In this video, Carl introduces the concept of wholesaling business acquisitions, contrasting it with traditional real estate wholesaling. Real estate investors typically earn $10-15K per property, but Carl explains how business wholesaling can yield significantly higher profits, up to $900K for a single transaction. The focus is on a unique annuity deal structure, similar to leasing a car rather than purchasing outright, allowing quick closings with minimal due diligence.

The annuity deal structure involves paying sellers over time, offering tax benefits and a steady income, which appeals to retiring baby boomers. For example, a business generating $300K EBITDA could be purchased for $1.2M, paid over ten years, with future profit potential upon reselling.

Carl explains how wholesalers can make substantial money by finding buyers and splitting the business’s cash flow. By structuring the deal to ensure cash flow exceeds debt servicing requirements, wholesalers can earn a stable income, sometimes equity, and even maintain minimal involvement.

This method allows wholesalers to leverage deals they find but may not want to keep, providing passive income and equity opportunities. By strategically growing the business’s revenue, buyers can maximize their returns while the wholesaler benefits from their initial structuring.

The video concludes by highlighting the annuity structure as a creative and lucrative way for investors to enter business acquisitions with little upfront cost and high earning potential.

Full Transcript:

Hey, guys. Carlo. I wanna talk to you today about wholesaling. So we’re not gonna be talking about wholesaling real estate.

We’re gonna be talking about wholesaling business acquisitions. So if you’re a real estate investor and you wholesale, then you can make ten, fifteen thousand dollars every time you wholesale a property to somebody else. That’s like you’re locking that deal under contract, getting really creative on the deal terms, and then selling that business to somebody else or selling that house to somebody else, and they’ll pay an assignment fee to you. Could be ten, could be fifteen k.

And if you do four or five of those a month, you know, you’re making fifty to seventy five k a month. That’s not bad. But what if I told you that you could wholesale just one business and make nine hundred thousand dollars for every business that you wholesale? Well, I’m gonna teach you in this video how to do it.

And we’re gonna use a creative deal structure called the annuity deal structure. So what is the annuity deal structure? So an annuity deal is like you, leasing a car versus buying a car. So if you wanna buy a car, you wanna buy Tesla, you can rock up to the Tesla dealership, pay fifty thousand dollars and the car’s yours, or you can actually lease the Tesla for a monthly payment over however many years that you decide to do it.

And this is exactly what we’re talking about with an annuity deal. It’s buying a business like you would lease a car. You’re showing the cash flow between you and the prior owner over a five to ten year period. One of the real big benefits of an annuity deal is they’re really, really quick to close.

You can close that deal really in a matter of days or two weeks maximum if you wanna take a lot of time over it for your first deal. And that’s kind of contrary to you going and getting, say, an SBA loan that would take you at least sixteen weeks to get that deal done. And sellers often don’t want a lot of that brain damage that can come from all the questions and DD and information that a bank and the SBA are gonna wanna know about the business. So you can do it really, really quick.

And then that means you, as the buyer or as a wholesaler, can do very little to no due diligence. Just make sure legally it’s safe to buy. There’s no big pending litigation flying around and that they’ve made their tax returns and everything’s good from that perspective. Take you one to two hours to do that DD, and then you can do the rest of the due diligence once you bought the business.

And this is saving this is solving a very major problem in the United States right now with baby boomers. A lot of baby boomers are retiring. They have very small four zero one k’s. They want income, not capital gains because they get all their money at closing.

They’re gonna pay a whole bunch of tax, maybe fifty percent or more, and then they’re gonna have less money to invest to create, like, an income stream for them. So we can pay them a lot more money over an extended period of time. And what’s really interesting is if we look at the valuations, let’s say we’re looking at a business doing three million of revenue, ten percent margin, three hundred thousand dollars of profit, which we call EBITDA. And let’s say the seller, wanted a four times multiple for that business, one point two million dollars on an annuity.

And if we go forward three years, let’s say we grow that business to five million, we get it to a million dollars of profit, twenty percent margin, we sell for a five times multiple. We’re buying at one point two through this creative structure. We’re selling for five million. Then let’s say within that period of time, we’ve paid down four hundred thousand dollars of the one point two million purchase.

That gets netted off. So we’re netting four point two million dollars as an exit, which is really, really cool. And because we’re paying the seller in installments, it’s a lot more tax efficient. So let’s talk about how we wholesale this deal.

So it’s a one point two million dollar purchase price. We’re gonna pay the seller for ten years at one hundred and twenty thousand dollars per year paid monthly.

It’s existing cash flow is three hundred. So as the wholesaler, what we can do is we can start divvying this up. We can say, well, okay. The debt service cover ratio, which is a really important term to use for the deal to make sure it’s safe, we wanna make sure that it’s at least one and a half times the amount of cash flow pumping through the business divided by the amount of cash flow that needs to go out to service the deal.

So in this example, the seller wants a hundred and twenty a year. It’s cash flow in three hundred, so that’s a two point five x debt service cover ratio, which is three hundred divided by one twenty. So then the seller gets a hundred and twenty thousand dollars a year, and then you have a hundred and eighty thousand dollars left between you and the buyer if you don’t want this business. So if you don’t want this business, not in your lane, but you’ve been able to go under contract, you might come to me and say, hey, Carl.

I’ve got a deal for you.

You’re walking into ninety thousand dollars a year of free cash flow. You don’t have to do anything. You don’t have to put anything down. I’m gonna give you ninety thousand dollars a year of free cash flow to take this business on.

What am I gonna say? No? Of course, I’m not. I’m gonna say, thank you so much.

That’s amazing. But you’re gonna make ninety thousand dollars a year as a wholesaler. You’re gonna get a little piece of equity in that deal potentially. And what’s really cool is if we go forward, the current year, you’ll have three hundred thousand dollars of cash flow, one twenty for the seller, ninety for the buyer, ninety for you as a wholesaler.

But then even if you did get equity, even if you’re rolling just getting that ninety thousand dollars a year, for me as the owner of that business, I’m gonna scale that up. Within three years, I might be making a million dollars a year in cash flow. I’ve still only got to pay the seller one twenty. I’ve still only got to pay you as the wholesaler ninety.

I’m getting the rest, which is seven hundred and ninety thousand dollars. So hope you found that useful. This is a really great way to be creative as wholesaling deals and using the creative annuity deal structure. Don’t forget to hit like or subscribe so you can get access to all my other videos as we put them up on YouTube, and I will see you guys soon.

Until then, bye for now.