In this episode I spoke with Ace Chapman from acechapman.com. He is a pioneer in the online business investment market and co-hosts The Web Equity Show with past Borderless Podcast guest Justin Cooke. If you are considering getting into the online business investment space you absolutely have to listen to their show as it maps out the process from start to finish.
I randomly ran into Ace while walking down the street in Medellin. It was great meeting and hanging out with him for a few days.
Ace bought his first business when he was 19, tried his hand at the stock market, worked in corporate America, built his own million dollar real estate business and has owned retail stores. All of that has gotten him to the strategy today of buying and selling online business in what he calls a “mini-mogul” strategy.
Online business is a quickly growing asset class that is mostly overlooked. They have advantages that traditional businesses do not such as lower overhead, the ability to hire a location independent workforce, and strategic tax advantages only to name a few.
Not only that but you are participating in a market that is growing fast with no signs of slowing down. In the last 10 years, the number of people using the Internet has grown by 600%. It’s estimated that there are more than three billion people now with access to the Internet.
These numbers are only growing. It’s estimated that by 2020, there will be five billion people online. In the United States alone, the market for just eBooks was worth $270 million in 2008. By 2014, that had already grown to $5.69 billion. If you do the math, that averages to over 250% growth per year.
So as you can see it would make sense to theoretically “buy real estate” in such a market.
Believe it or not it is possible to do deals with no money down. During the podcast Ace walks us through some of the recent online business acquisitions that he has made in such a way. There are great take-away’s there for structuring online or offline deals. He says it is helpful to look at structuring deals as an art which takes practice rather than a technical skill that scientifically applied.
Ace also does not believe in starting businesses. He finds that the money, time and energy that one must invest in a start-up is not worth the risk. He finds it to be a better idea to buy existing successful businesses that have already run the gauntlet and proven themselves.
As soon as he buys a business he begins thinking about who would be interested in buying it later on. He sees to types of buyers.
- Financial buyers: People that buy strictly on current cashflow of the business
- Strategic buyers: People that buy because they think that they can greatly improve the current value of the business.
There are usually more opportunities with the strategic buyers, whether you are on the buying or selling side. These opportunities usually take some time to build up moral between the parties involved and get the deal ready.
One of the biggest part of this strategy is deal flow. Ace talks about how to find these high quality deals by finding the right places to network with the people you need to talk to.
I hope you enjoy the podcast!
- Ace’s background and why prefers online businesses over traditional businesses. (5:00)
- The growth of the online business market. (9:15)
- Can non-tech savvy people invest in online businesses. (13:30)
- How to do deals with no money down. (16:30)
- Why Ace does not start businesses. (20:00)
- Thinking about selling the business when you buy. (24:40)
- How to find high quality deals (28:30)
- Tips on networking (33:00)
- Ace’s best advice for aspiring entrepreneurs (35:20)
Thanks for listening!
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