Time to Find Freedom and Buy Your Own Business
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Hey, I am Robert from Freedom Factory, and I wish to speak with you about something that is a really strong belief of mine, however I was in an online forum meeting with my fellow group of business owners and among my friends took a look at me and he said, is buying a service actually the most underestimated possession class? You have actually said that to me often, however I don't understand if I always believe it. So I wished to go through some simple mathematics and the way I look at buying a company and the way I look at other financial investments. For example, if you purchase a business for 4 times incomes, and let's state you don't make any modifications, it's flat, it doesn't grow, whatever. Your changes don't work. That's going to offer you a 25% return, suggesting it's going to pay for itself in four years due to the fact that you bought it 4 times revenues.
Now, on the other hand, let's say you go buy a stock. Let's say that stock has a price to revenues ratio, which is actually simply a multiple of 33 well, you're buying it at 3% so I mean, what you're actually hoping for is possibly 5% after taxes.
So when I look at what that appears like in 3 years or 5 years, and utilize any monetary calculator that you want, and you look at the time worth of money, those returns make such a massive difference. Warren Buffett's business partner is a person named Charlie Munger. And Charlie Munger, they asked him, they stated, if you were a young man and you were starting once again, and there was no Berkshire Hathaway, what would you do?
And he said, I would purchase as lots of software application of service business as I might at five to 7 times profits, which is generally what they opt for with low churn, indicating they do not alter. And I would alter my whole time to forever.
So once again, he would purchase software application as a service business at 5 to 7 times profits. With extremely low churn and it would hold them forever. So he also sees that small companies are the most underestimated asset class in America. So if you've ever considered buying a business or how do you discover a service that trades at three times profits or 4 times revenues or five times profits, why do not you give us a call at Freedom Factory?
Because I'll inform you, a few of the offers that we see are simply extraordinary. And I believe money is made on the buy, not on the sell. And if you can purchase the best business, specifically wish to take advantage of your unique capabilities are foolish human technique. And I have actually discussed that in other videos, but what I indicate, let's state you discover an excellent engineering company that has a sales issue and you're an extraordinary sales representative. All of a sudden, if you buy that at 4x and you can double it in two years. Well, your return is unbelievable. So if you've ever thought about purchasing an organisation or selling a service, give us a call here at Freedom Factory. I eagerly anticipate speaking to you soon.