From time to time I come across models that we have all seen, but when repositioned shed an entirely new light. Annuity Deals aka 100% seller financing is one of those models.
Quick and dirty - pay a seller what they want but on your terms###-###-#### years) in "annuity payments". I saw this concept during a recent training with Carl Allen - curious to know if anyone has entertained paying a deal over 5-10 years versus giving the seller everything up front...
From what I can see, this could be a great way to get started for newbies. This is definitely a model we're exploring with our roll-up strategy - nothing new, just a great way to reposition things.
Annuity Deals (100% Seller Financing)
by a professional from Wilfrid Laurier University
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-10% of monthly net profit after 3 consecutive profitable months for 2 years up to $50k
- 10% of net proceeds from an exit not to exceed 60k
-30% of net proceeds in the event of a liquidation
We gave him a direct line to some cash flow, made him a participant in the upside, and gave him a fail-safe in the event we couldn't turn it around. I believe I did cash app the seller $10 as consideration, but he didn't ask for that. Motivation is key in these types of deals, but even more important is understanding what problem the seller has and solving that with the structure of the deal. That's how I got this one done.
Now, would I do it again... Probably as I'm leveraging the business to do more deals. I do however have a higher appreciation for larger and more profitable businesses where the value of my time is concerned.