a lot more, I think, treacherous—would be the word—than that it was back then. So, yeah, I'm excited to speak.

Jaryd Krause:

Yeah, man. Cool. Well, so just speaking about your journey, I know a little bit about your journey up until we started working together and then watching a little bit from afar what you've done. But the audience doesn't know, and it's super fascinating how you've grown through your journey into what you're doing now.

So, initially, you bought a bunch of businesses—online businesses, right? You had 40 online businesses at one stage, and you were helping people with this with some acquisitions. And then you moved into private equity—microprivate equity, right?

Ace Chapman:

Yeah. So around that time, I was making a transition from owning deals personally into managing a fund. And basically, the interesting thing there was that I had a guy who would invest in deals.

So, obviously, I'm a kid, grew up in Chattanooga, Tennessee, in an inner-city type environment, and didn't come from any money. So everything was very bootstrapped.

But to get to those 40 businesses, I would have investors and that kind of thing. And so one of my investors, who was just this amazing Jewish guy down in Miami, was like, “I'm investing in these deals, but if you could just do a fund and raise some capital and do all of this as one instead of these one-off deals.”

And he was kind of giving me the dynamics around the income that I could generate as a fund manager. And so that was not something I was interested in, to be quite frank.

When he first told me about it, I was like, “Listen, man, I got a good thing going here. Basically, all of my money, I just keep, and I don't have to give it to other people.

It's like you're basically saying, ‘Hey, take all your money and split it with everybody, or just keep your money.’” It sounds like I'll just keep my money.

But we decided to do one fund to test it out. And so we did this $2 million fund and ended up with a 300% return, which even blew my mind. It did work out financially, which was a good thing for me.

And so then I was like, “Okay, great, let's do another one of those. Let's do a $5 million fund.” And so in that Miami community, it had gotten out about the first fund. And we were like, “Oh, we'll take the next three months and raise capital.” It might have been three days that we hit the $5 million.

And so the guy comes back, and he’s like, “Hey, I got some other people. We want to get them in. Let's raise it up to $7 million.” Obviously, we have the time to hit the $7 million. Long story short, we ended up going up to $12 million.

And I'm like, “Hey, the only fund I've done before is $2 million; I'm not really interested in doing a really huge fund yet.” But the plan was eventually we could do a huge fund, but like, “Let's just close this one at the 12.”

And long story short, the economics in that just weren't as good. And so there's a lot of complexity, and for your audience, some of them who may think about a fund should understand. But I'll keep it quick for the others who will find this super boring.

Basically, you've got this hurdle rate that you've got to get the investors back. So let's say that's 5% or 6%. If you're a newer fund, maybe it's 8%, but I had to kind of prove myself. So you're in the lower range.

And that was back then. Right now, you're going to get 5%. I'm making 5% just on my money in the bank, which is nuts. So you're not getting that hurdle rate anymore.

But on a $12 million fund, that means that I've got to make $600,000 before I start to make a dollar, right? And so you combine that with just some of the other economics, and even just in this micro private equity world, managing enough businesses to invest $12 million.

Because you're not buying the business cash, right? The reason we got a 300% return is because I was using a lot of the strategies that we even talked about back in 2017 to put the deals together.

So we're talking $12 million can get a ton of deals, especially if some of the deals happen to be no money down, just all those types of things. And so then you get into the management issues of all of those deals.

And so while the $2 million was this really cool opportunity, it actually turned out that a $12 million fund was a huge disadvantage, even if it's just, “Hey, I could make the $600 grand and just keep all of it very easily just on a couple of deals.”

And so that was what I realized. We ended up investing $7 million. We returned the rest of the $5 million because I'm in it learning, realizing these economics as I'm in it, like, “Wait a minute.” and realizing the amount of work, which I couldn't really project. I kind of project the money but I also project the amount of work.

And man, it is really, really easy to make money as an individual deal maker. And I think it's what we do now. And kind of after that is creating just holding companies.

And so that's been something that's been really cool to just take advantage of strategic advantages between different businesses and that kind of thing.

Jaryd Krause:

Yeah, cool. Congrats. I worked with you in 2016 and then in 2017. You were starting to get into this. And I think it was a couple of years later when I had people come to me and say, “Jaryd, I got X amount of money; let's just buy a bunch of businesses with it and do a fund.”

And I was very close to it, Ace. I was very close to going down that route, but I wasn’t up to it yet. But I was lucky enough; I was working with a mentor at the time who was like, “Jaryd, that's a lot of work.”

And for me, I can operate a business. I've grown a business and I've got those skills, but is it something that lights me up and something that I really want to do? Not particularly. I'd rather hire people to do that, but then you've still got to manage the people that you've hired and all those sorts of things.

Ace Chapman:

Dude, yeah, it's crazy. I can tell you. Even with the $7 million that we invested just because of the way we structured the deals, I mean, there was a point that I had about 45 employees, some overseas and quite a few in the US.

And the managers of those businesses and going back and forth with them, it's like, “Wait a minute, I'm supposed to be living a good life, not dealing with this madness.”

Jaryd Krause:

There is one other guy that does it in the online business space named Dom Wells and he comes from a really good management background. You know Dom. And yeah, he just seems to be one of those people who is a very good operator and can do it if people are interested.

Ace Chapman:

And he wants that life. I think if you want that life, you can be a good operator. I think some things are tough to become. It's tough to become a really good CFO. And I think there's also art to marketing and being a really good CMO.

I think when it comes to being both CEO and COO, a lot of it is very mechanical, and someone just has the talent. And having the CMO and having the CFO, just putting those people in place and management and those kinds of things. And basically, those things can be learned.

And one of the things that I admire about Dominic, because we need those people, is that he wants that business. I never really dreamed of being the CEO of some big corporation. Everything for me has been like, “Okay, how can I create business so that it’s this very side part of my life?” I want to be able to live the life that I want to live.

And I think that's the kind of people, even like you, that I've attracted and that I've worked with. It's not like, “Hey, let's build this big corporation. I want to build the biggest corporation.”

I mean, I love that we have people like Steve Jobs. Do I want his life for the money that he has? There's no amount of money that's worth that life for me.

Jaryd Krause:

Not at all. I'm with you in that. I think I was talking to a friend the other day around this. And it's great that people have aspirations because they make our lives better.

I'm using an Apple MacBook Pro and an iPhone, and it's made my life so much better. But I'd rather work 15 to 20 hours or 10 to 15 hours a week, and maybe I'm not a billionaire and I'm happy with not being one. I don't want the billionaire lifestyle.

Ace Chapman:

No, I'm not interested at all.

Jaryd Krause:

Yeah. So you learned so many lessons from micro PE. And then, with these micro PE firms that you started, were you only acquiring online businesses or was it a bit of a mixture of both?

Ace Chapman:

Yeah. So, actually, I was going to correct you at that point. So even when I was doing internet business before, at one point, I had 40 businesses. Some of those were offline and some of them were on the internet. So it was a mixture back then and we had some really amazing offline businesses.

My very first business was an internet-based stock market simulator. Great business. Loved it. But as I went on, I found these offline deals. So I did that.

Once I was doing the micro PE, I did understand that much. Having owned the offline deals, we do not want 20 of those in a fund, at least for me. Again, going back to the lifestyle, I at least knew enough about that. Because there are people that do that in the sub $10 million space or sub $10 million deals.

I think that's one of the cool things. It did allow me to close bigger deals. So in one of the funds, the largest deal that we did was a $12 million deal, and the whole fund was $12 million.

And so I think that's one of the things that people forget. We basically had a process. We can basically buy about $50 million worth of deals with this fund. But once we were doing that, it was all online and it was online at an amazing time. As you know, the times were so different.

We did a $6 million deal out of Athens that was just an amazing software business that I think we put down $1 million and a portion of it was earn-out. It was just all these other things. It was all basically seller financed with different tranches of different types of financing. But bottom line, it wouldn't happen today.

Jaryd Krause:

Yeah. I mean, if you're getting those sorts of deals today, those—if you put them in, call them assets—are more distressed. I've chatted with a couple of people. Marc Roca bought a $5 million revenue business for $1, but it's a distressed asset.

And he's a different operator. It’s actually quite new as of this year. And they basically acquired a bunch of debt and he's just been trying to get rid of that debt, and that's inventory debt. So it was a bunch of e-commerce businesses. He's an e-comm aggregator, mostly an Amazon aggregator.

And yeah, he wanted to say no to the deal multiple times, and they just want to get rid of it. And he thought, “Ah, if I just make a ridiculous offer that's so good for me I can't refuse, then I'll just do it even if I incur loss.” So he wanted to go and do it.

He's done a lot of distressed assets and that's his wheelhouse. For you and me, that might not be our thing. Definitely not mine.

Ace Chapman:

No. I can tell you, for me, it's 100% guaranteed not to be my thing. Again, they probably could have paid me a million dollars; I would've said no.

Just the headache of taking over distressed assets. Maybe in my 20s, I would've done something like that. And I'm glad that I got that experience, and part of that experience told me, “Oh, I never want to do this again.”

Jaryd Krause:

And so, learning from that experience, Ace, dealing with a fund and a lot of businesses and a lot of management and people, obviously, it sounds like you learned a bunch about what comes with that workload, but how did that transition you into something else? And what did you transition into?

Ace Chapman:

So, yeah, those realizations were what made me realize, “Oh, okay, this vision of what I had as far as being a fund manager and that kind of thing is profitable.”

And that was the thing. It wasn't like it was this unprofitable thing. People weren't happy that I gave them their $5 million back. They're like, “Wait a minute, based on your other fund, that could have been $15 million instead of $5 million.” So it wasn't like they were like, “Okay, thank goodness, let me get this.”

So what I realized was that—even more as I've gotten older—life and lifestyle are important. And so whatever business I do has to be built around the life that I want to live.

And the government is printing out trillions of these things that people are sacrificing their lives for and literally just throwing them all over the world. They literally just printed it and burned it up. It would have the same impact on my life. They're borrowing trillions, which is outrageous.

For me to trade portions of my life for even $1 million is completely outrageous when we have this infinitely valuable thing that is literally a miracle called life and we get to live it.

And to get out of that machine of working and trying to trade time for it, it’s a nightmare. And so my goal was all right. I want to do deals that are almost guaranteed.

And so what does that look like to do the most guaranteed level deal? And what that turned out to be was building a kind of holding company. And the reason that it was the most guaranteed deal is that we got to see this in the fund. The fund was still a realization of this.

One of the reasons that we could do a fund and generate such high returns is that I realized, “Hey, I'm not in this to take a risk.” We're not out here like, “Hey, I'm going to put some money in this stock, and I just hope it goes up.” It's like, “No. We're going to guarantee that there is success.”

And so one of the ways to do that is to make sure that the company that you buy is a customer of the other companies. So I knew if we're going to go out and buy companies with these funds, then they're all going to need marketing. So we might as well buy a marketing SEO agency first, because every business that we buy is going to need that service.

Not only that, once we go out and find those companies, we want to look for the companies that are not spending the most on marketing but are spending the most on what they're paying their agency to run their marketing, right? So that becomes part of the criteria to make sure that we're generating these returns.

Secondly, what are the other things in the expense column? Things like bookkeeping. Oh, great. We know every one of these things needs bookkeeping. So, secondarily, let's build that as the foundation of this.

And so now, with every deal we do, we're literally filtering them on, “Oh, y'all are paying a ton of money on bookkeeping.”. And then it's really cool too, because it's free money. It's a free ROI because you're not even paying for that expense, right?

So I might look at a business that's spending outrageous money on bookkeeping or marketing. And we look at that and it's only generating $100,000.

So it's going to sell it at three multiples of $300,000, but they've got $60,000 in this other expense. And so, for us, getting that at a 30% or 40% discount of the reality of that.

And so what I ended up doing after the funds was creating these holding companies. So now we've got a lot of holding companies. We help other people create holding companies where I invest in their holding company.

And we structure it the same way as that fund, where we're looking for these strategic things, which I feel like strategic really undervalues the kind of upside there. It's almost like a forced return.

And then, on the back end, you've got a forced higher valuation of that total portfolio. So then we end up packaging those companies and then selling them to people who do have those microfinances.

And so I'm hesitant to even come on a show like yours and say, “Hey, don't create a fund. Here's the downside.” Because most of our deals sell to those small funds.

Jaryd Krause:

I get it. Yeah. Okay. That makes total sense.

Ace Chapman:

So everybody should go out and create a fund.

Jaryd Krause:

Yeah, that's right. Guys, create a fund. Let's buy them. Let's buy them.

Ace Chapman:

Come to me. I got your deals. I got your deals.

Jaryd Krause:

Yeah, we have the money.

Ace Chapman:

I can stop, ready to go. We can help you hit your ROI. Investors are going to love you.

Jaryd Krause:

Yeah. And that's the way business should be—helping people do something that's great for them. And when they want an exit, we are over here; we've got the funds; let's give you what you deserve for the work that you've done. And everybody wins. It's the way to go.

So this is what we would call strategic acquisitions, a holding company doing strategic acquisitions or M&A (mergers and acquisitions), where, basically, I like to think of it as like renting a car or maybe a house, where if you are in Bali, most people come over and they rent a bike and they rent monthly.

I'm out here, and I'm like, “Why am I going to rent this bike when I can just go buy one? And I don't need to pay that expense every single month.” And it's nothing. It's only a couple hundred bucks or whatever. But it's that mindset in your business that can relate to, like you said, bookkeeping and marketing.

And so with these holding companies, what portion are offline and what portion are online businesses and how do you make that sort of mixture work?

Ace Chapman:

It's really mixed, man. And so one of the things that we're doing is doing a lot of offline deals and then turning them remote, which has been really great.

Yeah. I'm doing a lot of deals in the therapy industry. In the US, everybody is talking about mental health. It is just this explosive industry. And so we're doing a lot of deals in these businesses. And we're probably somebody who's kind of well-known and respected in the space.

And we basically convert them into being not necessarily remote, so they'll have a physical location. But there are certain businesses—gyms are another one—where, if you are leveraging the right technology, you can run it like an internet business.

And I think those are some of the best opportunities. Just not necessarily multiples get crazy on some of the internet deals. But what we've seen is that the terms get tougher than back in the day.

And one of the things is that I love the internet. We're closing plenty of internet deals and I love doing those deals. I think the real protection when you're doing these deals is the terms that you put together.

Historically, just historically, if it wasn't outside of SBA, on average, back in the day when I first got started, the average was 70% of the deal was financed by the seller. And the reason that wasn't so important was that it wasn't about the ROI for the seller, right?

It's not about the ROI for the seller. It was about a due diligence check. You know what I mean? Are you really selling me something that is real? And the best way to know that, like you do all the due diligence in the world, the best due diligence is a deal structure.

And now it's kind of converted, at least on the internet; it's converted to 70% upfront to the seller. It's just because there has been this big rush and there has been this big demand to live remotely and be able to buy a business.

And unfortunately, because everybody's fighting for those deals, it puts all the advantage into the hands of the seller, even to the point where they feel like, “I'm getting a bad deal if I'm not getting 70% up front.”

And so there's just like, “Hey, I just won't sell because I know that all these other people got 70% funds.” It's like, “Well, yeah, your deal kind of sucks in comparison,” but, hey, that becomes the standard.

But what a lot of buyers don't understand is that it's just not how buying and selling a business works because of the nature of the asset, which has a lot of control and a lot of insider knowledge.

I mean, basically, there's a lot of things I can go into, but just to keep it high level for your folks, the reason that's so important is that it's almost like somebody saying, “Hey, I'm literally telling you I'm an insider trader. I know all the information as an insider,” and that's the reason that the SEC regulates those insider traders.

And so you're basically going to that person saying, “Hey, I'm at a total disadvantage. I can get the general information, but I'm never going to be the insider.” You’re literally the CEO. So you have a huge advantage over me, and that's why the SEC regulates them and how they can trade.

But if you come in and you're like, “Hey, I don't know anything,” but the person's like, “Okay, I understand that, that makes sense.” “I'm going to take 70% of the risk that this is really the way it's supposed to be, and you figure out the other 30%.”. We can work on that.

If it's the other and they're like, “Hey, no, I want all my money up front,” then hey, it just isn't fair—you know what I mean—in this particular market.

Jaryd Krause:

Yeah. Sellers and buyers really need to be fair with each other's risks and what is coming into the deal to make it happen. Because then you get into these crazy seller markets.

Even when we're not talking about $1 million or eight-figure acquisitions, even around $100,000 on some of the brokers, they've been selling in seconds because the sellers just know that they can go get something they can sell without finance or a huge cash offer.

Ace Chapman:

And I don't blame them.

Jaryd Krause:

I don’t blame them, yes.

Ace Chapman:

Yeah. And so you go back to my first deal, which was not only one multiple and 3% down, and we’ve just come a long way, some of which is warranted, and it's all warranted based on supply and demand.

Demand is there. If you have enough dumb buyers that are buying really horrible deals and paying all cash for them, it puts the good buyers that know what they're doing at a disadvantage.

They know, “Hey, okay, this is a really great deal. Everything checks out in due diligence. But the final piece of my due diligence is this deal structure. But because there's so many dumb buyers out there that I have as a comparable, “I am at a disadvantage.”

So that has been a really cool thing with these remotely run businesses, where we put them on hold and there may be some internet deals. But when we do those, it's because we've got something that instantly is going to grow in that holding company.

But where we've seen the real value is being able to buy a business, partner with somebody or even partner with the seller of that business in some cases.

We are basically telling the owner of the therapy center, “Hey, if you work with us, we'll work with you; we'll make an investment and then we'll buy it. But you've got to do this work in order to make this a remote business.”

And then it becomes kind of in-between. It becomes this hybrid, where it has the really good things of the internet and what's still good about the offline, which is legitimacy, a really good deal structure, and an easier SBA. SBA just likes an offline business that really has a location. It just likes those better.

Jaryd Krause:

Yeah. Justin and I were talking about that. He was thinking that online businesses like lending would've gotten a bit easier by now for online businesses.

But let's be honest, they move pretty fast, and they don't have tangible physical things. And all those things are assets. We call them assets, but sometimes they're actual liabilities, like stock and all that sort of stuff that the bank can call back and get some money from.

But yeah, it's interesting. It's going to be very interesting when lending does start to become a thing for online businesses and what's going to happen with supply and demand in that space. It's going to be very, very interesting.

But yeah, like you said, the deal structure for an offline or physical business doesn't seem like it's changed in a long time for how long people have been acquiring and selling physical businesses.

I wanted to ask about the holding companies in terms of investors. How many investors do you have in a holding company? Is it one person, one company, and then you're just acquiring companies for them? Or how does that work?

Ace Chapman:

Yeah. So it does end up being really interesting. It's complicated, right? So right now, we've got about 50 people that are going through this process of building a holding company.

And so what ends up happening is that we will be investors in the holding company. And sometimes I'm an investor. I like to invest in these based on the deals that they're going to do.

The reason is that there are just so many different things that end up happening. So one example was that we had a guy who came in; he's a CPA. His name is Ephraim, and he has an awesome firm in Houston. I went to visit Justin in Houston when I went to see this member.

And so we closed this deal; We're talking. And so one of the things is that we have a lot of people that actually joined that are in a current business. And so they're looking to grow their business through acquisition. So Ephraim was one of those folks.

And so we go through this whole process where we do what I call a soft balance sheet. So it's not any of your hard assets or hard liabilities. It's connections, leads, and databases.

So we realized he's got all these people that have reached out to him, and they've wanted bookkeeping. So I'm like, “So what are you doing with these people?”

And he's like, “Nothing. We want to do high level CPA work and tax advisory for wealthy clients. We do not want to deal with these bookkeeping people.”

Again, based on that previous experience with the fund where it's like, “Oh, wow, this bookkeeping deal was one of our most profitable deals. Because every deal we bought was a new client and we could target people that were spending a bunch of money. And we sold that business and got a really great model.

I was like, “Dude, here's what we should do in your holding company. The first thing is going to be a manufacturer of bookkeeping businesses.” And so we created a bookkeeping business. We built that up.

Over the course of owning it, maybe eight months, he generated $15,000 a month. And not all of the eight months, but maybe four or five months in, he was at $15,000. And then we sold that business for $200,000. So, in total, he made about $300,000 off of that thing.

Now this is an asset that he already had that was just a soft asset that he wasn't monetizing, and that started to build his holding company. So now he's just going back. And so we kind of look for things like that.

Another quick example is that we had a guy who was a young black dude that didn't have credit, just got out of college and kind of spent his last little bit of money working with me.

And so he's like, “Okay, I want to raise capital,” which I really wasn't a fan of. I think you can always do a deal without money. “Let's just go do a deal. Even if it’s consulting for equity or just whatever the case is, let's go do a deal.”

But he really was like, “No, I really just want to get in that mode of being able to raise capital.” And so I call it acquisition holding companies, but it is more of a philosophy, and part of the philosophy is that everything that you're doing, you should make money from. No matter what you're doing,.

If you're going to exert activity, you're going to exert energy and do an activity, and it usually just takes a little bit more creativity to be able to make money from it.

And so it was like, “All right. Instead of you going out and trying to reach out to these investors and having lunch and getting coffee with them and doing all these different things, let's buy a business that works with your target audience.”

And so we had a whole target of these folks—a bunch of different folks that were going after. And we ended up snagging a deal. And so the deal was with this organization out of New York's association of fund managers. So they basically manage money.

And so he does a deal; we get into that; he gets 49%, so he doesn't get the whole thing, but it's no money down in order to go in and kind of revamp.

So the owner was a fund manager and was busy managing. As we just talked about, the management fund takes a bunch of work, but they had a couple thousand people that used to do events. So he ended up doing these events, and this thing is like, “Hey, I'll start that...” He gets 49% of the equity and starts to do that.

Now, all of a sudden, literally, he's getting paid to be the center of attention at the event where people who, I say, he would have had to pay or buy lunch and definitely outbid money, but he just literally wouldn't have been able to get in front of these people.

And they're paying him and he’s meeting these people, and he ends up with some other future things. He does so well that the owner of the business comes back and says, “Hey, I want to buy that 49% back.”

He calls me like, “Oh, the guy wants to buy it back. This is bad news.” I'm like, “Dude, it's not bad news, man. You got all the contacts. Just let them know yesterday's price is not today's price and we're all good.”

So it's complicated, but I didn't want to just say it's complicated and not answer. Those are some examples of what that looks like when it's not the typical way of saying, “Hey, I'm going to go out and get capital.”

Jaryd Krause:

One thing that I learned from you is to be very creative with how you put a deal together. And that's what makes it complicated. Because there's so many variations and ways that you can put a deal together that can make it work for the buyer and the seller.

And Stanford studies and all these different MBA sort of associations and stuff that have standard processes or standard deal structures.

But you come from the school of hard knocks. I was a plumber. We can just scrape things together and make it work and we can actually get better deals without having to do sort of the standard stuff that we learned from college or university. Would you agree with that?

Ace Chapman:

Absolutely, man. Absolutely. I think if somebody were to come to the two of us and we're together and we're helping them think about the deal, the three of us talking about that creates realities that that person on their own would never have been able to come to.

So part of it is the experience. You've been working with clients, looking at their deals and walking through them. I've obviously been doing that for a long time.

And then, even if that person comes from a little bit of naivety, I think that sometimes the naive question can lead to something beautiful. I've seen this over and over as I work with clients.

I'll give you an example of a naive question. I had a client come to me, and he's like, “Hey, I want to do something in the education space.” I'm like, “Oh, there's a lot of online education businesses.” He is like, “Yeah, that would be interesting,” and that kind of thing.

I could tell he just wasn't really excited. I'm like, “Well, like, what do you want to do?” Most people come in and they're excited to talk to me about the deals they want to do. He's like, “Well, probably what I want to do just can't be done.”

And I'm like, “Well, what do you want to do?” He is like, “I want to buy a university. You've never bought a university, have you?” I was like, “I haven't, but it doesn't mean that it can't be done.”

And sure enough, my man, Quincy, down in Florida, and I closed our first university earlier this year, in January. So sometimes just naive questions like, “Hey, I get excited about something that seems completely outrageous.”

Jaryd Krause:

I love it. I love it, Ace. It's funny. And this is what people do really, really well in life and business. They don't just hold themselves higher than every single other person that they work with or have in their life.

We get to learn from everybody in all walks of life and help each other all the way along the way. Yeah, they're the people that do well.

Ace Chapman:

The dumbest people are the ones that stop learning from everybody else, man. I never want to be that person. Because I wish I would've had somebody tell me, “Hey, here are the things to consider on this fun thing so that you don't have to spend this time.”

Remember when we just talked about it? Time is our most valuable asset. I'm trying to get to the very best answer, and I want to get as much information as I can from other people who've already done it.

And now there are a bunch of people that have started funds, but this was 2016. You know what I mean? It was way early in the process. So it just wasn't these microfinances and people doing it.

But I could have sat down with somebody and just asked those questions. Because if you don't get the people around you, if you don't pay Jaryd and get his help, you're going to make a mistake that he probably could have helped you avoid, and that's probably going to cost you more money.

Jaryd Krause:

Yeah, exactly. And that's where the ROI comes from investing in having people help you do things. So yeah, Ace, you mentioned time, and it is our most valuable asset. We can always earn more money, but we can't earn more time.

And speaking of time, I really appreciate you coming on and spending time with us. Where can we send people to find out more?

Ace Chapman:

My god, it's a joy.

Jaryd Krause:

Yeah, likewise. I'm lit up from the conversation, honestly. Yeah. Where can we send people to chat with you if they want to reach out?

Ace Chapman:

Instagram's great, @ace.chapman. I do have a YouTube channel. You can just search for Ace Chapman. And if you have a question about a deal or anything, feel free to shoot me an email at [email protected].

Jaryd Krause:

Love it. Guys, everybody who's listening, thank you so much for listening. Please share this podcast episode with somebody who's looking at acquiring an online business or maybe an offline business. I'm sure it's going to be very valuable for them. And Ace, again, really appreciates you.

Ace Chapman:

Awesome. Thank you, sir.

Jaryd Krause:

Hey, YouTube watcher, if you thought that video is good, you should check out this video here on 2 Best Types of Websites Beginners Should Buy. Or check out my playlist on How I Made My First $100k Buying Websites and how to do due diligence. Check it out. It's an awesome playlist. You'll enjoy it.

Want to have more financial and time freedom?

We help people buy established profit generating online businesses so the can replace their income and spend more time doing what they love with the people they love.

Host:

Jaryd Krause is a serial entrepreneur who helps people buy online businesses so they can spend more time doing what they love with who they love. He’s helped people buy and scale sites all the way up to 8 figures – from eCommerce to content websites. He spends his time surfing and traveling, and his biggest goals are around making a real tangible impact on people’s lives. 

Resource Links:

➥ Buying Online Businesses Website – https://buyingonlinebusinesses.com

➥ Sell your business to us here – https://buyingonlinebusinesses.com/sell-your-business/

➥ Download the Due Diligence Framework – https://buyingonlinebusinesses.com/freeresources/

➥ Cloud Ways (Website Hosting) – https://bit.ly/40tjyjG

➥ Optimize Press (WP Funnel for building landing pages & funnels) – https://bit.ly/3py1ln2

➥ Link Whisper (SEO tool for internal linking on websites) https://bit.ly/3l7K7Ld

 


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