How to Buy a Profitable Business With Little Money Down | Chip Miller

Chip Miller (00:00)
Yeah, I I think this is a tremendous opportunity for real estate investors, mostly because you already, on some level, intuitively understand the investment dynamics that go into buying a business. The cash flow considerations are very similar. We use SDE—slightly different terminology for certain things—but really in a nutshell, I think real estate investors are uniquely suited to capitalize on that silver tsunami where you can buy a small business for very little money down. In fact, I have a lender, a non-SBA lender, who could potentially go up to $500,000 if you have sufficient credit for little money down.

Scott Bursey (02:09)
Welcome back to the *Real Estate Pros Podcast* powered by Investor Fuel. I’m your host, Scott Bursey. And today is a massive episode, pros. We’re talking to Chip Miller of Transworld Business Advisors, the absolute juggernaut in deal volume across the nation. Chip isn’t just an observer. He has nearly 20 years of boots on the ground experience in real estate and business M&A. He’s bringing the kind of high-octane fuel that turns average operators into industry titans.

We’re talking about the engine behind business exits, acquisition strategies, and how to scale your portfolio. Chip, welcome to the show.

Chip Miller (02:45)
Yeah, thank you for having me.

Scott Bursey (02:46)
It’s just awesome having you here, my friend. And please tell us a little bit about yourself and Transworld Business Advisors.

Chip Miller (02:52)
Yeah, so I I’m excited to represent Transworld Business Advisors. We are the nation’s largest business brokerage for Main Street businesses throughout the country by deal volume. So we have offices throughout every major US city. I’m out of the Houston office and we do a lot of volume there. So greetings from Texas and I look forward to digging in with you.

Scott Bursey (03:13)
Awesome. Awesome. Let’s chop it up, Chip. What really caught my attention about you was the way you’ve been able to scale Transworld to the absolute top of the market by deal volume. You know, most brokers get stuck in the weeds of single transactions, but you managed to create a repeatable, high-velocity, repeatable machine that navigates both complex M&A and real estate landscapes at once.

You know, that level of operational consistency over two decades is rare.

Chip Miller (03:44)
Yeah, appreciate that. I don’t take all the credit. I’m part of a system that’s well established, a team that has a lot of talents. And the team has has created a system that allows a lot of deal flow to to take place, whether it’s a a small $50,000 landscaping business or, you know, $25 million construction company, we can do all of that and we have the systems in place to make it a smooth transition for both buyer and seller.

Scott Bursey (04:08)
And I must say that is a powerful team, Chip. I’m curious to get your take on this. What is the main ingredient inside Transworld that keeps you hitting these volume records?

Chip Miller (04:20)
Well, I think the broker’s communication skills are key in any deal. And I think a lot of people overlook the role of a broker and what kind of value they can add to a transaction. So if you’re an investor, you may be looking at a deal one way, but a broker may be able to help you look at a deal from maybe another perspective and see how it maybe adds value to your portfolio or how a capital cons capital constru structure can be aligned with what your plans are. So we’re here to help communicate with the buyer and with the seller to make sure everybody’s needs are met in a deal and and the transaction goes smoothly.

Scott Bursey (04:53)
That’s a solid foundation to build on. It’s clear that sticking to those core strengths has given you a real edge in navigating the market’s ups and downs.

Chip Miller (05:03)
Yeah, absolutely. And and I think consistency is key and persistence is key. Whether you’re an investor or a broker, I think we speak a lot of the same language and bring a lot of the same mentality, which, you know, allows us to, you know, speak the same language and and connect with people.

Scott Bursey (06:05)
Absolutely. It’s all about consistency, having those systems in place as you spoke of. And help us visualize this, Chip. Where do you see most sellers, even the smart ones, tripping up right now before they bring their business to to market?

Chip Miller (06:20)
Yeah, absolutely. So on the seller side, some common things that we see are number one, procrastinating and waiting until the last moment without a a proactive exit strategy, which means you end up selling the business for less than you could have if you had just prepared a few years in advance. If you’re selling in a distressed fashion, if your numbers are going down, for instance, it gets tougher to to get lending on a deal. And if it gets tougher to get lending on a deal, then it narrows your buyer pool. And sure we can find cash buyers, but if you had taken some proactive steps to work with a Transworld business advisor, for instance, to help you set up the, you know, get the maximized multiple for your business a couple of years in advance, that will allow you to be successful in your exit later on.

The other thing is I I think having unrealistic expectations about where the market is. And I understand, you know, from a broker’s perspective, we have to have empathy for a business owner because this is their baby. This is what they’ve built over a number of years. And we understand that you want to get the top dollar for it, but you also have to understand what the market is doing. And that’s kind of where we have to have maybe some tough conversations from time to time to set realistic expect expectations. Now, there are ways of deal structuring to where maybe you get more for the business over a period of time, and that’s where we help negotiate the deal and and pull the levers where necessary to make, you know, a buyer buy in and a and a seller to to buy into the deal as well. So those are th I think the two most common things that we see with sellers in in the marketplace.

Scott Bursey (07:47)
Chip, I must say, you see the reality behind the books. What is the one blind spot, if you will? You know, is it owner dependency, poor records, or unrealistic valuation expectations that kills the deal at the finish line in your view?

Chip Miller (08:05)
Well, c certainly. So I I think implicit in your question is that things early on in the process end up killing deals later on. And I think that’s one of the key things to to suss out there, which is a deal may be dead and you may not realize it. But that’s, you know, a broker can look at your books and understand, hey, this deal is not financeable because, you know, XYZ, maybe your revenues are declining, or maybe there’s a customer concentration issue, which you’re wanting a 4X multiple on your business. But, you know, your all of your, you know, liquidity is tied up in one asset. And does, you know, does that make sense for a buyer? So our job is to look at a deal not just from the seller’s perspective, but also from the buyer’s perspective to make sure everything makes sense going forward.

So yeah, that’s that’s one thing that absolutely bookkeeping is is paramount, making sure your books are clean. If you’re gonna, you know, make any large capital expenditures, like if you do have a real estate portfolio, if there’s some, you know, some upkeep that needs to be done on some properties, do that in in years previous to when you’re trying to make your exit because that’s going to, you know, show up on your books. So, you know, again, it goes back to being proactive and being strategic about making your exit.

Scott Bursey (09:13)
Well, thank you for that breakdown. And Chip, interested to know what is your team’s strategy at Transworld Business Advisors for let’s say the next 12 to 24 months.

Chip Miller (09:27)
Well, yeah, I think we’re we’re very much focused on growth, capitalizing on some of the things that we’re seeing in the marketplace in terms of lending opportunities, and having those conversations with sellers that hey, you know, it takes a good 10 to 12 months to sell a business, just on average. Our analytics shows that that’s kind of how the process unfolds. So if you’re having an up year, let’s say you’re part of that silver tsunami, you’re thinking about retiring, you know, you need to be thinking about it now and getting the ball rolling and getting that process in place, rather than trying to play catch up later on and then having to sell for less than you were wanting to. So that’s that’s kind of the conversation that we’re or things that we’re trying to emphasize over the next couple of years.

Scott Bursey (10:09)
Awesome, awesome, Chip. And let’s break this down. We’ve got this massive wave of baby boomers looking to exit. Where is the actual low-hanging fruit for a real estate pro looking to buy their first business?

Chip Miller (10:57)
Yeah, I I think this is a tremendous opportunity for real estate investors, mostly because you already, on some level, intuitively understand the investment dynamics that go into buying a business. The cash flow considerations are very similar. We use SDE—slightly different terminology for certain things—but really in a nutshell, I think real estate investors are uniquely suited to capitalize on that silver tsunami where you can buy a small business for very little money down. In fact, I have a lender, a non-SBA lender, who could potentially go up to $500,000 if you have sufficient credit for little money down. I think there’s, you know, some origination fee that’s rolled up in that loan, but they can amortize over seven years. Well, that gets you into a business that potentially is making you $100,000 a year after debt service. Well, I mean, compare that to what you have to do in real estate to yield a $100,000 cash flow, and it becomes a lot easier.

The barrier to entry is much lower for buying a business and, you know, and growing your portfolio from there. So it free long story short, there’s a lot more yield as far as cash flow goes in investing in businesses. And you already have the tools as a real estate investor to analyze the books, analyze the financials. And so I think you have a leg up compared to your first-time investor, you know, who who maybe hasn’t bought real estate before. And then on top of that, of course, a lot of these deals, I I mean, I have funeral homes for sale, I have hotels for sale right now that have an operating business, but they also have that real estate piece tied in. And so you’re able to get some really attractive, you know, amortization schedules and interest rates as a result of buying the two things together. So yeah, a ton of opportunity out there for a real estate investor.

Scott Bursey (12:42)
That really puts the current market landscape into perspective. And if you could walk us down this path, what is that one gotcha in the current interest rate environment that you see investors ignoring at their own peril?

Chip Miller (12:57)
So yeah, that’s a great question. So I I think it’s more looking at a deal holistically. You need to look at the the bigger picture and and consider things like time value of money. So what I mean by that is I’m not saying you should take, you know, any ri interest rate that’s presented to you, but if you have an opportunity to get into a a fixed-rate situation where there’s no prepayment penalty where you can restructure debt later on, it makes sense to buy the business now, get into it, let the business pay for things. And then if you need to restructure or get into a more sophisticated loan or capital structure, then you you have the time to do it. So I th what I see a lot of times with buyers is, and I understand it’s it’s a big investment, it’s it’s an important decision to make, but I see a lot of analysis paralysis and that costs them deals, especially because in in buying businesses, there’s the the personal component that’s maybe not there in real estate a lot of times. Which is if somebody has this baby that they’ve built over a long period of time, they want it to go to somebody they trust and they want it to go to somebody who will be a steward of their business and maybe grow it and and, you know, see something positive, you know, result from this person taking over.

So what you’re trying to do as a buyer a lot of times is project confidence, not only confidence in being able to get the deal done, but also confidence in being able to run this business. And a lot of times that actually gets you more concessions in a deal because the seller will say, “Hey, Chip, I want to do business with that guy because he is going to take my business and run with it.” And, you know, that that’s what I try to tell buyers is to get them out of their own ways. A lot of times, the more you, you know, seem noncommittal, the more you seem like you maybe don’t know what you’re doing, the more you’re costing yourself money up front. So again that’s where I come in as as as a broker is I try and coach people up and a lot of times they they may not listen to me and I’m trying to tell them, “Look, you you make more money by getting into this deal, and there’s a due diligence period for a reason, right?” Try not to do all of your due diligence before you even put an offer on the table. Let’s let’s get the ball rolling, let’s get things, you know, get a relationship established with the seller. And then a lot of times you’ll you’ll be pleased to find that you can get concessions or be able to ask for things during the process because they see the process moving along. So yeah, absolutely. There’s a a lot of things tied up with that that I could nerd out on, but I think that’s that’s some good feedback for for people out there.

Scott Bursey (16:08)
Couldn’t agree anymore, Chip. Confidence in your deals is everything.

Chip Miller (16:12)
Yep, absolutely. And and confidence as a broker, right? Like we we have to present clear numbers to people. We we have to be transparent in the process, but we also have to project confidence because, like I said, a lot of people, you know, when they’re buying a business, they don’t do this every day. Whereas we do. I mean, I’ve got four deals under contract right now that, you know, we’re negotiating due diligence and all that kind of stuff on, and all that stuff is old hat for me. I see it every day, but I have to understand or take a step back for a second, understand that a buyer, you know, may be investing a lot of money, a lot of their capital that’s available in this deal. And it, you know, it it is a risk. It is a risk. At the end of the day, all investments are a risk. And so helping buyers, you know, understand everything instills confidence in them. And then I think that projects into the deal.

Scott Bursey (16:58)
100%. And Chip, I know our pros are gonna want to hear this from you. How do you personally filter out the noise when evaluating a company so you can get to a to a yes faster than the competition?

Chip Miller (17:12)
Yeah, I I think it starts with making sure we have a good fit with buyer and seller. That’s a consideration that may not be there in a lot of just straight real estate deals, which is I have to understand what the buyer’s objectives are in the short term and in the long term, and then frame things or at least show them how a deal potentially aligns with that. So for instance, if a buyer is just trying to get their first platform company and buy it for little money down, okay, great, but you have to under understand that maybe there’s going to be some hair on a deal or, you know, a company that’s in that price point is going to be less established and not not have a management structure in place. And yes, you do not want to buy a job necessarily, especially as an investor, but what you have to do is look at a deal with the long term in mind.

So if getting into that welding shop that, you know, is sole proprietor and, you know, the the guy’s doing everything himself doesn’t sound appealing, I get that, but what if you were to buy that business and pay somebody to to do that work and maybe take less profit, but by having a business with that NAICS code, that is that that classification of business, that allows you to pivot and buy a much larger welding shop that’s doing $700,000 a year in SDE for less money down because the SBA will see it as an expansion. So if you’re framing it as, you know, “This is, you know, the best investment I can make right now,” and just looking at the short term, yeah, that well that small welding shop doesn’t make a lot of sense. But if it sets up the chess pieces on the board for you to make a bigger deal later, then that deal makes a ton of sense. So yes, you do that deal, you get into it, and then you you make it work because you’re setting yourself up for a much bigger fish, you know, in a couple of years. So that’s that’s kind of stuff that I try to coach buyers up on is you have to keep the long term in mind. And, you know, again as a broker, that’s where I think I can add some value.

Scott Bursey (19:11)
Chip, if I’m hearing you correctly, you must be able to pivot on a dime with that long-term perspective.

Chip Miller (19:17)
Yeah, absolutely. And then, you know, time value of money is a is another consideration. You know, if if you’re not familiar with that, I would definitely bone up on it. But it’s, you know, it’s the notion that getting in now is is better off for you than waiting and getting in later. And I think that’s, you know, there’s some overlap there with real estate investing, and there’s overlap there, of course, with with business investing. And so again, you do want to do your due diligence, but like I said, it generally if it gets you to where you’re wanting to go in the long term, then it makes sense to do the deal and figure out ways to make it work. And I’m here to help deal structure things in a way that protects a buyer just as much as it protects my seller clients.

So, you know, there’s things like earnouts, there’s things like seller financing that have a forgivable seller note in them. There’s a in my opinion, there’s a lot more tools in the toolbox to securitizing a business investment than there is necessarily for for real estate investing. There’s a lot of creative things you can do, of course, in real estate investing, but I think the the toolbox is even deeper with with businesses and that that allows you to to cover your risks quite a bit.

Scott Bursey (20:18)
Put that tool belt on and go to work.

Chip Miller (20:20)
There you go. There you go.

Scott Bursey (20:21)
Chip, what is the defining characteristic of a business that makes it an absolute must-buy deal versus just an okay one?

Chip Miller (20:31)
I I hate to give kind of a cop-out answer, but I think it really depends on the buyer, the specific buyer and what they’re trying to do. So what what may be a no-brainer for one type of buyer, maybe a okay, let’s let’s pump the brakes a little bit, or maybe this is a a yellow flag for a different type of buyer. For instance, I there’s a lot of people out there that like to, you know, invest in laundromats or car washes. Those are some familiar Main Street type deals. But for a first-time buyer, those businesses are particularly hard to size up because there’s a lot of cash involved a lot of times. You you could potentially get burned on those deals if you don’t know what you’re doing. So for first-time buyers, I I like to tell them, “Hey, you know, that’s maybe a good second play or third play once you, you know, build into the portfolio.”

But I think for a first-time buyer, you want something that’s gonna have receipts and a and a clear paper trail that you can verify during due diligence. It just makes it’s it’s like d doing checkers before you start playing chess. So, you know, like I said, to answer your question, I think it largely depends on who the buyer is, what their experience level is or level of sophistication is. For the really sophisticated buyers out there, I love working with you guys. It makes my life easy, although, you know, due diligence can be a little bit more involved. But yeah, I I think a a first-time buyer is gonna look at a deal much differently than maybe somebody who’s more tenured and that kind of thing. Now, I’m happy to help a buyer through the process. We do buyer representation agreement, so I’m happy to, you know, if you don’t know what questions to ask, we can help size up a deal for you. So that that’s something that we do as a value add for prospective buyers out there and happy to work with you, especially if you know if you need training wheels on the first deal or two, then then yeah, bring us into the picture and and we can help, you know, find a good deal that’s a good fit for you and and go from there. But 90% of what I do is working with sellers, so, you know, like that that’s most of where I I spend most of my day.

Scott Bursey (22:24)
You’re working with sellers, but you’re willing to nurture. I love that. And I love what you brought to the table here today. But we can’t let you go just yet. What additional words of wisdom or advice can you leave with our pros today?

Chip Miller (22:38)
Yeah, so I I think number one, when you when you’ve got your buyer hat on or your investor hat on, it can be really easy to miss the forest for the trees. And and by that I mean it it’s really easy to to dig into due diligence and, you know, send a a a page of 20 questions to a a seller before you even put an offer on the table because you’re trying to be careful. But if you keep the bigger picture of what you’re trying to do in mind—like let’s say your goal is, “Hey, I want to have a million dollar EBITDA between my real estate and my my business portfolio in the next three years”—well, I I think that if you start from that point, then deals start to make more sense early on. So so I think that’s the first thing is don’t get lost in the weeds of a deal, keep the big picture in mind. And then a lot of those little things can be addressed in in a purchase agreement through negotiating the deal. A lot of times there’s a lot of flexibility on that that minor stuff. So I think that’s the first thing is just keeping your eye on the big picture. I I think the second thing is, and that that kind of ties into that ready-fire-aim kind of mentality I see some of your other guests kind of propose or are are prop or proponents of.

But but yeah, so I I think that’s the first thing. And I think the second thing is that egos are expensive. So I see this with sellers and I see this with buyers, that they can’t get out of their own way to make a deal happen. And that’s part of what I do as a broker. So, what I mean by egos are expensive is like on the business side, if you’re operating, whether you’re operating as a real estate investor or business investor, it you’ve got to learn how to delegate. You’ve got to learn how to realize that my business is more valuable to other people if I’m not directly involved on an everyday basis. So a lot of business owners, they’ll buy a business and then it becomes their job and it be, you know, it creates burnout. Whereas if you’re an investor and keep that investor mindset, you figure out ways to build infrastructure with employees or management staff or delegating or outsourcing. All of those are skill sets that really come into play as a business investor. Because if a lot of times you think, “I can do this better than everybody else, right? You know, if you want something done right, you do it yourself.” That’s kind of the saying.

But that that leads you down a trap of getting over-involved in a business, being burnt out, and getting a much lower multiple for that business than if you went in with the idea that I am going to try and work as little as possible in this business. That’s not to say that it can be absentee, right? There’s this this myth of, you know, all these absentee businesses. You’re gonna have to have some level of involvement, but it’s about being strategically involved rather than tactically involved. And if you can parse those two things out, then I think you’re gonna be very successful.

Scott Bursey (25:23)
Being the smartest person in the room is very dangerous.

Chip Miller (25:27)
That’s right. That’s right. Being able to recruit the smartest people in the room is a much better place to be. And, you know, I’ll I’ll th kind of humbly brag that I would like to be part of that team that’s in the room for you. But, you know, hopefully you’re able to find the right people that click with you and and are part of your team.

Scott Bursey (25:43)
Chip, thank you for that. This has been an absolute masterclass. And for those of our listeners that want to keep this conversation moving, stay in your lane, collaborate with you, what’s the best way for them to plug into your pipeline and reach you directly?

Chip Miller (25:56)
Yeah, absolutely. So you can email me directly, [email protected]. Happy to respond. I try to get responses within 24 hours to anybody who reaches out to me. You can also go to our website, tworld.com. The South Houston office is gonna be linked below, I believe. So you can inquire about businesses that we have for sale. We have all of our portfolio listed online. It’s confidential in the sense that we have businesses listed, they’re not, you know, we don’t tell you exactly where they are until you sign an NDA, but you can kind of get a sense or sample what is out there and what’s available. Not just in Houston, not just in Texas, but even throughout the country. We have offices everywhere, we have listings throughout the country. And if something strikes your fancy, even if it’s not within my territory, I’ll be happy to get you in contact with somebody local who can who can help you out with that deal. So don’t hesitate to reach out. We’re we’re here for youBasically 24/7.

Scott Bursey (26:48)
Chip, my friend, thank you for joining us on the *Real Estate Pros Podcast* today.

Chip Miller (26:52)
Yeah, absolutely. Thank you, Scott.

Scott Bursey (26:54)
And to our listeners, we appreciate you. If you got value from today’s episode, please subscribe. We’ll be filling your tanks with the lineup of elite guests, just like Chip Miller, who are accelerating and setting the pace for the rest of the industry. Until next time, keep your standards high and your vision clear. We’ll see you on the next episode, everyone.