Most people think buying businesses is a numbers game.
Ace Chapman has done 200+ acquisitions – and he’ll tell you the numbers are almost never the point.
Ace has been in this game since the dot-com bubble. He almost sold a stock market simulator to a little Nebraska company called Omaha Securities – before it became Ameritrade. He got out of a real estate business right before 2008 hit. He’s not lucky. He’s built a framework for thinking about business ownership that most acquisition guys never arrive at, no matter how many deals they close.
But here’s where it gets interesting.
Right now, while everyone else is hunting online businesses in the U.S., Ace is doing something completely different – buying offline deals in Latin America, where business brokers don’t exist and most owners don’t even know selling is an option. Hotels. Spas. Mental health clinics. Panama. Colombia. Argentina. He walked into a hotel recently and heard the front desk pitch his own spa to a guest checking in.
In this episode, Jaryd sits down with Ace to unpack why he thinks every business is just inventory – and why holding on too long is the real risk most buyers never talk about. How he structures equity deals so he never has to build anything from scratch. And what a real portfolio actually looks like when you stop confusing operating businesses with wealth.
Most buyers are waiting for the market to calm down before they make a move.
Ace just went and found a completely different market – one where nobody else is even looking.
🎧 Hit play – this is what 200 acquisitions of hard-won experience actually sounds like in practice.
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Episode Highlights
[03:33] – Ace explains why retirement is the riskiest first-timer move most people ever make – and why most people don’t realize it until it’s too late.
[11:38] – The mindset shift that changed everything: why buying a business to grow it actually defeats the whole purpose of buying in the first place.
[15:45] – Ace reveals why he’s moved almost entirely into offline, international deals – and why Latin America is where the real opportunity gap exists right now.
[26:00] – The tanning salon roll-up story: how Ace transferred managers between two businesses to fix operations and marketing – without hiring a single new person.
[31:00] – The “Chairman Strategy” explained: why Ace treats every business need as an acquisition problem, not a hiring problem.
[37:27] – Why every business is going to fail eventually – and why the most rational thing you can do is always be working toward the exit.
[39:09] – Ace’s reframe that changes how you hold a portfolio: businesses aren’t assets to protect. They’re inventory.
Key Takeaways
➥ Every business will eventually go out of business – even the best ones. 99% of the original S&P 500 companies are gone. The only question is whether you exit on your terms or theirs.
➥ The real portfolio isn’t operating businesses – it’s what you build outside them. Royalties, equity positions, brokerage accounts. Ace took a group of royalties public. That’s the game after the game.
➥ Stop hiring. Start acquiring. Ace transferred one manager between two tanning salons instead of hiring twice. When he needed marketing, he bought social media accounts in the niche. You don’t build what you can buy.
➥ Timing the exit matters as much as building the business. Ace nearly missed the Ameritrade deal in 2001 and almost held through the 2008 real estate crash. After 200+ acquisitions, his rule is simple – you’re always working toward the exit.
➥ Go where the buyers aren’t. In the U.S., acquisition culture is loud and crowded. In Panama, Colombia, and Argentina, business brokers don’t exist. Sellers don’t know “multiples” is even a word. That gap is the opportunity
About the Guest:
Ace Chapman has been in Micro Private Equity for decades! Buying his first business at 19 with just $3,000, leveraging it into a $70,000 acquisition. Over 25+ years he has personally completed 200+ acquisitions across online and offline businesses, and built a 6-figure monthly income from his portfolio. Founder of Partners Equity Fund and author of The Ace Formula, Ace now consults founders and investors on building wealth through strategic business acquisitions. He’s based in South America and coaches clients globally.
Connect with Ace Chapman
Transcription:
You don't know when you have a Bernie Madoff, and you know, when you may have a good person. But the other part of that is it is your job, right? So you are the CEO. At some point, you basically become a full-time fund manager. It just so happens that all of the funds are your money.
Hey, I'm Jaryd Krause, host of the Buying Online Businesses podcast. And today I'm speaking with Ace Chapman. He's been in micro private equity for decades, buying his first business at 19 for three grand, scaling it, and exiting it.
He's got over 25 years of experience personally, completing over 200 acquisitions across online businesses and offline businesses, where he's built this incredible six-figure monthly income from his portfolio. He helps people acquire offline businesses, online businesses, hotels, and medical practices, and now he's the founder of Partners Equity Fund and author of the ACE formula.
And he consults founders and investors on building wealth through strategic acquisitions, and he's based in South America, and helps people globally. Now in this pod, ACE and I talk about why we should be thinking about retirement and how we should not just be using our businesses for a time.
What we should be doing to build a portfolio of assets that aren't just businesses and require our time to build our wealth, which can grow our income more than what we can actively do ourselves. We talk about how we can do that and why you should be doing that.
We talk about the mindset of whether you buy now based on what's happening in the world and market conditions, or should you sell now based on what's happening in market conditions, and how to navigate whether you acquire or sell an asset when you're thinking about retirement and building a portfolio.
We also talk about equity. When is it good to give people equity? When is it not so good to give people equity? How should you be doing that? And there's so much value in this pod around acquisitions. Now, if you're listening to this pod, we both know you want to acquire a business.
So do yourself a favor and dramatically decrease your risk of buying a lemon by getting my due diligence framework. It's what I use, it's what my clients use, and it's not only made people millions, but it's saved people millions of dollars as well. It's free, link is in the description.
Also, I'd love to give you some money. I pay the finest fees for up to two grand and up to anyone who refers me to a deal that we acquire. So if you know anyone you know with a business doing decay for a year or more, email me. Let's dive in.
Absolutely Ace, welcome to the pod, so good to have you on. It's been more than a handful of episodes, I would say. Congrats on your exit last year. You had an exit last year. Is it something you're open to talking about?
He's back! Yeah, man!
Yeah, yeah, we can definitely talk about it.
Cool, yeah. We're just talking about Ace asked me before we hit the record button, where am I at? What am I focusing on in life? And I asked Ace the same question, and he's just focusing on living, which is really cool. We would, it's, that's, think if you put that first, you become far more magnetic and attract the things that you should be doing versus the other way around.
But we were talking about retirement, right? And basically that, some people have so much expertise in one domain, you were saying, and then they, it's time to retire and they give their money over to, you know, an investment fund that they don't understand and they don't know how to prepare or they start this, this journey of getting into retirement later than maybe building that muscle a little bit whilst we're working.
Yeah. And it's a terrifying thing. I mean, if you think about it, it's like, all right, you spent 40 years of your life, like saving up and preparing for retirement. And then one day, you retire, and that's the first time that you're in this mode of managing.
You're really a fun manager, but you're doing it, and your livelihood depends on this thing that you're a first time,r which is just a terrible thing. Your livelihood is literally dependent on that, and you have never had any practice. And so what most people end up doing is just outsourcing that.
And part of the downside to that, we were talking before, it's like, you don't know when you have a Bernie Madoff, and you know, when you may have a good person. But the other part of that is it is your job, right? So you are the CEO. At some point, you basically become a full-time fund manager.
It just so happens that all of the funds are your money. So you are a very important client. And so it's like somebody coming to you and saying, Hey, I'm going to give you all of this money.
Now, what are you going to do? And you're like, okay, I don't know anything. So I'm just going to give it to somebody else. When the better thing is, wow, this person has entrusted me with all of their retirement.
I should try to get really good at that. And so if you're starting, no matter what age you are right now, you know that that day is coming where you, as the client, are basically saying, Hey, I'm working every day. I'm putting this money away, and I'm basically putting it away for future A's to be able to manage and be able to live off of this. And so if I'm doing that much work for that, then let me also get really good at that.
And the really exciting thing is, and it's been cool, like as I've spent more time with this, I've met other folks, and you just realized like a lot of the people are operating on an imaginary basis because they don't have any factual information. So they think I need this massive amount of money in order to live the life that I want.
You know, I look at your life, like you've designed the life that you want, even as you have these different streams of income. But when you're not really digging in to figure out all of those things, which is partly lifestyle.
Like, what do I want? Like, okay, what is the money that's going to take that? What are the different investment things to get me excited? And so when it's all just imaginary, it seems like this huge ordeal. And the more you get into it, the more it's actually simple.
Absolutely. And it's like, I could imagine how scary it is when you've got 40 years or how many years you've been working, and you've built up all of this money to this point. And then you start the journey from scratch with no knowledge or anything like that. And it's like all the money that you've ever made.
And it's like, the most risky time to do it versus like, why not just like learn this process over time to build that muscle, so when you do decide to stop working, you're a bit more empowered.
The way I actually look at it, Ace, is that I think what we should do with our savings is invest it, obviously, not actually have savings, but invest that money and have a portion of our income go towards that investment account or investment portfolio, and then build that investment portfolio to get to a point that it's making us more net wealth than our wage.
It's making us say, for example, your wage is 100k a year, or somebody listening to 100k a year, I would say the goal is to get an investment portfolio or a buyer business that gets you to 100k a year in income or more with minimal time input. And then leaving your job is less scary because you already have this thing in place that is running and systemized.
And then if you feel like spending a little bit more time, if you feel like working or feel like building that portfolio, you can, but without the necessary stress on making sure it performs because you built that earlier, right? And start slowly.
Say that last part again and start it again.
And just started it slowly. If you can get your net wealth growing more than what you could earn as a wage, why are you even working? Like when your focus could be spent on that income that is generating more for you without you doing the work to make it. It's kind of like I'm earning, I'm spending 40 hours a week for a hundred grand.
But if I stop that and I'm already making that hundred grand over here, we're in my investment portfolio, and I spend five hours a week making sure it's like, tied up really well and performing well, that has a far better economy of scale than what you could do with trying to get a wage.
Exactly. And I honestly just think that should be, that should be the whole point of working. Like the whole point from the very beginning, I feel like for a lot of people, unless you're working on something that you're passionate about, like which is the case for some folks, but I think for the majority of people, the job just has a job, right? And the only reason they're doing it is to be able to get the income, and the job's job is to pay my bills.
And so if that's the main reason that you have the job or are running the business or whatever, then the real goal is, and it's so interesting, and this, I wish I figured this out early on in my career.
But even as I started to buy businesses, really wanted to buy the business that was going to be able to build a treasury that was going to be able to generate a return even as you know, I, coach people in, in my, my last couple of years, the big focus was like, let's not, let's try to make sure that you're living as little as possible off of the income from the business.
What we want to do is take the income from the business, put that into a portfolio or another passive deal that you're not involved in operating, have these other things that you're investing in generate income,e and the income that you live off of should be that. And so that should start just day one.
It's just like, okay, whateve,r I don't have to get right now, I would rather, and it's so interesting too, because what ends up happening is even if like, you know, with all our bank accounts now, put, really have transferred, we just try not to use bank accounts really. So we try to take all of the money and put it into brokerage accounts.
And most of them, we do pretty conservative things like selling puts against whatever. But we're just doing income-generating strategies in that portfolio. And even if we do have to take out some of the principal that was the income from the business, we still have grown it a little bit.
Even if just a portion stays in there from the return, if all we keep in there, if we still just have to spend all of the principal and just that small amount, whatever it is, it's a tiny amount, that's money out of thin air.
You know what I mean?
Absolutely. I like the idea of no bank accounts. I think obviously each business has to have a bank account, or maybe two or three,e depending on currencies and whatnot. But why not have your business income grow and keep it in your business account until it's worthy to invest into maybe ETFs.
And maybe you do that automated like a lot of people do. What are they called? DCAing in or whatever it is. think the cost averaging in. Or what I like to do is I like to build up a little bit into the business bank account enough for a deposit to acquire real estate, and then go acquire real estate.
And then you have that less active investment class growing without your attention, too much attention. And then, you eventually don't become so reliant on that. I think it's what you're talking about, right? You don't become so reliant on one business. You're building things outside of your business that are going to grow at a faster rate. Eventually, when you take the money out of the business as a tool, a cash flow tool to put into this portfolio, that's why I wouldn't bother scaling my business anymore when this other thing is going to do it for me without me trying, you know?
Think that was one of the things that I realized over time in buying deals is, know, early on it was, want to buy the business and grow the business, scale the business. And it actually goes against the whole philosophy of buying businesses, right? Like, the whole point of why we're buying a business is that starting a business from scratch is a headache and super risky.
Like it just is, it's just super risky. It's a bunch of work. You're trading in all of those hours, all of this money, all the energy into this thing. And it has a very high, it has a higher likelihood of not working every start from scratch than it does for you. So, yeah.
And so if you take that though, and then even when you're growing the business, a lot of that work of trial and error, trying things, and all of those things, a lot of that work that you put into it, and even just reinvesting that money, it has the same risk profile as being in a startup.
Like now you've gone from, I'm not the startup guy, to trying to essentially start new projects to grow this other business. But the real big, real thing there is that our goal is to buy assets that produce income. And so I want to make sure that this thing is an asset, and then I want to use that asset to go and buy more assets.
I don't want to say, I'm going to buy this asset. And now, after I've been the asset buyer, I'm going to take off that hat and put on the entrepreneur hat and operations hat and go into the business to work on and then have to run that business forever, and try to retire from your business, right?
Like, take money off of people. The way I think about it is when people are acquiring these businesses, we say, I help people acquire them with SBA. And there are some other great lending options as well. But eventually get to a point where the debt isn't so large. And then it makes sense to take money out of the business.
Or even if they feel like, okay, I've bought this business, I put my entrepreneur hat on for one to two, three years and scale this thing, I can sell that business and use the money from the proceeds to pay away the loan and then put a little into another investment category, real estate ETFs, whatever you want to do, take a portion to buy something at the same price range again, and use the skills that you had to grow that one another two to three years, and then you could just keep, there's so many ways to do it, but the goal is taking money off the table to have your net wealth grow without your active input, I would say.
And I think in the final point, we can go on to whatever, but the thing to keep in mind is that nobody who's like one of the wealthiest people on the planet may have made their money through operating a business. It's not through the operations, income, and profits that are generated from the business. So Jeff Bezos was literally a billionaire before Amazon made a penny of profit.
Same for Elon, same for Mars. Like all of these folks, like the wealth doesn't come from the business game, the way that regular people play the business game, which is like, I'm trying to operate this business and get some profits and then try to become wealthy from the income from the business. The wealth comes from all of the things you were just mentioning. It's the game outside of the operations that creates wealth, not the operations of the business.
Yeah, absolutely. Absolutely. The operations game is generating the cash flow and can help you scale that cash flow, but the wealth that that cash needs to be distributed for wealth. So I wanted to talk about what sort of deals you're doing now, where you're at, what you think about AI and DD, and yeah, where are you? Yeah, there's so much happening.
Where you guys are investing, what sort of portfolios you're building, are you still doing the holdcos? Yeah, what does it look like for you at the moment?
So mostly doing international, pretty much offline deals. everything from hotels to mental health business to a spa business. So what I've found and kind of the cool opportunity right now is that while in the U S, buying businesses has gotten super popular, which is really cool.
But as everybody knows, the best opportunities are not where things are really popular. And so when you go to these other countries, it's literally the opposite, which I've known for years, but it's just so beyond kind of where we are now. It's just this huge chasm.
You know, in a lot of these countries, it's not just like, people aren't hyped about buying businesses, or there's not a Cody Sanchez of Panama, where I am now, Cody Sanchez of Argentina, where I have a deal. like, of those things just exist. Okay, that's the case. But like, literally, business brokers don't even exist, right? Like, the cultural attitude to a business is that there are only two options. I'm going to pass it down to my kid, and if they don't want it, I'm going to close it down.
And so a majority just isn't even like, I gave a speech in Colombia and Bogota to a group of entrepreneurs there. And like you would have thought, which we now see that people don't care, but you would have thought that, like, brought up UFO on stage and was like, Hey, I'm gonna show you this UFO. You know what I mean? And just talking about, okay, y'all should sell your businesses. They're like, what, what are you talking about? And so it just isn't.
And these are brilliant. I'm not saying they're not; these are brilliant business people with very valuable businesses, but it just isn't a part of the way they do business. So the community that creates and how you can structure deals and all of that is really cool. And just have a pick of the litter.
Yeah, awesome. Awesome. When you're so, you're doing mostly off-market, not sorry, offline deals, which is they're all off market, aren't they? Yeah. Absolutely. Yeah. That's, it's great. Like, cause you've done so many online acquisitions, and that's where I'm mostly, is online acquisitions. I have advised on offline acquisitions as well. And it's, it's a different, it's, it's so, there's not as much hype around it. There's not as much content around it for sure.
What fuck did Justin do?
In Australia, there's a lack of, as you said, there's a lack of brokers, a lack of good brokers. I know somebody in Australia who has been a broker for like two years now. He just got started because he knew an older dude who was like, Hey, I need some help with this.
And he's just gone in and crushed it, like doing way more deals than all the other brokers because they just, it's just not, it's not a thing for them. They're not, they're not motivated. And he is, he's younger, he's motivated, and good on him. It's great to see.
Yeah. And if you're somebody who's using the AI and understands technology.
So let's talk about AI then. Where are you using that in your deals, and how would you say?
So, since we're doing these international deals, that's another place where they're just not really leveraging AI. We just did a deal on a mental health business that is in Colombia. Just the simple things are like, hey, they just had a terrible website. And so I'm showing the lady that runs the business, like, okay, we're talking about the website.
I was like, yeah, we can just do it right now. And she's like, " Your web developer, like, no, we can use this. And so I'm like, going to do it like, oh, we can chase this, we can do this. And so just think, you know, there's also the chasm there just in technology of being able to leverage technology and AI in these businesses.
And even just in the most simple way in the, in the spa, we started using Go High Level and have created this kind of network. It was really cool. We're partnering with these different hotels. And so I'm telling the people that are running, like, hey, we need to do this, da da da, we need to get these partnerships with hotels and get them to send us clients and all these different things. And so, you know, just compiling all the information, having AI do the outreach, you know, just, so I ended up staying at a hotel, and you know, it's so cool.
The guy I check in and the guy at the front desk are like, like, and we have a special where you go to this spa, and you get this discount that I'm like, that's what I wanted him to get the whole spiel. But it's like, that's my business. And this was kind of one of our tactics. makes everything so easy. where it's just immediate. I cannot believe that this happened in my lifetime.
It's insane to see how it's made people. There are so many benefits. There are negatives to everything, right? But it is just a tool, and the benefits are incredible. I'm just grateful that the internet happened in my lifetime. I mean, I would still look at it as like, hang on, this guy is like buying online businesses. What the hell? Still, most of my friends don't have any idea what I do, right? Like, what is your name?
I'm killing him.
Yeah, exactly. I want to ask you about portfolios and building a portfolio. How many businesses is too many businesses do you think for somebody to do, and how do you advise people on scaling a portfolio of businesses? Like, when does it become a liability to add another business to your portfolio? And then also, we can move into partnering and bringing partners for growth as well.
How would you? It's different for every investor, of course, but say just to keep it simple for growth, with minimal risk. What's the typical sort of advice you would give?
Yeah. And I've definitely changed. We were talking about the whole co thing, and like one of the things that I think you just have different personality types. And so the truth is, they're just different types of people. Like I realized, wow. Okay. There are these people who are just aggressive go-getters, and they do want to build this large portfolio.
And so, you know, as I work with people to build holding companies and have multiple businesses or do roll-ups in a certain industry or just all these different things, I realized, all right, that's just a small subset of the people that want to do deals. For the average person, the real goal should be that you are really, you're honestly, the portfolio is from existing.
And so the portfolio is really of your businesses, but you're doing kind of what we talked about on the front end, where you're taking the businesses,s and you're investing in these other assets so that those remain when you exit the business.
So then you sell the business. And then the things that I like to keep are, you know, I may have a royalty, I might have a certain amount of equity that's in that business that I hold onto, but it's all minority, and somebody else is going to run it.
And so what my portfolio really should look like is more of a true portfolio where I'm still getting cash flow, and then I'm taking that and reinvesting in other things. And then I'm off the assets that have more passive assets that are created.
But the portfolio is really basically all, it's all paper assets, but that is the beautiful thing about private equity, it's, you know, I had put together a group of royalties that we took public.
These were just almost, again, like I like to do the things that just create money out of thin air, but that, in a lot of cases, you know, when I'm negotiating with somebody, it didn't really take off the price. So, still getting the same thing, but it's just like, okay, I just want this small amount of equity in the deal. Typically, your buyers want you to have a certain amount of equity. You know, I have this really tiny royalty. It doesn't really affect you, but you get me tied into the business to help you grow and all these different things. And so you negotiate those things in there.
And just have these, these, this asset, or portfolio of assets, as opposed to a portfolio of operating businesses for that person. think that's a nightmare.
I absolutely agree. Mean, it can make sense when you're building a hold co to have multiple businesses in it and have the grand exit to be operating a few, but I think it makes more sense to have, before you do even acquire another business for a hold co, is to have the majority of the operations handled and taken care of.
Mean, operations that were the business are still growing without your input and moving yourself more into the CEO role and having a COO, maybe even a fractional CMO for that business, until before you go away and get some more debt or use cash to acquire another one.
And then you can have economies to scale with your CEO and CMO within multiple deals, a nd then exit, and they, the COO and CMO, go along, and then you can start reinvesting into something a bit more passive, right?
I think personally, I like to buy businesses now. And again, everybody's going to have just their hustle mode that they're in. I'm obviously in the least hustle mode that I've been in my life. But the funny thing is, I think it's more profitable.
So I'm much more attractive.
Yeah, yeah, just life is better. I so what, I really try to do is the first deal this goes back to. I learned this not because of being smart, but through experience. But I got lucky when I bought this tanning salon. And the first tanning salon that I bought, and so this was gonna be a whole roll-up of tanning salons.
So the first one I bought, it just had amazing operations. And they, just the team, were amazing, but they didn't sell anything. They were terrible at marketing, and they were terrible at sales. Like literally, the previous owner had told them, when people come in, they will tell you if they want lotion, and don't try to sell them lotion.
And I'm trying to convince them to sell stuff. It's like, no, like you're going to ruin the business trying to sell stuff to people. So the second one I bought was the opposite. Operations were a nightmare. And I took my manager from the first one over there. And so, you know, I obviously couldn't go in and actually use the product. So I just walk in with her, like I'm a friend waiting.
And so she comes in, we get in the car, like, so what do you think about this place? She's like, " Man, this place is terrible. Everything is terrible. Like the bed was dusty, like we would never allow that. Like, she was just like all this stuff that she didn't like about the operations.
But I knew the numbers, and they were blowing us out of the way. We had a great business, but their marketin, they were just killing it on the marketing. You know, when we went in, they were hard-selling her. They didn't know that she owned, she was, you know, running a tennis line. But so they're like hard, like you're not going to get a good tan if you don't use this lotion. You've got to get the top of the line if you really want a great tan.
Like they're like hardcore sellers. And so I, we bought that one next, and I literally just transferred the two managers. And so the point of that is even when it comes to talent, I don't want to, what am I, I don't want to build anything in life. You know, we've talked about this before, like, it's more hardcore now about the whole thing.
We don't try to build our house. We don't try to build our car. We don't try to sew our clothes. There's just nothing else that we do where we're trying to build it. It is only if we try to get into business that we think, I've got to build that. And so I think even for the components, if I need a CMO, I'm more going to say, hey, can I just buy a marketing agency maybe and take that person and like, don't, don't want to build anything.
I agree. Even if you don't buy the marketing agency to grow the business that you own, you can, a business can acquire a fractional CMO or a consultant or bring partners in. When does it make the most sense to start, and who would you suggest, you know, offering parts, offering equity to people to grow your business? Have you, have you done much of that offering, offering equity? Like I'm looking at a deal now where the previous owner is looking to sell,l and they tried to sell the business to the operators.
I'm listening. You're right. Whilst I'm telling this story, there are two operators, and they tried to buy it, but they weren't able to get the financing or acquire the business. And so what happened is they went back to the drawing board to sell it to the markets, and the opportunity for a new buyer is to acquire the business and then offer some form of equity to the operators who are clearly looking at other ways to build their wealth and to grow something.
So they're motivated, and it makes sense to bring them in without the new owner having to grow the business. Already insight as I already know what they would do if they were to get equity and they're to be incentivized to do so.
So it makes sense in that way for somebody who hasn't got an operator or people in the team that they could just give equity to. How would you suggest they go about doing that?
Yeah. So I'm a big, big fan of, I think my videos are frozen for some reason, but I'm a very big fan of just equity for everything. Right. And so, like in that specific case, like, know, obviously, you have to make sure the person's right. You've got it.
Cause the downside to equity is, you want to make sure you structure in a way that is tied to their performance, which is way more important than even the performance. You're paying cash. because you know, cash, know, I can make more, but you can't make more equity, right?
So that person is going to be tied to you forever until you buy them out or do whatever. But the exciting thing for us as dealmakers is that none of this stuff, the same way we're just talking about, like none of this stuff is our life's work. I do understand the trepidation when it comes to equity and doing equity deals, when you've poured your time and energy and effort, literally like exchanging your life.
Like you've exchanged a portion of your life for this business, and then somebody comes along, and they want a piece of it. And so it's literally like, Hey, I'm giving you a little bit of me with this thing. Butn, in general, you know, it just is that, that same principle.
You know, one of the things that I've put together is this, this thing that I call the chairman strategy, which we just realized is just all like taking more of a developer's approach to building the business. And so it's like being a business developer where all of the pieces, everything that we need, is out there.
And a lot of time,s just not, it's not even used. know, I'm the building I'm in has office space and for, you know, 50 % of the day minimum, those offices are all empty. There's paying for electricity. So when I'm thinking about an equity deal, whether it's trying to hire somebody or whatever, I really want to start with whatever the first principle is of what I'm trying to get done.
Because what I'm finding, and that's a little bit of what I was alluding to when like, you know, when you say like, hire this team, dah, dah, I just have almost an aversion to it because I've seen over and over that we can get whatever we need done and especially if it is like a first principle where, know, let's say that we need a CMO and we're like, Hey, we need the CMO to run our marketing.
Well, why do we need the CMO? Because we want more customers. So we may not need as high a quality CMO if we just go and do it. We literally like I had an art business where, you know, I know nothing about art, and we bought this art business, and you know, a big part of our marketing was just acquiring social media accounts in the marketing and the art space.
And so our, it changed really what we needed from a CMO. Cause the CMO is really just an acquisitions expert, right? Where we're just buying these, these assets. And so that's all I would say is like, even when you're thinking about a deal, like the one you're mentioning with that kind of equity is really getting down into what does this business need?
And where can I just go get what the business needs without an intermediary person? And I think, going back to AI, I think this is where everything is just going to go, where you just realize that there are a lot of things where people are actually slowing down the way things could work because people aren't open-minded, and they just think like, well, this is how business works. Where you have these employees, and they do these things, and da-da-da.
Well, let's just say, it's not necessarily that the business needs employees. So let's like look at what the business does need and then figure out and like what the employee is actually getting.
And then let's start there and then build the business. And I think it changes if you think about it that way; it changes the way you build a business, but you're still doing a lot more equity-type deals.
Yeah, it's big. It's, I think a lot of people now are looking to how do I grow the business and getting generic basic advice, either from AI or listening to content and trying to implement that and grow their business that way versus like you say, slowing down and thinking, hang on, how do I do this in a way that there's less work, but the scale is significant and there's minimum risk, minimal risk in it and do it that's an out of the box way, but maybe slower path to growth, far better exponential growth over time, which creates a better asset and a better lifestyle. That's why most of us are doing this, right? Is lifestyle.
Exactly.
I wanted to ask some more questions. So that's about equity. What about economic cycles? You've been through a bunch of economic cycles, market changes, when you're building a portfolio, what's the actual mental framework you use to stay rational and not get too caught into, this tariff thing is I can't buy a business that's buying stock from China or the war, there's a war happening and I, you know, I've got to sit on my hands and do nothing.
What's the mental framework that you use? I can share mine, but I would love to hear yours on how to just stay in the game and not freak out and be emotionally ping ponged around by the market and news.
Yeah, one of the things that I was in the first dot com crash and bubble. So the bubble burst in 2001, when I owned the internet-based business. That was my very first acquisition. And so literally 25 years ago, we're going through that dot-com bubble burst.
And I had had a buyer come to me who was from Omaha Security. So the business I bought was called coolwallstreet.com. It was one of the only stock market simulator games that existed back then. And this little company out of Nebraska called Omaha Securities came to us, and they're basically like, hey, we're doing a roll-up of some different businesses.
And you have these young people who are interested in the stock market, and we have a brokerage, so we want to introduce you to the stock market. And they were like, the acquisition is going to be all stock.
And I was like, dude, I'm not buying for all y'all's stock Omaha Securities. What even is that? Long story short, the rest of that roll up was several other brokerages in one of the, used one of the acquisitions' names, which is Ameritrade.
And so that became a massive business, and the dot-com bubble burst, and my business became nothing. So that was, you know, especially at that point, just like a life change, would have been life-changing money.
You know, I went through that and was like, wow, like I, you know, that would have been a great opportunity to sell. The next time that happened was just six years later, when I had owned Homevestors, I'd done an acquisition called Homevestors, and we were in the real estate space, and I had a buyer that was coming to me, and he wanted to buy the business unsolicited.
And so I'm kind of telling him like, no, I don't want to sell,l and this kind of thing. And I saw myself really as this entrepreneur again, as opposed to an asset holder where my job was just to maximize the value of the asset, which, the most important part of that is the exit.
So, you know, he wanted to buy, I wasn't interested in selling, and you know, I ended up giving him a price. And so he came to me once was like, Hey, I just want to take I just want to take $10,000 off the price. I'm like, no, I'm not going to do that. Um, long story short, like we're back and forth several different times.
He finally like at just my price, and I sold the business, and then 2008 happened with the real estate bubble burst. And so I did get lucky in that one. And so the real point of this is I wouldn't encourage people to try to ride all of the waves in their business because every business is going to fail. Like every business is going to go out of business. It's only a matter of when.
The standard, the S&P 500, knows that those are the best businesses on planet earth. And 99 % of the businesses that were on the original S&P 500 are all out of business. And so it is important to understand. Like, I understand having fortitude and not being too emotional and that kind of thing.
But I do want to encourage people to also be on the other side of that, which is that the point of the business isn't to last forever. That is just an impossibility. So you know your business is going to go out of business, whether it's one of these issues that happens or something else. And so the really important thing is you're just always trying to exit.
I love that. It's a vehicle. It's a tool, and you don't want to be in business forever anyway. You know, you don't want to be 95 having to be an operations guy and, know, or even be sitting on the board. You don't want to be going and attending board meetings at that age. You know, like it's a vehicle, you know, it's going to pass, but I like to consider it inventory. is a big, I just like, it's literally like the business is the product. And so that, like, as you have a portfolio, you just have these different equity positions, all this stuff. It's just inventory.
And that's on the, like you said, don't always give up the opportunity to sell because your business isn't gonna be around forever,r even if you just hold onto it. Even if you're not working in it, and you've got good growth strategies and operators doing it. So there are opportunities to sell. I think the same for acquisition.
A lot of people are sitting around going, " Okay, the war, the tariffs, the whatever. Any news thing that pops up can be a reason, like I'm just gonna sit on my cash, which is a scary thing as well, because that is devaluing the more you sit on it anyway. So it's like, there's no perfect time to buy or sell.
It's more about if you can, and it makes sense financially, do it without having the noise of like, do I hold onto the business longer and make more money? Or do I hold onto my cash and not get into the market? Then you're gonna you're gonna get you're gonna have a good time and a tough time, no matter what decision you make.
Yeah, exactly. There's nowhere around it. That is the game.
Thanks for playing the game and being a part of it, and helping me learn so much and helping everybody else learn so much. It's so good to have you on, and yeah, I look forward to doing more in the future with you and seeing what sort of deals you're doing in a year or two to come. Awesome!
Man, thank you so much for having me on again. I appreciate it.
Yeah, likewise. Everybody is listening. Thank you for listening. If you haven't subscribed, I never asked for a subscription. I don't think I've done that in like years. So consider subscribing.
Hey, I'm Jaryd Krause, host of the Buying Online Businesses podcast. And today I'm speaking with Ace Chapman. He's been in micro private equity for decades, buying his first business at 19 for three grand, scaling it, and exiting it.
He's got over 25 years of experience personally, completing over 200 acquisitions across online businesses and offline businesses, where he's built this incredible six-figure monthly income from his portfolio. He helps people acquire offline businesses, online businesses, hotels, and medical practices, and now he's the founder of Partners Equity Fund and author of the ACE formula.
And he consults founders and investors on building wealth through strategic acquisitions, and he's based in South America, and helps people globally. Now in this pod, ACE and I talk about why we should be thinking about retirement and how we should not just be using our businesses for a time.
What we should be doing to build a portfolio of assets that aren't just businesses and require our time to build our wealth, which can grow our income more than what we can actively do ourselves. We talk about how we can do that and why you should be doing that.
We talk about the mindset of whether you buy now based on what's happening in the world and market conditions, or should you sell now based on what's happening in market conditions, and how to navigate whether you acquire or sell an asset when you're thinking about retirement and building a portfolio.
We also talk about equity. When is it good to give people equity? When is it not so good to give people equity? How should you be doing that? And there's so much value in this pod around acquisitions. Now, if you're listening to this pod, we both know you want to acquire a business.
So do yourself a favor and dramatically decrease your risk of buying a lemon by getting my due diligence framework. It's what I use, it's what my clients use, and it's not only made people millions, but it's saved people millions of dollars as well. It's free, link is in the description.
Also, I'd love to give you some money. I pay the finest fees for up to two grand and up to anyone who refers me to a deal that we acquire. So if you know anyone you know with a business doing decay for a year or more, email me. Let's dive in.
Absolutely Ace, welcome to the pod, so good to have you on. It's been more than a handful of episodes, I would say. Congrats on your exit last year. You had an exit last year. Is it something you're open to talking about?
He's back! Yeah, man!
Yeah, yeah, we can definitely talk about it.
Cool, yeah. We're just talking about Ace asked me before we hit the record button, where am I at? What am I focusing on in life? And I asked Ace the same question, and he's just focusing on living, which is really cool. We would, it's, that's, think if you put that first, you become far more magnetic and attract the things that you should be doing versus the other way around.
But we were talking about retirement, right? And basically that, some people have so much expertise in one domain, you were saying, and then they, it's time to retire and they give their money over to, you know, an investment fund that they don't understand and they don't know how to prepare or they start this, this journey of getting into retirement later than maybe building that muscle a little bit whilst we're working.
Yeah. And it's a terrifying thing. I mean, if you think about it, it's like, all right, you spent 40 years of your life, like saving up and preparing for retirement. And then one day, you retire, and that's the first time that you're in this mode of managing.
You're really a fun manager, but you're doing it, and your livelihood depends on this thing that you're a first time,r which is just a terrible thing. Your livelihood is literally dependent on that, and you have never had any practice. And so what most people end up doing is just outsourcing that.
And part of the downside to that, we were talking before, it's like, you don't know when you have a Bernie Madoff, and you know, when you may have a good person. But the other part of that is it is your job, right? So you are the CEO. At some point, you basically become a full-time fund manager.
It just so happens that all of the funds are your money. So you are a very important client. And so it's like somebody coming to you and saying, Hey, I'm going to give you all of this money.
Now, what are you going to do? And you're like, okay, I don't know anything. So I'm just going to give it to somebody else. When the better thing is, wow, this person has entrusted me with all of their retirement.
I should try to get really good at that. And so if you're starting, no matter what age you are right now, you know that that day is coming where you, as the client, are basically saying, Hey, I'm working every day. I'm putting this money away, and I'm basically putting it away for future A's to be able to manage and be able to live off of this. And so if I'm doing that much work for that, then let me also get really good at that.
And the really exciting thing is, and it's been cool, like as I've spent more time with this, I've met other folks, and you just realized like a lot of the people are operating on an imaginary basis because they don't have any factual information. So they think I need this massive amount of money in order to live the life that I want.
You know, I look at your life, like you've designed the life that you want, even as you have these different streams of income. But when you're not really digging in to figure out all of those things, which is partly lifestyle.
Like, what do I want? Like, okay, what is the money that's going to take that? What are the different investment things to get me excited? And so when it's all just imaginary, it seems like this huge ordeal. And the more you get into it, the more it's actually simple.
Absolutely. And it's like, I could imagine how scary it is when you've got 40 years or how many years you've been working, and you've built up all of this money to this point. And then you start the journey from scratch with no knowledge or anything like that. And it's like all the money that you've ever made.
And it's like, the most risky time to do it versus like, why not just like learn this process over time to build that muscle, so when you do decide to stop working, you're a bit more empowered.
The way I actually look at it, Ace, is that I think what we should do with our savings is invest it, obviously, not actually have savings, but invest that money and have a portion of our income go towards that investment account or investment portfolio, and then build that investment portfolio to get to a point that it's making us more net wealth than our wage.
It's making us say, for example, your wage is 100k a year, or somebody listening to 100k a year, I would say the goal is to get an investment portfolio or a buyer business that gets you to 100k a year in income or more with minimal time input. And then leaving your job is less scary because you already have this thing in place that is running and systemized.
And then if you feel like spending a little bit more time, if you feel like working or feel like building that portfolio, you can, but without the necessary stress on making sure it performs because you built that earlier, right? And start slowly.
Say that last part again and start it again.
And just started it slowly. If you can get your net wealth growing more than what you could earn as a wage, why are you even working? Like when your focus could be spent on that income that is generating more for you without you doing the work to make it. It's kind of like I'm earning, I'm spending 40 hours a week for a hundred grand.
But if I stop that and I'm already making that hundred grand over here, we're in my investment portfolio, and I spend five hours a week making sure it's like, tied up really well and performing well, that has a far better economy of scale than what you could do with trying to get a wage.
Exactly. And I honestly just think that should be, that should be the whole point of working. Like the whole point from the very beginning, I feel like for a lot of people, unless you're working on something that you're passionate about, like which is the case for some folks, but I think for the majority of people, the job just has a job, right? And the only reason they're doing it is to be able to get the income, and the job's job is to pay my bills.
And so if that's the main reason that you have the job or are running the business or whatever, then the real goal is, and it's so interesting, and this, I wish I figured this out early on in my career.
But even as I started to buy businesses, really wanted to buy the business that was going to be able to build a treasury that was going to be able to generate a return even as you know, I, coach people in, in my, my last couple of years, the big focus was like, let's not, let's try to make sure that you're living as little as possible off of the income from the business.
What we want to do is take the income from the business, put that into a portfolio or another passive deal that you're not involved in operating, have these other things that you're investing in generate income,e and the income that you live off of should be that. And so that should start just day one.
It's just like, okay, whateve,r I don't have to get right now, I would rather, and it's so interesting too, because what ends up happening is even if like, you know, with all our bank accounts now, put, really have transferred, we just try not to use bank accounts really. So we try to take all of the money and put it into brokerage accounts.
And most of them, we do pretty conservative things like selling puts against whatever. But we're just doing income-generating strategies in that portfolio. And even if we do have to take out some of the principal that was the income from the business, we still have grown it a little bit.
Even if just a portion stays in there from the return, if all we keep in there, if we still just have to spend all of the principal and just that small amount, whatever it is, it's a tiny amount, that's money out of thin air.
You know what I mean?
Absolutely. I like the idea of no bank accounts. I think obviously each business has to have a bank account, or maybe two or three,e depending on currencies and whatnot. But why not have your business income grow and keep it in your business account until it's worthy to invest into maybe ETFs.
And maybe you do that automated like a lot of people do. What are they called? DCAing in or whatever it is. think the cost averaging in. Or what I like to do is I like to build up a little bit into the business bank account enough for a deposit to acquire real estate, and then go acquire real estate.
And then you have that less active investment class growing without your attention, too much attention. And then, you eventually don't become so reliant on that. I think it's what you're talking about, right? You don't become so reliant on one business. You're building things outside of your business that are going to grow at a faster rate. Eventually, when you take the money out of the business as a tool, a cash flow tool to put into this portfolio, that's why I wouldn't bother scaling my business anymore when this other thing is going to do it for me without me trying, you know?
Think that was one of the things that I realized over time in buying deals is, know, early on it was, want to buy the business and grow the business, scale the business. And it actually goes against the whole philosophy of buying businesses, right? Like, the whole point of why we're buying a business is that starting a business from scratch is a headache and super risky.
Like it just is, it's just super risky. It's a bunch of work. You're trading in all of those hours, all of this money, all the energy into this thing. And it has a very high, it has a higher likelihood of not working every start from scratch than it does for you. So, yeah.
And so if you take that though, and then even when you're growing the business, a lot of that work of trial and error, trying things, and all of those things, a lot of that work that you put into it, and even just reinvesting that money, it has the same risk profile as being in a startup.
Like now you've gone from, I'm not the startup guy, to trying to essentially start new projects to grow this other business. But the real big, real thing there is that our goal is to buy assets that produce income. And so I want to make sure that this thing is an asset, and then I want to use that asset to go and buy more assets.
I don't want to say, I'm going to buy this asset. And now, after I've been the asset buyer, I'm going to take off that hat and put on the entrepreneur hat and operations hat and go into the business to work on and then have to run that business forever, and try to retire from your business, right?
Like, take money off of people. The way I think about it is when people are acquiring these businesses, we say, I help people acquire them with SBA. And there are some other great lending options as well. But eventually get to a point where the debt isn't so large. And then it makes sense to take money out of the business.
Or even if they feel like, okay, I've bought this business, I put my entrepreneur hat on for one to two, three years and scale this thing, I can sell that business and use the money from the proceeds to pay away the loan and then put a little into another investment category, real estate ETFs, whatever you want to do, take a portion to buy something at the same price range again, and use the skills that you had to grow that one another two to three years, and then you could just keep, there's so many ways to do it, but the goal is taking money off the table to have your net wealth grow without your active input, I would say.
And I think in the final point, we can go on to whatever, but the thing to keep in mind is that nobody who's like one of the wealthiest people on the planet may have made their money through operating a business. It's not through the operations, income, and profits that are generated from the business. So Jeff Bezos was literally a billionaire before Amazon made a penny of profit.
Same for Elon, same for Mars. Like all of these folks, like the wealth doesn't come from the business game, the way that regular people play the business game, which is like, I'm trying to operate this business and get some profits and then try to become wealthy from the income from the business. The wealth comes from all of the things you were just mentioning. It's the game outside of the operations that creates wealth, not the operations of the business.
Yeah, absolutely. Absolutely. The operations game is generating the cash flow and can help you scale that cash flow, but the wealth that that cash needs to be distributed for wealth. So I wanted to talk about what sort of deals you're doing now, where you're at, what you think about AI and DD, and yeah, where are you? Yeah, there's so much happening.
Where you guys are investing, what sort of portfolios you're building, are you still doing the holdcos? Yeah, what does it look like for you at the moment?
So mostly doing international, pretty much offline deals. everything from hotels to mental health business to a spa business. So what I've found and kind of the cool opportunity right now is that while in the U S, buying businesses has gotten super popular, which is really cool.
But as everybody knows, the best opportunities are not where things are really popular. And so when you go to these other countries, it's literally the opposite, which I've known for years, but it's just so beyond kind of where we are now. It's just this huge chasm.
You know, in a lot of these countries, it's not just like, people aren't hyped about buying businesses, or there's not a Cody Sanchez of Panama, where I am now, Cody Sanchez of Argentina, where I have a deal. like, of those things just exist. Okay, that's the case. But like, literally, business brokers don't even exist, right? Like, the cultural attitude to a business is that there are only two options. I'm going to pass it down to my kid, and if they don't want it, I'm going to close it down.
And so a majority just isn't even like, I gave a speech in Colombia and Bogota to a group of entrepreneurs there. And like you would have thought, which we now see that people don't care, but you would have thought that, like, brought up UFO on stage and was like, Hey, I'm gonna show you this UFO. You know what I mean? And just talking about, okay, y'all should sell your businesses. They're like, what, what are you talking about? And so it just isn't.
And these are brilliant. I'm not saying they're not; these are brilliant business people with very valuable businesses, but it just isn't a part of the way they do business. So the community that creates and how you can structure deals and all of that is really cool. And just have a pick of the litter.
Yeah, awesome. Awesome. When you're so, you're doing mostly off-market, not sorry, offline deals, which is they're all off market, aren't they? Yeah. Absolutely. Yeah. That's, it's great. Like, cause you've done so many online acquisitions, and that's where I'm mostly, is online acquisitions. I have advised on offline acquisitions as well. And it's, it's a different, it's, it's so, there's not as much hype around it. There's not as much content around it for sure.
What fuck did Justin do?
In Australia, there's a lack of, as you said, there's a lack of brokers, a lack of good brokers. I know somebody in Australia who has been a broker for like two years now. He just got started because he knew an older dude who was like, Hey, I need some help with this.
And he's just gone in and crushed it, like doing way more deals than all the other brokers because they just, it's just not, it's not a thing for them. They're not, they're not motivated. And he is, he's younger, he's motivated, and good on him. It's great to see.
Yeah. And if you're somebody who's using the AI and understands technology.
So let's talk about AI then. Where are you using that in your deals, and how would you say?
So, since we're doing these international deals, that's another place where they're just not really leveraging AI. We just did a deal on a mental health business that is in Colombia. Just the simple things are like, hey, they just had a terrible website. And so I'm showing the lady that runs the business, like, okay, we're talking about the website.
I was like, yeah, we can just do it right now. And she's like, " Your web developer, like, no, we can use this. And so I'm like, going to do it like, oh, we can chase this, we can do this. And so just think, you know, there's also the chasm there just in technology of being able to leverage technology and AI in these businesses.
And even just in the most simple way in the, in the spa, we started using Go High Level and have created this kind of network. It was really cool. We're partnering with these different hotels. And so I'm telling the people that are running, like, hey, we need to do this, da da da, we need to get these partnerships with hotels and get them to send us clients and all these different things. And so, you know, just compiling all the information, having AI do the outreach, you know, just, so I ended up staying at a hotel, and you know, it's so cool.
The guy I check in and the guy at the front desk are like, like, and we have a special where you go to this spa, and you get this discount that I'm like, that's what I wanted him to get the whole spiel. But it's like, that's my business. And this was kind of one of our tactics. makes everything so easy. where it's just immediate. I cannot believe that this happened in my lifetime.
It's insane to see how it's made people. There are so many benefits. There are negatives to everything, right? But it is just a tool, and the benefits are incredible. I'm just grateful that the internet happened in my lifetime. I mean, I would still look at it as like, hang on, this guy is like buying online businesses. What the hell? Still, most of my friends don't have any idea what I do, right? Like, what is your name?
I'm killing him.
Yeah, exactly. I want to ask you about portfolios and building a portfolio. How many businesses is too many businesses do you think for somebody to do, and how do you advise people on scaling a portfolio of businesses? Like, when does it become a liability to add another business to your portfolio? And then also, we can move into partnering and bringing partners for growth as well.
How would you? It's different for every investor, of course, but say just to keep it simple for growth, with minimal risk. What's the typical sort of advice you would give?
Yeah. And I've definitely changed. We were talking about the whole co thing, and like one of the things that I think you just have different personality types. And so the truth is, they're just different types of people. Like I realized, wow. Okay. There are these people who are just aggressive go-getters, and they do want to build this large portfolio.
And so, you know, as I work with people to build holding companies and have multiple businesses or do roll-ups in a certain industry or just all these different things, I realized, all right, that's just a small subset of the people that want to do deals. For the average person, the real goal should be that you are really, you're honestly, the portfolio is from existing.
And so the portfolio is really of your businesses, but you're doing kind of what we talked about on the front end, where you're taking the businesses,s and you're investing in these other assets so that those remain when you exit the business.
So then you sell the business. And then the things that I like to keep are, you know, I may have a royalty, I might have a certain amount of equity that's in that business that I hold onto, but it's all minority, and somebody else is going to run it.
And so what my portfolio really should look like is more of a true portfolio where I'm still getting cash flow, and then I'm taking that and reinvesting in other things. And then I'm off the assets that have more passive assets that are created.
But the portfolio is really basically all, it's all paper assets, but that is the beautiful thing about private equity, it's, you know, I had put together a group of royalties that we took public.
These were just almost, again, like I like to do the things that just create money out of thin air, but that, in a lot of cases, you know, when I'm negotiating with somebody, it didn't really take off the price. So, still getting the same thing, but it's just like, okay, I just want this small amount of equity in the deal. Typically, your buyers want you to have a certain amount of equity. You know, I have this really tiny royalty. It doesn't really affect you, but you get me tied into the business to help you grow and all these different things. And so you negotiate those things in there.
And just have these, these, this asset, or portfolio of assets, as opposed to a portfolio of operating businesses for that person. think that's a nightmare.
I absolutely agree. Mean, it can make sense when you're building a hold co to have multiple businesses in it and have the grand exit to be operating a few, but I think it makes more sense to have, before you do even acquire another business for a hold co, is to have the majority of the operations handled and taken care of.
Mean, operations that were the business are still growing without your input and moving yourself more into the CEO role and having a COO, maybe even a fractional CMO for that business, until before you go away and get some more debt or use cash to acquire another one.
And then you can have economies to scale with your CEO and CMO within multiple deals, a nd then exit, and they, the COO and CMO, go along, and then you can start reinvesting into something a bit more passive, right?
I think personally, I like to buy businesses now. And again, everybody's going to have just their hustle mode that they're in. I'm obviously in the least hustle mode that I've been in my life. But the funny thing is, I think it's more profitable.
So I'm much more attractive.
Yeah, yeah, just life is better. I so what, I really try to do is the first deal this goes back to. I learned this not because of being smart, but through experience. But I got lucky when I bought this tanning salon. And the first tanning salon that I bought, and so this was gonna be a whole roll-up of tanning salons.
So the first one I bought, it just had amazing operations. And they, just the team, were amazing, but they didn't sell anything. They were terrible at marketing, and they were terrible at sales. Like literally, the previous owner had told them, when people come in, they will tell you if they want lotion, and don't try to sell them lotion.
And I'm trying to convince them to sell stuff. It's like, no, like you're going to ruin the business trying to sell stuff to people. So the second one I bought was the opposite. Operations were a nightmare. And I took my manager from the first one over there. And so, you know, I obviously couldn't go in and actually use the product. So I just walk in with her, like I'm a friend waiting.
And so she comes in, we get in the car, like, so what do you think about this place? She's like, " Man, this place is terrible. Everything is terrible. Like the bed was dusty, like we would never allow that. Like, she was just like all this stuff that she didn't like about the operations.
But I knew the numbers, and they were blowing us out of the way. We had a great business, but their marketin, they were just killing it on the marketing. You know, when we went in, they were hard-selling her. They didn't know that she owned, she was, you know, running a tennis line. But so they're like hard, like you're not going to get a good tan if you don't use this lotion. You've got to get the top of the line if you really want a great tan.
Like they're like hardcore sellers. And so I, we bought that one next, and I literally just transferred the two managers. And so the point of that is even when it comes to talent, I don't want to, what am I, I don't want to build anything in life. You know, we've talked about this before, like, it's more hardcore now about the whole thing.
We don't try to build our house. We don't try to build our car. We don't try to sew our clothes. There's just nothing else that we do where we're trying to build it. It is only if we try to get into business that we think, I've got to build that. And so I think even for the components, if I need a CMO, I'm more going to say, hey, can I just buy a marketing agency maybe and take that person and like, don't, don't want to build anything.
I agree. Even if you don't buy the marketing agency to grow the business that you own, you can, a business can acquire a fractional CMO or a consultant or bring partners in. When does it make the most sense to start, and who would you suggest, you know, offering parts, offering equity to people to grow your business? Have you, have you done much of that offering, offering equity? Like I'm looking at a deal now where the previous owner is looking to sell,l and they tried to sell the business to the operators.
I'm listening. You're right. Whilst I'm telling this story, there are two operators, and they tried to buy it, but they weren't able to get the financing or acquire the business. And so what happened is they went back to the drawing board to sell it to the markets, and the opportunity for a new buyer is to acquire the business and then offer some form of equity to the operators who are clearly looking at other ways to build their wealth and to grow something.
So they're motivated, and it makes sense to bring them in without the new owner having to grow the business. Already insight as I already know what they would do if they were to get equity and they're to be incentivized to do so.
So it makes sense in that way for somebody who hasn't got an operator or people in the team that they could just give equity to. How would you suggest they go about doing that?
Yeah. So I'm a big, big fan of, I think my videos are frozen for some reason, but I'm a very big fan of just equity for everything. Right. And so, like in that specific case, like, know, obviously, you have to make sure the person's right. You've got it.
Cause the downside to equity is, you want to make sure you structure in a way that is tied to their performance, which is way more important than even the performance. You're paying cash. because you know, cash, know, I can make more, but you can't make more equity, right?
So that person is going to be tied to you forever until you buy them out or do whatever. But the exciting thing for us as dealmakers is that none of this stuff, the same way we're just talking about, like none of this stuff is our life's work. I do understand the trepidation when it comes to equity and doing equity deals, when you've poured your time and energy and effort, literally like exchanging your life.
Like you've exchanged a portion of your life for this business, and then somebody comes along, and they want a piece of it. And so it's literally like, Hey, I'm giving you a little bit of me with this thing. Butn, in general, you know, it just is that, that same principle.
You know, one of the things that I've put together is this, this thing that I call the chairman strategy, which we just realized is just all like taking more of a developer's approach to building the business. And so it's like being a business developer where all of the pieces, everything that we need, is out there.
And a lot of time,s just not, it's not even used. know, I'm the building I'm in has office space and for, you know, 50 % of the day minimum, those offices are all empty. There's paying for electricity. So when I'm thinking about an equity deal, whether it's trying to hire somebody or whatever, I really want to start with whatever the first principle is of what I'm trying to get done.
Because what I'm finding, and that's a little bit of what I was alluding to when like, you know, when you say like, hire this team, dah, dah, I just have almost an aversion to it because I've seen over and over that we can get whatever we need done and especially if it is like a first principle where, know, let's say that we need a CMO and we're like, Hey, we need the CMO to run our marketing.
Well, why do we need the CMO? Because we want more customers. So we may not need as high a quality CMO if we just go and do it. We literally like I had an art business where, you know, I know nothing about art, and we bought this art business, and you know, a big part of our marketing was just acquiring social media accounts in the marketing and the art space.
And so our, it changed really what we needed from a CMO. Cause the CMO is really just an acquisitions expert, right? Where we're just buying these, these assets. And so that's all I would say is like, even when you're thinking about a deal, like the one you're mentioning with that kind of equity is really getting down into what does this business need?
And where can I just go get what the business needs without an intermediary person? And I think, going back to AI, I think this is where everything is just going to go, where you just realize that there are a lot of things where people are actually slowing down the way things could work because people aren't open-minded, and they just think like, well, this is how business works. Where you have these employees, and they do these things, and da-da-da.
Well, let's just say, it's not necessarily that the business needs employees. So let's like look at what the business does need and then figure out and like what the employee is actually getting.
And then let's start there and then build the business. And I think it changes if you think about it that way; it changes the way you build a business, but you're still doing a lot more equity-type deals.
Yeah, it's big. It's, I think a lot of people now are looking to how do I grow the business and getting generic basic advice, either from AI or listening to content and trying to implement that and grow their business that way versus like you say, slowing down and thinking, hang on, how do I do this in a way that there's less work, but the scale is significant and there's minimum risk, minimal risk in it and do it that's an out of the box way, but maybe slower path to growth, far better exponential growth over time, which creates a better asset and a better lifestyle. That's why most of us are doing this, right? Is lifestyle.
Exactly.
I wanted to ask some more questions. So that's about equity. What about economic cycles? You've been through a bunch of economic cycles, market changes, when you're building a portfolio, what's the actual mental framework you use to stay rational and not get too caught into, this tariff thing is I can't buy a business that's buying stock from China or the war, there's a war happening and I, you know, I've got to sit on my hands and do nothing.
What's the mental framework that you use? I can share mine, but I would love to hear yours on how to just stay in the game and not freak out and be emotionally ping ponged around by the market and news.
Yeah, one of the things that I was in the first dot com crash and bubble. So the bubble burst in 2001, when I owned the internet-based business. That was my very first acquisition. And so literally 25 years ago, we're going through that dot-com bubble burst.
And I had had a buyer come to me who was from Omaha Security. So the business I bought was called coolwallstreet.com. It was one of the only stock market simulator games that existed back then. And this little company out of Nebraska called Omaha Securities came to us, and they're basically like, hey, we're doing a roll-up of some different businesses.
And you have these young people who are interested in the stock market, and we have a brokerage, so we want to introduce you to the stock market. And they were like, the acquisition is going to be all stock.
And I was like, dude, I'm not buying for all y'all's stock Omaha Securities. What even is that? Long story short, the rest of that roll up was several other brokerages in one of the, used one of the acquisitions' names, which is Ameritrade.
And so that became a massive business, and the dot-com bubble burst, and my business became nothing. So that was, you know, especially at that point, just like a life change, would have been life-changing money.
You know, I went through that and was like, wow, like I, you know, that would have been a great opportunity to sell. The next time that happened was just six years later, when I had owned Homevestors, I'd done an acquisition called Homevestors, and we were in the real estate space, and I had a buyer that was coming to me, and he wanted to buy the business unsolicited.
And so I'm kind of telling him like, no, I don't want to sell,l and this kind of thing. And I saw myself really as this entrepreneur again, as opposed to an asset holder where my job was just to maximize the value of the asset, which, the most important part of that is the exit.
So, you know, he wanted to buy, I wasn't interested in selling, and you know, I ended up giving him a price. And so he came to me once was like, Hey, I just want to take I just want to take $10,000 off the price. I'm like, no, I'm not going to do that. Um, long story short, like we're back and forth several different times.
He finally like at just my price, and I sold the business, and then 2008 happened with the real estate bubble burst. And so I did get lucky in that one. And so the real point of this is I wouldn't encourage people to try to ride all of the waves in their business because every business is going to fail. Like every business is going to go out of business. It's only a matter of when.
The standard, the S&P 500, knows that those are the best businesses on planet earth. And 99 % of the businesses that were on the original S&P 500 are all out of business. And so it is important to understand. Like, I understand having fortitude and not being too emotional and that kind of thing.
But I do want to encourage people to also be on the other side of that, which is that the point of the business isn't to last forever. That is just an impossibility. So you know your business is going to go out of business, whether it's one of these issues that happens or something else. And so the really important thing is you're just always trying to exit.
I love that. It's a vehicle. It's a tool, and you don't want to be in business forever anyway. You know, you don't want to be 95 having to be an operations guy and, know, or even be sitting on the board. You don't want to be going and attending board meetings at that age. You know, like it's a vehicle, you know, it's going to pass, but I like to consider it inventory. is a big, I just like, it's literally like the business is the product. And so that, like, as you have a portfolio, you just have these different equity positions, all this stuff. It's just inventory.
And that's on the, like you said, don't always give up the opportunity to sell because your business isn't gonna be around forever,r even if you just hold onto it. Even if you're not working in it, and you've got good growth strategies and operators doing it. So there are opportunities to sell. I think the same for acquisition.
A lot of people are sitting around going, " Okay, the war, the tariffs, the whatever. Any news thing that pops up can be a reason, like I'm just gonna sit on my cash, which is a scary thing as well, because that is devaluing the more you sit on it anyway. So it's like, there's no perfect time to buy or sell.
It's more about if you can, and it makes sense financially, do it without having the noise of like, do I hold onto the business longer and make more money? Or do I hold onto my cash and not get into the market? Then you're gonna you're gonna get you're gonna have a good time and a tough time, no matter what decision you make.
Yeah, exactly. There's nowhere around it. That is the game.
Thanks for playing the game and being a part of it, and helping me learn so much and helping everybody else learn so much. It's so good to have you on, and yeah, I look forward to doing more in the future with you and seeing what sort of deals you're doing in a year or two to come. Awesome!
Man, thank you so much for having me on again. I appreciate it.
Yeah, likewise. Everybody is listening. Thank you for listening. If you haven't subscribed, I never asked for a subscription. I don't think I've done that in like years. So consider subscribing.
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.
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