How To Buy A Business

A business that makes five hundred thousand dollars a year in profit sells for about a million and a half.

Put eight of those exact same businesses together under one roof, and three years later they're worth forty-eight million.

Nothing about the businesses changed. Same trucks. Same crews. Same customers. Same people running them. The only thing that changed is that there are eight of them instead of one.

That gap — between three times profit and eight times profit — is the real reason I spend my life helping people buy businesses. And today I'm going to show you exactly how I make money from it. Including the part where I make a lot more than you probably think.

So for the next twenty minutes I'll walk you through the whole thing. Why one small business is cheap. What it actually takes to buy one at three times profit — the real process, not theory. Why eight of them together are worth double. And then the actual numbers: what the owners get, what the investors get, and what I get.

And then I'll open my laptop and show you the plan document itself. The cap table, the returns, the agreement people would sign.

If you want that plan — the full model, the numbers, the term sheet, the whole breakdown — go to my Instagram, the link's below in the description, and DM me the word ROLLUP. I'll send it over.

No cost, nothing weird. I'll just send you the document.

If you're new here, my name is Moran Pober. I've been involved in over a billion dollars of acquisition transactions. That includes a two hundred million dollar a year roll-up we built in two years, and the exit of rollups.com to Naval Ravikant's company.

So I've been on both sides of this. The buying, and the rolling up.

Now here's the part most people get wrong about my business.

People assume I make my money from what clients pay me to help them buy a business. And look — that's a real business. It pays the team, it pays the bills. But it's the small part. Honestly, it's the smallest part.

The money that actually matters comes after. It comes from what those businesses become when you put them together.

And I want to be completely straight with you about that. Because once you understand my incentive, you'll understand why I push so hard for people to buy well instead of just buy fast.

So. Why is a business making half a million dollars a year in profit only worth a million and a half?

It's not the profit. The profit's real. It's who is allowed to buy it.

Think about who's actually shopping for a five-hundred-thousand-dollar-profit business. It's one person. An individual. Somebody who saved up, or got an SBA loan, and is going to quit their job and go run this thing themselves.

That's a small pool of buyers. And every single one of them is asking the same question: what happens if the current owner leaves?

Because in a business that size, the owner is the business. He knows the customers. He knows the pricing. He does the estimates himself. Half the crew works there because of him.

So the buyer discounts it. Hard. Two and a half, three times profit. Maybe three and a half if the books are clean. And it's not unfair — that's genuinely what a business is worth when it depends on one human being who's about to walk out the door.

And here's the part that traps most business owners for their entire life. That owner can grow it for twenty more years, and it will still sell for about three times profit. Bigger number. Same multiple.

Most owners never get out of that. They think the way out is to work harder. It isn't.

Now, people hear "buy a business at three times profit" and assume that's some aggressive lowball you have to fight for. It isn't. Three times is the market for these. But you still have to be the person who gets it. So let me tell you what that actually takes.

Start with the seller, because everyone gets this backwards. Nobody sells a good business at three times because they got outnegotiated. They sell because of where they are in their life.

He's sixty-one. He's been doing it twenty-eight years. His kids don't want it — they've got their own careers. His back hurts. His wife wants to see him. He's had one deal already fall apart on him, probably because the buyer couldn't get financing, and it cost him six months and a lot of hope.

And the honest truth is nobody else can buy it. Private equity won't look at it. A strategic won't bother. His alternative to selling at three times is closing the doors, or handing it to an employee for nothing.

So three times isn't an insult to him. It's the only real number he's ever going to see. Understanding that changes how you talk to these people entirely — you're not there to grind him down, you're there to be the one who actually finishes.

Now your side. Four things.

One — be able to prove you can close. Proof of funds. A bank pre-qualification letter. A one-page profile of who you are. Before you ever get on the phone. Sellers at this size have been burned by tire-kickers, and they will take a lower number from someone credible over a higher number from someone who might vanish.

Two — go where there's no competition. A business listed on a marketplace with six people bidding goes for four, four and a half times. The same business, found direct, with you as the only buyer in the room, goes for three. That difference is the whole deal. It's why we spend most of our effort on businesses that aren't publicly for sale.

Three — accept the volume. You will look at something like a hundred businesses to close one. You'll send a lot of letters of intent that go nowhere. That's not you failing, that's the job. Anyone telling you they found the perfect deal in three weeks is either lucky or lying.

Four — do real diligence, and be willing to walk. Get a quality of earnings review. Look hard at the add-backs, because half of them are usually nonsense. Check whether one customer is thirty percent of revenue. And ask the honest question — how much of this business walks out the door with him? Because if the answer is most of it, three times is still too much.

On the money: you're typically putting about ten percent down. The rest is an SBA loan and often a note from the seller. And from the moment you sign the letter of intent to the day you actually own it — ninety to a hundred and twenty days.

That's the process. It's not complicated. It's just long, and most people quit in the middle of it.

Alright. So now imagine eight people each did exactly that. Eight businesses. Four million dollars of combined profit. Twenty-two million in revenue.

Watch what happens when you put them together.

Suddenly a completely different buyer shows up.

Private equity firms — the smaller ones, lower middle market — have money they are obligated to deploy. Hundreds of millions of it. And they cannot be bothered with a five-hundred-thousand-dollar business. The deal is too small. Their diligence costs the same whether they're buying a one-million-dollar company or a forty-million-dollar one. It's not worth their time.

But at four million dollars of profit? Now you're a real acquisition. Now they show up. And they pay differently. Six times. Eight times. Ten, in the right industry.

Why? Three reasons, and none of them are magic.

One. It's not one guy anymore. There's a real CEO. There's a management team. Eight regional managers. Any one of them leaves, the business keeps running. That's the big one — that's most of the re-rate right there.

Two. The numbers are clean. Consolidated. Audited. A buyer can actually diligence it without finding cash in a shoebox.

Three. And this is the part I'm personally most excited about — you can run one AI operating layer across all eight. One system answering the phones, quoting the jobs, booking the work, running dispatch, chasing the invoices. You can't justify building that for one business doing two point eight million. Across eight, it's obvious. And it adds two, three points of margin.

But I want to be honest about that last one. The AI is maybe a third of why the value goes up. Two thirds of it is just scale, and having real management instead of one owner. Anyone telling you AI is the whole story is selling you something.

So here's the offer I make to each of those eight owners. And I want to walk through it carefully, because this is the part that has to be fair or none of it works.

They sell me half their business for cash, at three times. Seven hundred and fifty thousand dollars, wired at closing.

The other half they don't sell. They contribute it. And I credit that half at four and a half times — not three.

Why four and a half? Because that half is going into a company that gets valued at six times on day one, and sold at eight or ten later. If I credited it at three, I'd be quietly taking their entire re-rate for myself. So we split it. They give up part of the upside, because I'm the one raising the money and carrying the risk. But they keep most of it.

So their number is seven hundred and fifty thousand in cash, plus one million one hundred and twenty-five thousand in stock. That's one point eight seven five million of value — for a business that would have sold, alone, for one and a half.

They're ahead before anything has even happened. And they still own a quarter of their own company's upside, in a vehicle that's about to get repriced.

So eight businesses. Twelve million dollars of purchase price at three times. Six million of that goes out in cash. The rest stays in as owner stock.

Then I raise money. Nine and a half million dollars from investors. That covers the six million of cash to the owners, plus two million to build the systems, plus a million and a half for lawyers, accountants and working capital.

And here's the part that matters. I raise that nine and a half million at six times profit. So the combined company is valued at twenty-four million on day one.

Now — that twenty-four million is a valuation. It is not cash. Let me be very clear about that, because this is where people get lied to. Nobody got rich on day one. It only becomes real money when we actually sell.

Here's who owns it. The eight owners hold thirty-seven and a half percent — more than anybody. The investors hold thirty-nine point six percent. And I hold twenty-two point nine percent.

Then we run it for three years. Grow five percent a year. Put the AI systems in, that's a couple more points of margin. Buy three more small companies along the way at four times.

Three years in, combined profit is about six million dollars. Sell at eight times, that's forty-eight million. Sell at ten times — which is where these platforms actually trade in a good sector — that's sixty million.

Okay. Let's take the eight times case. Forty-eight million, minus the debt, leaves about forty-four and a half million to split.

The eight owners hold thirty-seven and a half percent of that. Sixteen point seven million between them — call it two point one million each. Add the seven hundred and fifty thousand they got in cash three years earlier, and each owner walks with about two point eight million.

Now compare that to doing nothing. If that owner just kept grinding alone, grew five percent a year, and sold three years later at the same three times — one point eight five million.

So: one point eight five alone. Two point eight with us. That's about fifty percent more.

And if we sell at ten times instead of eight, each owner is at about three point four million. That's nearly double what they'd have gotten on their own.

And all of that is on top of two things that don't show up in the numbers — the seven hundred and fifty thousand dollars they already had in their pocket three years earlier, and their name coming off the personal guarantee on the bank loan. Their house stops being collateral. For a lot of owners, that one matters more than the money.

The investors — nine and a half million in — get seventeen and a half million back at eight times. That's about twenty-three percent a year. At ten times it's twenty-two million, and thirty-three percent a year. That's why they say yes.

And me. Twenty-two point nine percent. About ten point two million at eight times, or twelve point nine at ten times. Plus the management company I run charges each business two and a half percent of revenue for the systems, the marketing, the back office, the AI — that's roughly nine hundred thousand of profit to me across the three years.

So call it eleven million at eight times. Closer to fourteen at ten.

I didn't put in a dollar.

That's the model. That's what I actually do.

So now — why does any of that make me want to help you buy a business?

Because look at what I need for it to work.

I need eight businesses that are actually good. Real profit, real customers, clean books. If you buy a bad business, I have nothing — a pile of eight broken companies is worth less than three times profit, not more.

I need you to still own it in three years. Not blown up, not sold in a panic. So I need you to survive year one, which is the year most people don't.

I need you to have grown it. Because in my model, the only version that loses money is the one where we buy eight businesses and fail to grow them. The multiple protects me. Bad operations don't.

And I need you to want to stay and run it. A roll-up without operators is just eight leaderless businesses.

So my incentive is not to get you into a deal. My incentive is to get you into a good one — in a sector I understand, at a price you can actually service — and then help you run it well for years.

That's why we analyse deals for free. That's why we tell people to walk away. I have killed deals for clients that would have paid us, because a client who buys a bad business is worth nothing to me three years from now.

Now I want to name the uncomfortable part out loud, because if I don't, somebody else will.

There's a conflict here. I help you buy a business, and later I might want to buy it from you. That is a real conflict and I'm not going to pretend it isn't.

So here's how I handle it. If we ever get to that conversation — you get your own lawyer, and I pay for it. You get an independent valuation, not my number. Everything I make on the deal goes in writing in front of you before you sign anything. And nobody's support, nobody's deal flow, nobody's access changes based on whether they say yes or no.

If I can't do it that way, I shouldn't do it at all.

Let me show you the actual document, so you can see this isn't a napkin idea.

Ad-lib over the plan page: the three-party table, the eleven terms an owner signs, the returns at six, eight and ten times.

Notice I keep the bad case in there. Six times, no growth — everybody loses money. That's in the same document I send investors. If a version of this doesn't show you the downside, don't trust it.

If you want it — Instagram, link's in the description, DM me the word ROLLUP and I'll send it.

And if you'd rather just go do this yourself with no involvement from me at all — genuinely, go do it. The information's the same either way.

Here's what I actually want you to take from this.

The reason I'm this obsessed with getting people to buy businesses isn't generosity. It's that I've seen what's on the other side of it, and it isn't what people think.

Everybody's out there trying to build something from zero. Grinding five years to get to a million in revenue.

And meanwhile there's a sixty-one-year-old plumber with four trucks, twenty-eight years of customers, six hundred thousand a year in profit, and nobody to sell it to. His kids don't want it. He's going to close it, or hand it to an employee for nothing.

You can buy that. With mostly borrowed money. This year.

And then — this is the part almost nobody understands — you're not stuck at three times profit forever. The moment you're one of eight instead of one of one, the same business is worth two, three times more.

Not because you worked harder. Because of who's allowed to buy it.

That's the whole thing. Three times when you're alone. Eight times when you're not.

Everything I do is built on that one gap. Now you know it too.