How to Buy a Business: 4 Important Factors to Consider

Key factors I consider when deciding to purchase a company.

In a past video, you said you were going to purchase a bunch of companies this year. What are the factors you look at when you decide to buy a company?

0:10 I don't discuss that much because I don't want people knowing because it's going to create more competition, but I'll tell you what I look for, and this applies to any companies out there if you want to purchase some.

How to Buy a Business Factor #1
0:20 I look for EBITDA. At least three years worth of EBITDA. So I'm looking for three years running revenue and profit, and I buy companies for 2.5 to three times profit. And yearly profit. I won't pay a dollar more than that.

How to Buy a Business Factor #2
0:40 I also look for companies that have high expenses, and I cut down. I know that sounds mean, but it's a reality, right? I'll cut the extra expenses; I'll make it more profitable.

How to Buy a Business Factor #3

1:20 So an affordable acquisition when I look at how much revenue I can generate per visitor. It's an expensive acquisition when you look at how much multiple I'm paying, cause I'm buying zero in revenue, there are expenses, and I'm just buying the website. I don't get the revenue; I don't get the software, anything like that.

1:40 Those are the main factors I'm looking for, I'm not looking for a team to come carry over when I'm buying companies, more so, three years worth of revenue, profit, right? And I want to pay a multiple of 2.5 to three X profit.

How to Buy a Business Factor #4
2:00 The last thing I'm looking for is traffic. So anyone who's a leader in my space that I can buy, especially if they're not making much, to them, I may end up giving 'em like, few hundred grand, a half a million, million dollars and they'll be like, oh my god, I got a million bucks when I'm losing money. I'm like, yeah, no problem, cause look, you know, get rid of the team, I know this sounds ruthless but sadly, sometimes this is what business comes to, and I'll take everything, and I'll merge it over into my core site.

2:20 Now, of course, if there are talented people on that team, I'll take them over, or I'll try to find them a job. Any time I let someone go, I go above and beyond to hit up other people I know and go to bat for those people and try to place them in another job. But that's my strategy when it comes to buying businesses and when I do that, I want to be the largest in my space, so I'll keep purchasing other people to be the largest because once you're the largest, the amount of multiple that you get on valuation is much more substantial.

2:40 So a lot of times, companies will be worth three, four X, five X profit, sometimes even three, four, five X revenue. But if you're the leader in the space, sometimes you're worth 10, 20 X revenue. So I'll buy a lot of smaller players up for cheaper, merge them all in, I'll be the most significant player, and I'm doing arbitrage on the multiple. That's my strategy with acquisitions.

So if you like this video, like, comment, share. I do appreciate it, and if I can ever do anything to help you out genuinely, even it's, you know, giving you some advice, I don't care for the money, just leave a comment below, and I will do my best to try to help you out and answer all your questions. Thank you for watching.

[avneet]

Hey neil, my sole purpose of commenting is to tell you that you're amazing 😊😊

[samueldhinakar]

You are pure. Generous. Talented. Blessed to have you in our generation. The way you help people to get job makes you an angel. Thank you sir🙏🏻❤️

[JasonAKMitchell]

The funny thing is that I was going to ask you more about buying businesses. And here's a video on it right here.

I've been studying LBOs and how to use leverage to buy business (obviously cash flowing) and then keep running them for that cash flow.

[liambbarr]

Neil, what would you recommend is the best strategy for a very small AdWords budget regarding a local business? Think rental services. P.s: Thanks for replying to comments, it truly shows you care about your audience!

[dansal]

Niel what tools/ services do you use to verify profits? It seems like most sellers ask for 20-30x monthly revenue, what's your take on this since your looking at yearly earnings.

[matislf]

Super solid high level stuff man. Thanks!

[RohitGupta-]

I'm very excited about Ubersuggest new feature. Thank you for bringing such an amazing feature for us.

[wedoebe]

Hi Neil, this video cam at the perfect time.👌

I have a question for about a situation that I have. I have friend who has a business that he is trying to get a buyer for (it's a local business), but he having a hard time finding a buyer. The business is Synthetic Grass company (synthetic grass is more sought after by businesses and consumers then I thought), with great financials. The business is valued at over a million dollars; and only wants 800, 000. He doesn't want to go the 'business broker' route, as he doesn't want to give up the 10% that most business brokers want if they get the business sold.

Any suggestions❓🤔

[hrishikeshpawar]

Hey Neil! Please don't Stop 🙏❤ this is

[gaminggajju]

Hey Neil ! Here is my question If i Add a youtube Video in my Blog Post and a user come from google search on my blog post and watch video

So this time is count on my site or not ??

[shibamkar]

My competitors are writing very short posts of about 500 words but still getting 1st position for the keywords. And they have many posts like this which is driving them lots of traffic. How can I beat them and outrank them in SERP?

[Pranav-cfdm]

Hey Neel, awesome video very informative.

[mauricemorris]

When purchasing a business the due diligence process I need help with can I speak with you sometime. Thanks for the video too

[overscarf]

Neil how me and the other people will be successful online marketing there are so many competitors on social media. also people have got a webpage and they are using eally good equipments buying from Amazon and they create an amazing content for google, taking great photos. Their dreams are coming true but we are still dreaming of being success.

[tjmanou]

HELP!!! I get great CTR and conversion rate on CPC for last 12 months. last four days a 75% drop in leads even tho looking at CPC nothing is different. still great CTR and conversions. Spoke with Google. everything seams fine their end. User behavior? does this happen often? should i redesign the landing page? thank you Neil.

[heed.]

Great video as always, Neil! Do you read a lot? if so, do you have (recent) list of books you'd recommend? thanks.

[naddyamin]

Hello Neil, Greetings from India..
I am following you for almost 6 years now, wrote several emails as well unfortunately never heard anything back I understand you have too much to work on, no hard feeling love your contents keep this up!

One Question: How to boost Seo for Copywriting? for blogging its seems okay to rank for we need to write something around the title we have chosen but what about a services how to make it more attractive and at the same time seo implementation is perfect so it can generate leads and business ?

[sainigagz]

Hey Neil i need a suggestion!
My site speed is fast without amp but with amp it's taking more time!
So i go with the amp or not! And also does AMP help with the ranking's?

[nadersabry]

Neil in your case as a personal brand can you still sell it to someone else does that work out well

[manavsingh]

Hey Neil, I want to create my content around case studies. I want to look at the marketing campaigns and then write on my blog what tactics they used to reach their goals. How can I do that? How to create case studies?