4 Rules To Buy A Profitable Business (With Little Money Down)

Photo by Samson Creative. on Unsplash

Most people will believe that you need to write a big check in order to buy a business from someone. Some would also agree that you need a big bank account to run a business. However, there is a way for you to buy a profitable and sustainable business with little money down and in some cases no money down. Nathan Latka is a Software CEO, Podcast Host and now an author of his new book How To Be A Capitalist Without Any Capital. In his book, he shows you how he was able to buy companies for as little as $1,000 and in one case was paid $15K to buy a company. That sounds insane, I know, but he shows screenshots and numbers in his book.

After reading his book, I want to share his 4 Rules of buying a business as a beginner.

Rule #1 Digital Over Brick & Mortar

A digital business like a software company has a lower operating cost compared to a Brick & Mortar business where you pay rent, utilities, inventory, etc. In an online business, your focus is getting people to visit your website vs getting people to arrive in a physical location which requires more effort than a simple click. It’s much easier to get people to visit a website than it is to come to a location.

Recommendation:

But as a beginner, your best buys will be Free Apps and Web Extensions. Normally these free apps and extensions are done by individuals and small businesses as a hobby or side project. If you can see that the app has not been updated in more than 6 months it’s likely they do not have the time to maintain it and you can convince them to sell.

Rule #2 No Employees

Employee wages are normally the biggest expense most businesses have when starting. Again it’s about keeping your expenses low, and having little to no employees will keep costs low when starting your business. It’s inevitable that you will need help in your online business which is why Nathan recommends using freelancers from sites like Fiverr.com, Toptal.com, and Upwork.com. I’ve personally used Fiverr before and it’s a great place to get freelancers on a budget.

Recommendation:

Assuming you buy a free app or extension that needs to be updated or upgraded; you can find a freelancer to do this for you. Once your upgrade is complete, your new business can continue running with no employees. You just have to be responsible for keeping it updated as new tech emerges and to remain a competitor in your space.

Rule #3 Already Established User Base

Building up an audience for a business takes time, effort and money most of all. If you can find a business opportunity that already has a user base then your road to success is that much easier. An example of an already established user base can be a chrome web extension with over 10K users or a social media account with over 15K followers. If you find a business with a big enough user base then you don’t have to spend money on acquisition.

Recommendation:

Search for a user base with over 1K at least. A higher user base will most likely cost you more money. But if you own a company with a thousand users and charge a fee as little at $3 a month; that’s already a monthly recurring revenue of $3,000 and $36,000 annual recurring revenue. That’s already an amazing source of income for a one-time investment.

Rule #4 Have A Monopoly Over A Distribution Channel

A business that has a monopoly over a distribution channel like Chrome Web Store, Apple App Store, Google Play, Salesforce AppExchange, etc has a huge advantage over businesses that are dependent on who bids the highest for traffic. The distribution channels mentioned are free and many people search for those channels on a daily basis. If you can find a business that gets enough traffic from these free distribution channels, you are seeing a potential golden goose.

Recommendation:

If you can search a keyword in one of these free channels and see that the top applications are free and have a growing user base; then you know you have a potential winner.

Summary

If you follow the recommendation of buying a free app or chrome extension you will likely be able to make this purchase with little money. I wanted to test this theory after learning these 4 rules. I personally reached out to a developer of a chrome extension I found in the chrome web store. This individual had over 6K users and I asked if he was willing to sell or partner up on the extension. He informed me that he does not have time to maintain and would rather sell.

This proved to me that this concept has some truth. There are more developers like this individual who is willing to give up their project for a small price. You just have to search for them. You can negotiate price and terms once you get to that point, but the possibility of buying a money making business with a low budget is possible.

If done successfully you can use your profits to reinvest in your new application or tool to continue its growth. Once you’ve done this successfully once you will be more inclined to do it again and you should. This process of buying a business does require effort in researching your potential buys and considering the risk involved. The steps mentioned sound easy because they are, but still perform your due diligence in this new venture.

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A family man learning Crypto, NFT & DeFi. Sharing what I learn from my research and experimentation so you don’t have to.

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Kevin Arguello

Kevin Arguello

A family man learning Crypto, NFT & DeFi. Sharing what I learn from my research and experimentation so you don’t have to.

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