10 ms·

I Bought a Business for $0

gandalfian 6y ago
He paid for the business in instalments. The monthly instalments were less than the monthly profits. I think that is what he is saying.
- WrtCdEvrydy 6y ago
  Yeah, but it doesn't clickbait as much... Should have been "I got paid to buy a business from someone"
  - IncRnd 6y ago
    I sold my last house for more than I purchased it. Next week I'll create an investor's newsletter about how to purchase a house and get paid to live in it!
    - __blockcipher__ 6y ago
      Oh god, I’d wager you just described 1000 different real real estate newsletters:P My biggest pet peeve is these “real estate investors” who don’t understand investing in any serious way and so falsely misrepresent renting out a property as “passive income” (how laughable) and list their “investment returns” without any noting of the massive leverage it took to get those returns. If you buy a house with 5% down and the housing market goes up 50% in 5 years you’re not an investment genius, you just took a risky highly leveraged bet and it paid off (and housing bets at least in America do tend to pay off thanks to the insanity of central-bank-attributable rock bottom interest rates as well as the essentially propagandistic way that Americans are taught to think about real estate) So not sure if I have a coherent point here but I wish people would (a) actually adjust for inflation when telling their “I bought at X and sold at the 1.5x 4 years later” stories and (b) would also show some awareness of how insanely leveraged people often are on their houses.
      - toast0 6y ago
        > If you buy a house with 5% down and the housing market goes up 50% in 5 years you’re not an investment genius, you just took a risky highly leveraged bet and it paid off (and housing bets at least in America do tend to pay off thanks to the insanity of central-bank-attributable rock bottom interest rates as well as the essentially propagandistic way that Americans are taught to think about real estate) I agree with most of what you're saying, but if your mortgage is non-recorse (which is the case for purchase first-mortgages in CA at least), I wouldn't say it's a risky bet. If it goes poorly, you can walk away and the bank gets your house (and you get imputed income maybe). You only lose your down payment and any equity, which at 5% down is probably less than the loss the PMI took. It's not the same riskyness as say buying stocks on margin, or selling short or writing uncovered options.
        scubbo 6y ago
        Having just bought a house in California - what is this "5% down" you speak of?
        astura 6y ago
        FHA loans have a down payment requirement that can be as low as 3.5% https://www.hud.gov/buying/loans https://www.hud.gov/buying/loans Also, VA loans let you buy a house with no down payment. (For veterans)
        IncRnd 6y ago
        NOW, in my much-anticipated newsletter I will reveal all the tips and game-winning strategies I've discovered over the course of my high-powered investment career. If you act today, I will include the secrets of how to get a 5%-down mortgage without any PMI!! This is a hidden method used exclusively by the super-rich to get even richer. Once you learn what I will teach, you will live worry-free, regardless of what pitfalls you encounter in life. BONUS! The government doesn't want you to know this secret method to get a 15% piggyback loan, but I will show you this super-simple almost "devious" extra double-tranche, rolling mortgage financial instrument - and even more. Why wait to order, when you could make them all wait on you?
    - neonological 6y ago
      No that's different. The more accurate analogy is if you can charge rent to tenants in the property in a way that covers all expenses. Then other then the down payment the tenants are basically letting you leverage an appreciating asset at no cost to you. I do this now in California and with the essentially 0% interest rate I refinanced the loan and now I generate a profit every month from leveraging an asset on top of the appreciating value. Rent is the black hole people can use to leach resources away from productivity. Simply by taking a loan and redirecting the economic output of people who live on my property towards the loan I benefit without producing any utility for the economy at all. That is in a sense "Free." If the loan is paid off, that money gets redirected towards me again with minimal effort on my part.
      - kbutler 6y ago
        > I benefit without producing any utility for the economy at all. You provide the tenants the opportunity to have housing without the risks of ownership (the down payment and risk of declines. See 2008, for example). It's not for everyone, and moving to ownership may be more beneficial long-term, but it is needed for some and at some times.
        neonological 6y ago
        I didn't own property, then I went to a bank to apply for a loan. Now my tenants pay for that loan with rent. They are paying the bank interest and money for my loan on a property I never lived in nor have the money to purchase without a loan.
        kbutler 6y ago
        Did you compel them to make that deal? Did you deceive them to make that deal? You had the credit and financial resources to commit to that purchase. Some reasons they may choose to rent instead: - lack capital - lack credit rating - not willing to commit for the long-term - not want to be responsible for maintenance - not willing to assume risk in the real-estate market I know people who are financially literate and have capital who choose to rent. I chose to purchase, but came to realize that “home ownership” is two-way — to some extent you’re also owned by the home.
  - devoutsalsa 6y ago
    I’m dating a non-native English speaker. This morning I was explaining clickbait to her. First I had to explain bait. Next I explained the title of “The Witcher Season 2 Netflix release date” [1] Finally I shared with her the content “Those looking for news of a final release date for The Witcher Season 2 on Netflix will be disappointed to learn that no date has been set just yet.” [1] https://www.shacknews.com/article/123143/the-witcher-season-2-netflix-release-date https://www.shacknews.com/article/123143/the-witcher-season-...
    - pimlottc 6y ago
      Surely they have clickbait in other languages?
      - tomashubelbauer 6y ago
        There's not a good word (that I know of) for this in my language (Czech). People who can speak English use the English word. People who don't just say something along the lines of the article author being a bastard.
        ElFitz 6y ago
        In French some say "putaclic". But it’s not widespread outside of the "old-ish" French tech sphere and, being composed of the word "pute", a slang for prostitute, quite vulgar...
        177tcca 6y ago
        So, less reframing and cutesy phrases, perhaps? Things might have been a lot different if instead of saying LinkedIn was using "dark patterns" to grow, they were being pieces of shit.
        tpm 6y ago
        Different for sure, but better or worse? Here in our culture we don't really do reframing and cutesy phrases. But the public discourse is very vulgar and pessimistic, and this is not a fad, it's like that for decades already.
- philshem 6y ago
  > The monthly instalments were less than the monthly profits. From my reading of the article, it wasn’t monthly profit but rather monthly revenue. From the article > Because the business was already doing more than our monthly payments to the seller, as long as the business didn’t implode (it didn’t ), we’d be able to buy the business with its own revenue.
- rwmj 6y ago
  He's paying in time and risk, rather than money. He has to run the company, which presumably is a full-time job, and there's a risk it implodes before he has fully paid for it (which it didn't, but it might have done).
  - ilaksh 6y ago
    I assume he hired one or two people from overseas and paid them the bare minimum to keep the business just operational so that he could pocket as much as possible.
    - justinmares 6y ago
      Nope, we did not do this. We invested a ton in the business and didn't take a dollar out (besides small salaries) for 2.5 years. More context here - https://microconf.gen.co/justin-mares/ https://microconf.gen.co/justin-mares/
  - deleted 6y ago
    [deleted]
  - imtringued 6y ago
    His only risk is being unable to pay, the deal being canceled and ultimately losing payments (which according to him were paid for by the business generating a profit, so he never risked his own money). Since the seller lent the business to him he didn't even have to provide upfront capital.
- isatty 6y ago
  Right, when put that way it does not make sense (even if the original owner had to put time and effort into it) - but the original owner got to keep a fat chunk of equity + monthly payments so it's somewhat of a fair deal.
smoldesu 6y ago
TL:DR - person spent money on company, company revenue paid off bill before it was due
barbegal 6y ago
Whats the legal purpose of a letter of intent? If the letter isn't binding then surely it has no real legal power.
- maneesh 6y ago
  It's similar to an engagement proposal for marriage. You aren't legally requiredto get married if you get engaged --- but having an engagement first gets all parties more committed, makes it clear that there will be a next step. He mentions in the article, it serves to provide some sort of verifiable agreement on the important numbers, and security that the buyer is serious
- IncRnd 6y ago
  An LoI lays out the understandings of the parties, so they can know whether to proceed and under what terms they should do so. An LoI also creates a backstop of intents in case of legal proceedings. Thirdly, an LoI let's parties define expected remedies in case the deal fails. There may additionally be specific implementation details spelled-out. I'm sure there may be more reasons, but those are the ones I'm familiar.
- inopinatus 6y ago
  LOIs are dangerous documents because, unless drafted by a capable lawyer, they likely create a contract. If someone asks for a LOI with regards to, say, an equipment purchase, and suggests that it is a “non-binding document”, I halt the deal because they’re probably either unscrupulous or incompetent. In such circumstances a LOI is essentially a badly written purchase order, and the other party may rely on it, and bill you accordingly, and repudiation is actionable. The document I hope they describe should be more like a Heads Of Agreement, setting out, at most, terms of reference for a deal.
- deleted 6y ago
  [deleted]
- detaro 6y ago
  Details depend on the legal system, but an LoI can have binding clauses (e.g. an exclusivity clause) and it not being binding for the final contract to actually happen doesn't mean it isn't requiring you to be truthful. E.g. if you state that you intend on selling to X (but some things still need to be hashed out which could break the deal), and X on that basis pays an auditor or lawyers to finalize details, and then it comes out that you actually were already in the process of selling to Y and didn't really intend to sell to X, then you might owe X compensation for the costs they incurred based on your misrepresentation - and X has a signed piece of paper to point to as evidence. (And in reverse if X strings you along with misrepresentations) And the term LoI is somewhat vague - LoIs can also be actual contracts if they aren't carefully worded.
rvnx 6y ago
The other side of the story is interesting as well: https://medium.com/swlh/saas-7th-time-lucky-b971dae7d36 https://medium.com/swlh/saas-7th-time-lucky-b971dae7d36 Essentially, the former owner had no interest into maintaining the business (serial entrepreneur) and just likes to launch new ideas
totoglazer 6y ago
Seems odd the previous owner accepted such a low monthly payment. I guess it required a lot of work? Or perhaps the owner felt the downside risk was substantially higher than it appears?
- deleted 6y ago
  [deleted]
- Tuna-Fish 6y ago
  He got to keep 20%, and the new owners were much more interested in putting in the work for growing the business than he was. 20% of a business that's now more than 5 times the value it was when he sold 80% of it, plus $400k cash, and not having to work on it at all anymore can be a pretty good deal on it's own...
  - treelovinhippie 6y ago
    The equity piece is the key. If you sold for a lump sum you're all out and happy. But I imagine if you sell for a monthly payment, you're still emotionally attached. Would suck to check on how the business is going and regret your decision to sell for a monthly payment with no equity.
    - hayd 6y ago
      It does depend how unscrupulous the buyer is... you may end up being cheated out of your equity. That said, I like the cash-equity split without the condition of working on the project further yourself. It gives an incentive for the seller to not disappear/become uncontactable...
- marcins 6y ago
  My understanding is the numbers in the article are made up to illustrate the deal structure, not the actual numbers in the deal.
iujjkfjdkkdkf 6y ago
I don't know if this qualifies as a "dark pattern", but this kind of "social proof" feature that the article is about buying really is hostile to consumers and is nothing to be proud about buying.
- kyrieeschaton 6y ago
  Not true. There is a reason why people sort products by popularity. This is just a variation.
- mlyle 6y ago
  This doesn't seem so bad to me. I've enjoyed seeing it at the bottom of sites. The upside is, it provides some evidence that the site is actually transacting business besides me (that could be fake). And I've clicked on the listings of things other people are buying-- e.g. what does this business mostly sell to people?
  - ALittleLight 6y ago
    I just assumed it was fake. It feels so scammy.
    - luplex 6y ago
      That would be false advertising, therefore illegal. I'm sure smaller sites get away with it.
      - detaro 6y ago
        Do you have a source on that? (It's not exactly uncommon to be obviously fake, e.g. travel sites that show you they sold more rooms in a hotel in the past week than the hotel has)
        jfk13 6y ago
        They may have truly sold more rooms than the hotel has... just not all for the same night.
aeturnum 6y ago
This seems like a great deal for everyone involved! I think the real takeaway here is that many entrepreneurs are not interested in running successful business. They'd rather be starting new things! So if you are good at running businesses there's a decent chance you can take over their business in return for letting them keep a lot of the profit. Everyone wins - the creator gets an income stream to support their future work and you get a business that's already working.
- jpindar 6y ago
  And people have different definitions of successful. Some might think a business is not worth bothering with if it's not going to make them rich, I'd consider it successful if it could pay my rent.
  - that_guy_iain 6y ago
    Yea, I was reading lean startup and it goes on about how just because the revenue and profits are going up doesn't mean you're doing well. It considered success as growth by other metrics.
  - taneq 6y ago
    Exactly. My company’s first product is niche enough that it will never scale to the stratosphere... but my goals for it were explicitly: 1) To provide a steady enough stream of income that I don’t have to go back to a “real job”. 2) To do so while allowing me to spend some time developing my next product (with better scaling characteristics.) It’s doing both of these so I consider it a total win, despite me still not owning a private island.
- vdfs 6y ago
  What i don't understand is, if the seller is not in need for the whole selling price, and the MRR is covering his installment, why sell it? He will make $500K in 20 months and keep 100% ownership
  - superhuzza 6y ago
alex_g 6y ago
> "Buying up small apps in the Google Chrome or Mac app store." This is a focus of mine. I've recently acquired a Mac app and I have a hunch that there are a lot of small Mac apps producing small but reliable income.
- WesleyJohnson 6y ago
  At the risk of inviting competition, to you have posts that detail how you go about doing your research on what to buy?
  - alex_g 6y ago
    I didn't want to share this in my comment at the risk of coming across as a self-promoter, but I've started writing about what I look at when evaluating an opportunity. https://www.getrevue.co/profile/AppleTurnover https://www.getrevue.co/profile/AppleTurnover I don't really mind competition, I'm sure there folks that have been doing what I am for many years now. If I had to boil it down to a few key points: - Is the app something I'd use - Is it something I'm interested in pushing towards "best-in-class". I'm an optimistic person and I know a lot of app acquisitions will end up in milking existing users and adding little value, but I'd like to believe that app acquisitions have the benefit of making apps better overall. Rather than starting from scratch, developers have the opportunity to push forward from a solid base that has achieved some level of product-market fit. - Does it have something in common with other things I'm working on/ working towards? Sharing tech/marketing/sales efforts will help maximize the time spent on maintenance and growth.
surround 6y ago
> we stumbled across Notify: a simple Shopify plugin that would pop up at the bottom of a website, displaying a purchase another customer had recently made. Not only are these kind of pop ups incredibly annoying and an invasion of the purchaser’s privacy, they are also considered to be dark pattern. https://webtransparency.cs.princeton.edu/dark-patterns/ https://webtransparency.cs.princeton.edu/dark-patterns/ (See: Social Proof)
- 55555 6y ago
  What do you do for a living?
- kbutler 6y ago
  Annoying, yes. Invasion of privacy? No. (Someone, somewhere bought one of these. Who's privacy has been invaded?) Considered a dark pattern? Again, "somebody bought one of these". Pretty insignificant.
  - r1ch 6y ago
    I've seen similar Shopify apps that exposed other customers entire order information publicly. Don't trust that every developer implements apps in a perfectly private way.
taytus 6y ago
TL;DR Marketing bullshit for some startup.
vidarh 6y ago
One area I have wanted to play in, and started looking at before I ended up in my current job, was to seek out businesses where the owner wanted to sell because they struggled with the costs of scaling. When I was running my consulting business, I can across several where the path to fixing this was obvious for me, and I offered people to fix their scaling challenge for a percentage of savings or a percentage of the business, but I was starting to look for businesses like this to outright purchase, as there were a number of owners who when faced with this just saw it as too complicated for them to want to deal with. If I find myself back doing consulting again at some point, I'll likely revisit that, as so many people don't understand how to cut their hosting costs.
- 55555 6y ago
  This is interesting to me. So would video sites be be a good candidate? High hosting bills leading to low profit margins leading to low valuations. How much can you realistically cut them by?
  - vidarh 6y ago
    Potentially. It really depends how well they've done it so far. One site I looked at was an image hosting site, where they unfortunately ended up selling for a pittance because they just didn't have patience to have the work done, but they were at a scale where setting up their own simplistic CDN would have allowed them to cut bandwidth bills by about 70%-90% (ideal thing to look for: anything with huge AWS bandwidth bills, as AWS bandwidth egress is extortionate). Storage as well was an issue there in that their storage backend was expensively redundant without adding much security. E.g. they could have reduced their number of copies substantially by using a backend using erasure coding. They also could have cut a substantial amount off their hosting bill simply by running an image optimiser on upload. Overall reduction looked like it would have been ~50%-60% at least. It was also under-monetised in all kinds of ways, but cutting even 30% without any improvement in monetisation would have made that example profitable. There are a lot of companies out there where hassle causes businesses to get sold for a pittance or even shut down because the owners doesn't have the patience to see a process like that through. I talked to another one - actually an image hoster that would have made a perfect complement to merge into the one I mentioned above - that just shut down while I was talking to the others because he didn't even want to go through the hassle. In the end he just refused to even try selling anything but the domain names. Figuring out a process to get people like that to sell while still a going concern has lots of potential. Of course there are risks there in terms of guarding against people who are in a rush to sell because they're trying scam you. But also a lot of people who are just burned out or feel they have run out of options and want out and who are grateful for any option that lets them recoup something. For a decent person there's a lot of opportunity to both make a good profit and help people out there. Of course there's also plenty of opportunity to be an asshole and profit even more.
binbag 6y ago
He bought a business for $400k.
nickelpro 6y ago
Am I the only one who finds the initial email very unprofessional? Everything from the subject line, all lower case, even the closing words. I wouldn't have taken an email like that seriously or would have assumed it was a scam.
- machomaster 6y ago
  Definitely not the only one. The second screenshot of an email also looks highly suspicious from my non-American point of view. The first sentence has "great (meeting you)". The second sentence has "really excited", "greater (potential)" and "would love (to play a role)".
mrtweetyhack 6y ago
Yeah, I've see a site with that shit and I hate it
mikikian 6y ago
This sounds a lot like a seller financed deal. Hopefully the seller had a secured loan against those installment payments because in the event of default, at least the seller gets his/her company back.
sidlls 6y ago
This is as misleading as those real estate shows that promise "no money down" or "other people's money" style financing. They bought 80% of a business at 0% APR for a set of 20 installment payments. They are funding the payments with the business' revenue--meaning they are not able to pocket that cash themselves, i.e., they're using their (business) income to pay the cost of the loan.
- inopinatus 6y ago
  The title is clickbait, but the deal itself is also boring. Basically, they funded the capital for an acquisition, from debt representing the expected future cashflows of the acquired entity, with repayments timed similarly to match. As M&A goes, that is ho-hum unremarkable. It's the most ordinary of all M&A business cases, or indeed any business case, viz. that the IRR exceeds the WACC. The only aspect of this deal that looks even slightly uncommon - and then, only very slightly, depending on your locale - is that the original founder is the bond holder, and the capital thereby very cheap. Being funded by privately issued debt means the glibness in the article's tone must be overshadowed by the unstated but strongly undesirable consequences of defaulting on the repayments. Yes you can "buy a company for $0", at least going by the amortized net values of future cashflows. But caveat emptor, if your eyes aren't wide open, you can also lose your shirt.
  - pottertheotter 6y ago
    If it were so unremarkable, why isn't there a term for this sort of transaction and an I industry built around it? I suggest the transaction be called a leveraged buyout (we can shorten it to LBO) and call the industry private equity.
    - hedgehog 6y ago
      Seller financed sales are reasonably common in business and real estate.
    - deleted 6y ago
      [deleted]
IkmoIkmo 6y ago
Same energy as all someone saying he bought a home for $0 by buying it with a mortgage and renting it out such that the mortgage is paid by the tenant. It's completely fine saying you bought a business with $0 downpayment. But saying you bought it for $0 is just silly, you didn't. If you did, you could close down the business the same day and walk away from it. But you can't, because in fact you signed a contract for half a million in instalments. The article is nice but there was no need for the clickbait title.
- high_byte 6y ago
  Article is great. I'm comfortable with the title, the meaning pretty evident in this case. IMO. or maybe I'm just used to clickbaits I already translate them in my mind...
  - Someone 6y ago
    Evident? My guess was that they bought a company that has serious debts or other obligations. On those, you can sometimes get money to buy them.
purple_ferret 6y ago
From one of his other articles he linked: >Similar arbitrages exist everywhere. My old roommate for a while was buying Toyota Prius’ and paying people minimum wage to drive them around taking Uber rides. He'd then take the difference between what Uber paid him and what he paid his drivers… often 5-10k a month. Is this legal?
- HeyLaughingBoy 6y ago
  If they were properly classified as employees, why wouldn't it be?
kitcar 6y ago
"I bought a business using time instead of money"
Havoc 6y ago
How does a notification pop up move a million in yearly revenue though? I get that it’s recommending a product but still seems pretty wild
dr_kiszonka 6y ago
Reviews Meta is looking for a buyer [0,1]. I am not affiliated at all with them, but I use the website frequently and would hate to see it discontinued or purchased by someone malicious like The Great Suspender was. 0. https://reviewmeta.com https://reviewmeta.com 1. https://reviewmeta.com/blog/successor-to-reviewmeta/ https://reviewmeta.com/blog/successor-to-reviewmeta/
supert56 6y ago
Interesting article. I didn’t know about this as a method so it was useful to me. Thanks for sharing!
eb0la 6y ago
A friend did something similar: he bought a hosting business and paid with cash the business made. Totally licit. It was a similar case: the founders just wanted to pivot and do something else after >5 years in the business.
projektfu 6y ago
Most veterinarians who buy practices buy their businesses "for free". There is usually a large bank loan and a small seller loan. The deal is structured to pay a decent salary and cover the debt in 10-15 years. Sure doesn't feel free, though, to have a personal guarantee on a gigantic loan.

He paid for the business in instalments. The monthly instalments were less than the monthly profits. I think that is what he is saying.

WrtCdEvrydy 6y ago
Yeah, but it doesn't clickbait as much... Should have been "I got paid to buy a business from someone"
- IncRnd 6y ago
  I sold my last house for more than I purchased it. Next week I'll create an investor's newsletter about how to purchase a house and get paid to live in it!
  - __blockcipher__ 6y ago
    Oh god, I’d wager you just described 1000 different real real estate newsletters:P My biggest pet peeve is these “real estate investors” who don’t understand investing in any serious way and so falsely misrepresent renting out a property as “passive income” (how laughable) and list their “investment returns” without any noting of the massive leverage it took to get those returns. If you buy a house with 5% down and the housing market goes up 50% in 5 years you’re not an investment genius, you just took a risky highly leveraged bet and it paid off (and housing bets at least in America do tend to pay off thanks to the insanity of central-bank-attributable rock bottom interest rates as well as the essentially propagandistic way that Americans are taught to think about real estate) So not sure if I have a coherent point here but I wish people would (a) actually adjust for inflation when telling their “I bought at X and sold at the 1.5x 4 years later” stories and (b) would also show some awareness of how insanely leveraged people often are on their houses.
    - toast0 6y ago
      > If you buy a house with 5% down and the housing market goes up 50% in 5 years you’re not an investment genius, you just took a risky highly leveraged bet and it paid off (and housing bets at least in America do tend to pay off thanks to the insanity of central-bank-attributable rock bottom interest rates as well as the essentially propagandistic way that Americans are taught to think about real estate) I agree with most of what you're saying, but if your mortgage is non-recorse (which is the case for purchase first-mortgages in CA at least), I wouldn't say it's a risky bet. If it goes poorly, you can walk away and the bank gets your house (and you get imputed income maybe). You only lose your down payment and any equity, which at 5% down is probably less than the loss the PMI took. It's not the same riskyness as say buying stocks on margin, or selling short or writing uncovered options.
      - scubbo 6y ago
        Having just bought a house in California - what is this "5% down" you speak of?
        astura 6y ago
        FHA loans have a down payment requirement that can be as low as 3.5% https://www.hud.gov/buying/loans https://www.hud.gov/buying/loans Also, VA loans let you buy a house with no down payment. (For veterans)
        IncRnd 6y ago
        NOW, in my much-anticipated newsletter I will reveal all the tips and game-winning strategies I've discovered over the course of my high-powered investment career. If you act today, I will include the secrets of how to get a 5%-down mortgage without any PMI!! This is a hidden method used exclusively by the super-rich to get even richer. Once you learn what I will teach, you will live worry-free, regardless of what pitfalls you encounter in life. BONUS! The government doesn't want you to know this secret method to get a 15% piggyback loan, but I will show you this super-simple almost "devious" extra double-tranche, rolling mortgage financial instrument - and even more. Why wait to order, when you could make them all wait on you?
  - neonological 6y ago
    No that's different. The more accurate analogy is if you can charge rent to tenants in the property in a way that covers all expenses. Then other then the down payment the tenants are basically letting you leverage an appreciating asset at no cost to you. I do this now in California and with the essentially 0% interest rate I refinanced the loan and now I generate a profit every month from leveraging an asset on top of the appreciating value. Rent is the black hole people can use to leach resources away from productivity. Simply by taking a loan and redirecting the economic output of people who live on my property towards the loan I benefit without producing any utility for the economy at all. That is in a sense "Free." If the loan is paid off, that money gets redirected towards me again with minimal effort on my part.
    - kbutler 6y ago
      > I benefit without producing any utility for the economy at all. You provide the tenants the opportunity to have housing without the risks of ownership (the down payment and risk of declines. See 2008, for example). It's not for everyone, and moving to ownership may be more beneficial long-term, but it is needed for some and at some times.
      - neonological 6y ago
        I didn't own property, then I went to a bank to apply for a loan. Now my tenants pay for that loan with rent. They are paying the bank interest and money for my loan on a property I never lived in nor have the money to purchase without a loan.
        kbutler 6y ago
        Did you compel them to make that deal? Did you deceive them to make that deal? You had the credit and financial resources to commit to that purchase. Some reasons they may choose to rent instead: - lack capital - lack credit rating - not willing to commit for the long-term - not want to be responsible for maintenance - not willing to assume risk in the real-estate market I know people who are financially literate and have capital who choose to rent. I chose to purchase, but came to realize that “home ownership” is two-way — to some extent you’re also owned by the home.
- devoutsalsa 6y ago
  I’m dating a non-native English speaker. This morning I was explaining clickbait to her. First I had to explain bait. Next I explained the title of “The Witcher Season 2 Netflix release date” [1] Finally I shared with her the content “Those looking for news of a final release date for The Witcher Season 2 on Netflix will be disappointed to learn that no date has been set just yet.” [1] https://www.shacknews.com/article/123143/the-witcher-season-2-netflix-release-date https://www.shacknews.com/article/123143/the-witcher-season-...
  - pimlottc 6y ago
    Surely they have clickbait in other languages?
    - tomashubelbauer 6y ago
      There's not a good word (that I know of) for this in my language (Czech). People who can speak English use the English word. People who don't just say something along the lines of the article author being a bastard.
      - ElFitz 6y ago
        In French some say "putaclic". But it’s not widespread outside of the "old-ish" French tech sphere and, being composed of the word "pute", a slang for prostitute, quite vulgar...
      - 177tcca 6y ago
        So, less reframing and cutesy phrases, perhaps? Things might have been a lot different if instead of saying LinkedIn was using "dark patterns" to grow, they were being pieces of shit.
        tpm 6y ago
        Different for sure, but better or worse? Here in our culture we don't really do reframing and cutesy phrases. But the public discourse is very vulgar and pessimistic, and this is not a fad, it's like that for decades already.
philshem 6y ago
> The monthly instalments were less than the monthly profits. From my reading of the article, it wasn’t monthly profit but rather monthly revenue. From the article > Because the business was already doing more than our monthly payments to the seller, as long as the business didn’t implode (it didn’t ), we’d be able to buy the business with its own revenue.
rwmj 6y ago
He's paying in time and risk, rather than money. He has to run the company, which presumably is a full-time job, and there's a risk it implodes before he has fully paid for it (which it didn't, but it might have done).
- ilaksh 6y ago
  I assume he hired one or two people from overseas and paid them the bare minimum to keep the business just operational so that he could pocket as much as possible.
  - justinmares 6y ago
    Nope, we did not do this. We invested a ton in the business and didn't take a dollar out (besides small salaries) for 2.5 years. More context here - https://microconf.gen.co/justin-mares/ https://microconf.gen.co/justin-mares/
- deleted 6y ago
  [deleted]
- imtringued 6y ago
  His only risk is being unable to pay, the deal being canceled and ultimately losing payments (which according to him were paid for by the business generating a profit, so he never risked his own money). Since the seller lent the business to him he didn't even have to provide upfront capital.
isatty 6y ago
Right, when put that way it does not make sense (even if the original owner had to put time and effort into it) - but the original owner got to keep a fat chunk of equity + monthly payments so it's somewhat of a fair deal.

smoldesu 6y ago

TL:DR - person spent money on company, company revenue paid off bill before it was due

barbegal 6y ago

Whats the legal purpose of a letter of intent? If the letter isn't binding then surely it has no real legal power.

maneesh 6y ago
It's similar to an engagement proposal for marriage. You aren't legally requiredto get married if you get engaged --- but having an engagement first gets all parties more committed, makes it clear that there will be a next step. He mentions in the article, it serves to provide some sort of verifiable agreement on the important numbers, and security that the buyer is serious
IncRnd 6y ago
An LoI lays out the understandings of the parties, so they can know whether to proceed and under what terms they should do so. An LoI also creates a backstop of intents in case of legal proceedings. Thirdly, an LoI let's parties define expected remedies in case the deal fails. There may additionally be specific implementation details spelled-out. I'm sure there may be more reasons, but those are the ones I'm familiar.
inopinatus 6y ago
LOIs are dangerous documents because, unless drafted by a capable lawyer, they likely create a contract. If someone asks for a LOI with regards to, say, an equipment purchase, and suggests that it is a “non-binding document”, I halt the deal because they’re probably either unscrupulous or incompetent. In such circumstances a LOI is essentially a badly written purchase order, and the other party may rely on it, and bill you accordingly, and repudiation is actionable. The document I hope they describe should be more like a Heads Of Agreement, setting out, at most, terms of reference for a deal.
deleted 6y ago
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detaro 6y ago
Details depend on the legal system, but an LoI can have binding clauses (e.g. an exclusivity clause) and it not being binding for the final contract to actually happen doesn't mean it isn't requiring you to be truthful. E.g. if you state that you intend on selling to X (but some things still need to be hashed out which could break the deal), and X on that basis pays an auditor or lawyers to finalize details, and then it comes out that you actually were already in the process of selling to Y and didn't really intend to sell to X, then you might owe X compensation for the costs they incurred based on your misrepresentation - and X has a signed piece of paper to point to as evidence. (And in reverse if X strings you along with misrepresentations) And the term LoI is somewhat vague - LoIs can also be actual contracts if they aren't carefully worded.

rvnx 6y ago

The other side of the story is interesting as well: https://medium.com/swlh/saas-7th-time-lucky-b971dae7d36 https://medium.com/swlh/saas-7th-time-lucky-b971dae7d36 Essentially, the former owner had no interest into maintaining the business (serial entrepreneur) and just likes to launch new ideas

totoglazer 6y ago

Seems odd the previous owner accepted such a low monthly payment. I guess it required a lot of work? Or perhaps the owner felt the downside risk was substantially higher than it appears?

deleted 6y ago
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Tuna-Fish 6y ago
He got to keep 20%, and the new owners were much more interested in putting in the work for growing the business than he was. 20% of a business that's now more than 5 times the value it was when he sold 80% of it, plus $400k cash, and not having to work on it at all anymore can be a pretty good deal on it's own...
- treelovinhippie 6y ago
  The equity piece is the key. If you sold for a lump sum you're all out and happy. But I imagine if you sell for a monthly payment, you're still emotionally attached. Would suck to check on how the business is going and regret your decision to sell for a monthly payment with no equity.
  - hayd 6y ago
    It does depend how unscrupulous the buyer is... you may end up being cheated out of your equity. That said, I like the cash-equity split without the condition of working on the project further yourself. It gives an incentive for the seller to not disappear/become uncontactable...
marcins 6y ago
My understanding is the numbers in the article are made up to illustrate the deal structure, not the actual numbers in the deal.

iujjkfjdkkdkf 6y ago

I don't know if this qualifies as a "dark pattern", but this kind of "social proof" feature that the article is about buying really is hostile to consumers and is nothing to be proud about buying.

kyrieeschaton 6y ago
Not true. There is a reason why people sort products by popularity. This is just a variation.
mlyle 6y ago
This doesn't seem so bad to me. I've enjoyed seeing it at the bottom of sites. The upside is, it provides some evidence that the site is actually transacting business besides me (that could be fake). And I've clicked on the listings of things other people are buying-- e.g. what does this business mostly sell to people?
- ALittleLight 6y ago
  I just assumed it was fake. It feels so scammy.
  - luplex 6y ago
    That would be false advertising, therefore illegal. I'm sure smaller sites get away with it.
    - detaro 6y ago
      Do you have a source on that? (It's not exactly uncommon to be obviously fake, e.g. travel sites that show you they sold more rooms in a hotel in the past week than the hotel has)
      - jfk13 6y ago
        They may have truly sold more rooms than the hotel has... just not all for the same night.

aeturnum 6y ago

This seems like a great deal for everyone involved! I think the real takeaway here is that many entrepreneurs are not interested in running successful business. They'd rather be starting new things! So if you are good at running businesses there's a decent chance you can take over their business in return for letting them keep a lot of the profit. Everyone wins - the creator gets an income stream to support their future work and you get a business that's already working.

jpindar 6y ago
And people have different definitions of successful. Some might think a business is not worth bothering with if it's not going to make them rich, I'd consider it successful if it could pay my rent.
- that_guy_iain 6y ago
  Yea, I was reading lean startup and it goes on about how just because the revenue and profits are going up doesn't mean you're doing well. It considered success as growth by other metrics.
- taneq 6y ago
  Exactly. My company’s first product is niche enough that it will never scale to the stratosphere... but my goals for it were explicitly: 1) To provide a steady enough stream of income that I don’t have to go back to a “real job”. 2) To do so while allowing me to spend some time developing my next product (with better scaling characteristics.) It’s doing both of these so I consider it a total win, despite me still not owning a private island.
vdfs 6y ago
What i don't understand is, if the seller is not in need for the whole selling price, and the MRR is covering his installment, why sell it? He will make $500K in 20 months and keep 100% ownership
- superhuzza 6y ago

alex_g 6y ago

> "Buying up small apps in the Google Chrome or Mac app store." This is a focus of mine. I've recently acquired a Mac app and I have a hunch that there are a lot of small Mac apps producing small but reliable income.

WesleyJohnson 6y ago
At the risk of inviting competition, to you have posts that detail how you go about doing your research on what to buy?
- alex_g 6y ago
  I didn't want to share this in my comment at the risk of coming across as a self-promoter, but I've started writing about what I look at when evaluating an opportunity. https://www.getrevue.co/profile/AppleTurnover https://www.getrevue.co/profile/AppleTurnover I don't really mind competition, I'm sure there folks that have been doing what I am for many years now. If I had to boil it down to a few key points: - Is the app something I'd use - Is it something I'm interested in pushing towards "best-in-class". I'm an optimistic person and I know a lot of app acquisitions will end up in milking existing users and adding little value, but I'd like to believe that app acquisitions have the benefit of making apps better overall. Rather than starting from scratch, developers have the opportunity to push forward from a solid base that has achieved some level of product-market fit. - Does it have something in common with other things I'm working on/ working towards? Sharing tech/marketing/sales efforts will help maximize the time spent on maintenance and growth.

surround 6y ago

> we stumbled across Notify: a simple Shopify plugin that would pop up at the bottom of a website, displaying a purchase another customer had recently made. Not only are these kind of pop ups incredibly annoying and an invasion of the purchaser’s privacy, they are also considered to be dark pattern. https://webtransparency.cs.princeton.edu/dark-patterns/ https://webtransparency.cs.princeton.edu/dark-patterns/ (See: Social Proof)

55555 6y ago
What do you do for a living?
kbutler 6y ago
Annoying, yes. Invasion of privacy? No. (Someone, somewhere bought one of these. Who's privacy has been invaded?) Considered a dark pattern? Again, "somebody bought one of these". Pretty insignificant.
- r1ch 6y ago
  I've seen similar Shopify apps that exposed other customers entire order information publicly. Don't trust that every developer implements apps in a perfectly private way.

taytus 6y ago

TL;DR Marketing bullshit for some startup.

vidarh 6y ago

One area I have wanted to play in, and started looking at before I ended up in my current job, was to seek out businesses where the owner wanted to sell because they struggled with the costs of scaling. When I was running my consulting business, I can across several where the path to fixing this was obvious for me, and I offered people to fix their scaling challenge for a percentage of savings or a percentage of the business, but I was starting to look for businesses like this to outright purchase, as there were a number of owners who when faced with this just saw it as too complicated for them to want to deal with. If I find myself back doing consulting again at some point, I'll likely revisit that, as so many people don't understand how to cut their hosting costs.

55555 6y ago
This is interesting to me. So would video sites be be a good candidate? High hosting bills leading to low profit margins leading to low valuations. How much can you realistically cut them by?
- vidarh 6y ago
  Potentially. It really depends how well they've done it so far. One site I looked at was an image hosting site, where they unfortunately ended up selling for a pittance because they just didn't have patience to have the work done, but they were at a scale where setting up their own simplistic CDN would have allowed them to cut bandwidth bills by about 70%-90% (ideal thing to look for: anything with huge AWS bandwidth bills, as AWS bandwidth egress is extortionate). Storage as well was an issue there in that their storage backend was expensively redundant without adding much security. E.g. they could have reduced their number of copies substantially by using a backend using erasure coding. They also could have cut a substantial amount off their hosting bill simply by running an image optimiser on upload. Overall reduction looked like it would have been ~50%-60% at least. It was also under-monetised in all kinds of ways, but cutting even 30% without any improvement in monetisation would have made that example profitable. There are a lot of companies out there where hassle causes businesses to get sold for a pittance or even shut down because the owners doesn't have the patience to see a process like that through. I talked to another one - actually an image hoster that would have made a perfect complement to merge into the one I mentioned above - that just shut down while I was talking to the others because he didn't even want to go through the hassle. In the end he just refused to even try selling anything but the domain names. Figuring out a process to get people like that to sell while still a going concern has lots of potential. Of course there are risks there in terms of guarding against people who are in a rush to sell because they're trying scam you. But also a lot of people who are just burned out or feel they have run out of options and want out and who are grateful for any option that lets them recoup something. For a decent person there's a lot of opportunity to both make a good profit and help people out there. Of course there's also plenty of opportunity to be an asshole and profit even more.

binbag 6y ago

He bought a business for $400k.

nickelpro 6y ago

Am I the only one who finds the initial email very unprofessional? Everything from the subject line, all lower case, even the closing words. I wouldn't have taken an email like that seriously or would have assumed it was a scam.

machomaster 6y ago
Definitely not the only one. The second screenshot of an email also looks highly suspicious from my non-American point of view. The first sentence has "great (meeting you)". The second sentence has "really excited", "greater (potential)" and "would love (to play a role)".

mrtweetyhack 6y ago

Yeah, I've see a site with that shit and I hate it

mikikian 6y ago

This sounds a lot like a seller financed deal. Hopefully the seller had a secured loan against those installment payments because in the event of default, at least the seller gets his/her company back.

sidlls 6y ago

This is as misleading as those real estate shows that promise "no money down" or "other people's money" style financing. They bought 80% of a business at 0% APR for a set of 20 installment payments. They are funding the payments with the business' revenue--meaning they are not able to pocket that cash themselves, i.e., they're using their (business) income to pay the cost of the loan.

inopinatus 6y ago
The title is clickbait, but the deal itself is also boring. Basically, they funded the capital for an acquisition, from debt representing the expected future cashflows of the acquired entity, with repayments timed similarly to match. As M&A goes, that is ho-hum unremarkable. It's the most ordinary of all M&A business cases, or indeed any business case, viz. that the IRR exceeds the WACC. The only aspect of this deal that looks even slightly uncommon - and then, only very slightly, depending on your locale - is that the original founder is the bond holder, and the capital thereby very cheap. Being funded by privately issued debt means the glibness in the article's tone must be overshadowed by the unstated but strongly undesirable consequences of defaulting on the repayments. Yes you can "buy a company for $0", at least going by the amortized net values of future cashflows. But caveat emptor, if your eyes aren't wide open, you can also lose your shirt.
- pottertheotter 6y ago
  If it were so unremarkable, why isn't there a term for this sort of transaction and an I industry built around it? I suggest the transaction be called a leveraged buyout (we can shorten it to LBO) and call the industry private equity.
  - hedgehog 6y ago
    Seller financed sales are reasonably common in business and real estate.
  - deleted 6y ago
    [deleted]

IkmoIkmo 6y ago

Same energy as all someone saying he bought a home for $0 by buying it with a mortgage and renting it out such that the mortgage is paid by the tenant. It's completely fine saying you bought a business with $0 downpayment. But saying you bought it for $0 is just silly, you didn't. If you did, you could close down the business the same day and walk away from it. But you can't, because in fact you signed a contract for half a million in instalments. The article is nice but there was no need for the clickbait title.

high_byte 6y ago
Article is great. I'm comfortable with the title, the meaning pretty evident in this case. IMO. or maybe I'm just used to clickbaits I already translate them in my mind...
- Someone 6y ago
  Evident? My guess was that they bought a company that has serious debts or other obligations. On those, you can sometimes get money to buy them.

purple_ferret 6y ago

From one of his other articles he linked: >Similar arbitrages exist everywhere. My old roommate for a while was buying Toyota Prius’ and paying people minimum wage to drive them around taking Uber rides. He'd then take the difference between what Uber paid him and what he paid his drivers… often 5-10k a month. Is this legal?

HeyLaughingBoy 6y ago
If they were properly classified as employees, why wouldn't it be?

kitcar 6y ago

"I bought a business using time instead of money"

Havoc 6y ago

How does a notification pop up move a million in yearly revenue though? I get that it’s recommending a product but still seems pretty wild

dr_kiszonka 6y ago

Reviews Meta is looking for a buyer [0,1]. I am not affiliated at all with them, but I use the website frequently and would hate to see it discontinued or purchased by someone malicious like The Great Suspender was. 0. https://reviewmeta.com https://reviewmeta.com 1. https://reviewmeta.com/blog/successor-to-reviewmeta/ https://reviewmeta.com/blog/successor-to-reviewmeta/

supert56 6y ago

Interesting article. I didn’t know about this as a method so it was useful to me. Thanks for sharing!

eb0la 6y ago

A friend did something similar: he bought a hosting business and paid with cash the business made. Totally licit. It was a similar case: the founders just wanted to pivot and do something else after >5 years in the business.

projektfu 6y ago

Most veterinarians who buy practices buy their businesses "for free". There is usually a large bank loan and a small seller loan. The deal is structured to pay a decent salary and cover the debt in 10-15 years. Sure doesn't feel free, though, to have a personal guarantee on a gigantic loan.