Ace Chapman was a born entrepreneur; at the age of 5 he sold his school pictures to make back the $20 it cost for him to take them, by the age of 19 he had bought his first business, and by the age of 21 he had made his first million.
A college dropout with an eye for opportunity, Ace Chapman found a calling in buying and selling businesses. It was with the motivation to continue enjoying his life and having the luxury of freedom to do what he wanted that he invested in this business of buying businesses.
In the past 16 years, Ace has purchased over 40 businesses and discovered unique strategies to finance businesses and continues to help other people leverage those same strategies.
Ace Chapman Says Don’t Start Businesses, Buy Them
How much would you pay to spend an hour with a guy who bought 40 businesses over the last sixteen years? Imagine the advice and wisdom you would receive if he were able to show you how to duplicate his success, how to buy and sell, working, running businesses every single day? Let’s welcome Ace Chapman to the show. How’s it going?
I am glad to be here with you. Thanks so much for inviting me to the show.
I’m going to make you go back to the beginning, to the times when you probably weren’t as successful as you are now. Tell us how you got started.
It goes back to 1999. I was a nineteen-year-old college student up at Colgate University trying to bear grit it through the tough winters. I grew up in Tennessee, so going out of there was rough, but it definitely provided a lot of time for studying and coming up with other things to do while indoors. One of those things was to play on the stock market simulator that was a game. You take virtual money, you invest it in stock market, and see how well I would do in these competitions. I was a huge business nerd and enjoyed that thing, but the site that I used was always crashing and the owners gave terrible customer service. As I got through my freshman year, I was like, “I should reach out to these guys and intern for them because they obviously need the help.” I reached out to them and didn’t hear anything back for a while, which was their MO.
They wrote back and said, “We’ve moved on to a different project. We’re not focused on this. We want to sell it. If you go out and find us a buyer, then you could get the business sold to them and become their intern.” Even as a naive nineteen-year old kid, I’m not going to do the work of finding you a buyer so that I can become a free intern. I was curious about the numbers that they were doing in the business, and I reached out and told them, “Maybe I’ll find some buyers that wants to buy the business.” I found out they were making $60,000 a year and only want $70,000 for the business. That sounded like an amazing deal to me. The only downside was all I had was $2,700 leftover from work in the summer before cutting grass. My next step was trying to figure out how can I take these $2,700 and buy a $70,000 business. That was the beginning of what I still do to this day.
You did get the $70,000 didn’t you? How did you do it?
The first thing was going back to them and saying, “If I come up with $35,000, would you mind if I pay you the other $35,000 over time?” The truth is this was a crazy deal because they were already selling this thing at what we call ‘one times earnings’. It means you can get most of your money back the first year. It’s like buying a rental property, but instead of that mortgage taking 15, 20 or 30 years to pay down, the rate is going to cover all the payments in a single year, so it was an amazing deal. To give you an idea, we’re happy to buy things that two to three times earnings. It’s even crazier to sell something at one times earnings and then turn around and say, “I’ll finance half of it for you.”
One of the lessons that I learned at that point was you don’t get the outrageous by not asking for it. There’s no way that anything outrageous is going to happen to you if you don’t ask. Me, being naive and not realizing how absolutely ludicrous that was, is what allowed me to get that deal. It still is a reminder for me today, because I get naive clients that I go in and we buy businesses together. Now, I’m a little more jaded. I don’t go for the outrageous as easily because I’m not as naive as I was at nineteen.
I got them to finance half of it. I went back to a buddy of mine who also used the site, and I turned him on and he came from some money. It wasn’t a huge deal for him to invest $15,000 into this thing and he saw the potential. Unbeknownst to my parents, we’ve taken out credit card loans. I’ve got some credit, they have a little cash, and my greatest fear at that point was my parents finding out about these credit cards because they would kill me.
You would never have learned that lesson if you didn’t take the risk and give it a shot. That is the insight here, but here’s something else that’s interesting. What you figured out is that you could leverage the entire sale from the revenue of that first site. You were able to come up with enough money to pay them half and then the other half could come from the revenue generated by the site itself.
The rest of it was paid for by the income from the site. Since I was a broke college kid, it wasn’t like I needed to cover a bunch of bills.
We’ve seen that model in real estate as well. I know people who’ve gone up to a homeowner and said, “I’d like to buy your house, but I’ll pay you the down payment in the second half of the year.” Go to the bank get money back when they closed and put money in their pocket when buying a house for nothing. This is a fantastic model, and I love the fact that you did this in your college freshman year. I did something like that in my college freshman year, but I didn’t stay in school. Did you?
I did for a year. I bought this thing, we’re running it, I ran it over the summer, which was funny because my parents kept telling me, “Aare you going to get a job this summer?” This is 1999. The internet was a new thing. Mark Zuckerberg didn’t exist. All these young people that have built these businesses, it wasn’t a story line in the consciousness of people. My parents were like, “Just do that at night. Go out and get a regular summer job.” They bugged me quite a bit. I kept trying and said like, “This is making real money.” I went back to college my sophomore year, ran it that year, ended up growing from 2,000 users to 100,000 users. I was approached by investors who wanted to take it to another level. They said, “We believe in college. We think education is important, but if we put our money in this, we want it to be you’re 100%, so focus.” That’s when I made the decision to leave school.
Back in 1999, I was running and building. I should say, the about to become the largest furniture shopping website in the world. I had never done anything like that before. A bunch of venture capital guys trusted me to take this company forward, and we did. We had a great time doing it, but it’s these experiences, the timing, and the moments. After you got involved, we had a little bit of an internet implosion. Were you still with that same company then?
I leave school, this is 2000. This thing is exploding. We’ve got a couple of offers that are in the seven figures. I’m twenty years old and I’m thinking, ”This is it. I’m about to exit and be a millionaire.” We’re growing this thing, and then all of a sudden, the carpet got swept out from under us. We realize that a lot of the businesses that we were in business with that were paying us for ads on the site were going out of business left and right. It was the dotcom bust. They were losing their funding, they couldn’t do any business with this, and this thing was dwindling away. We ended up axing out a small amount of money that allowed me to have enough to survive for a few months. That was the first time I had that realization that when you get into these things, that things are looking good, it doesn’t mean that it’s going to work that way forever.
You were rich for about twenty minutes, and on paper no less. You are jilting me with my memories in those times because I called up by venture capital guys when the market crashed, and I said. “I still have $2.5 million of your money. Do you want it back? I think you should take it back because the market is totally dead.” Here you are now, you’re out of college because you’re running the site.
I left college; I don’t have a company; I don’t have a degree. I’ve got to figure out what I’m going to do next. I decided to take a corporate gig. I have been doing some finance and had built up a name. They were like, “We’d love for you to come and be in our department.” I quickly realized that corporate America was not for me. Part of that was seeing some of the people that have been there for 20 or 30 years, and realized that I don’t want that to be my life. The other part was I still was a renegade. I was also very young. In the internet, nobody else was using the internet to advertise and get clients, so I started making some good money.
I wanted to hire an assistant because I knew that could allow me to focus. Every time I got a deal done, I was spending a whole two days getting all the paperwork together. I went to them, I wanted to bring on the system. They told me that it’s a seniority thing. I’m like, “I will pay for these. I will pay you. I’ll use my money. I’ll pay it and take care of the expenses.” They’re like, ”If you get an assistant, other people that have been here longer or are going to be upset.” That was my first taste of corporate politics. It has nothing to do with the money, it has nothing to do with me making more money, it’s corporate politics.
As an entrepreneur, it’s hard to understand. This is not going to cost you anything, and if anything, will make you more money. Why wouldn’t you do that? Being young and being a renegade, I was walking by an office building one day and I saw a leased sign. It clicked in my head, ”I’ll hire people and set up my old office and put it assisted over here. I leased this office out. It’s a block away from the bank, and I go back and forth. Then I hired a second person. They heard that I had some other people. They said, “We’re going to let you either resign or we’re probably going to end up firing you if we let you deeply into this.” I was like, ”You are right, I need to resign.” That was my short-lived time in corporate America. I went out and bought a mortgage company, which I probably would have never done without that experience.
Once you got that mortgage company, did you ever find a way to let those people know that you had gone and done that after they fired you, and felt that little bit of smug satisfaction that, ”You did me a favor by firing me”?
Yes, even by co-workers. You have people that are envious in their life. I was young, I was 21 at this point, and you had these people that had been working at the bank and worked these careers 20 to 30 years, and they could be dropped at any point and a lot of the work that they’ve done and relationships. I still have lunch with them. It was a good natured thing. Even when I got in trouble, I was like the little brother that is going to do some idiotic thing like hire people and have it come through the bank. I also got great advice from them as well.
The mortgage company that you started and grew, how did you end up resolving that? What happened to that company?
I bought it; I didn’t start it. That would have been a lot tougher. I bought an existing mortgage company. We went in and I already had my team. I had two employees that fortunately knew how everything worked. They had two not so great employees that eventually we let go of, so we went in and took over this company. It’s like real estate. The owner of the business has some health issues; they need to get rid of this business as quickly as possible. They have a couple employees that weren’t up to par and not capable of carrying on. I got that business with no money down, and I earn now over time. The only way the seller got money was if I made money, so they were very motivated to send me business.
It turned out to be a great deal. A better deal was that I had a client who owned a HomeVestor franchise, which is a business that buys and sells real estate. Long story short, we ended up buying that business and then combining the two. That was a great time for me. One of the fortunate things of that first experience was I had a guy who came to me wanting to buy the two companies. Unlike before, where I told my suitors I was trigger happy because I knew things could change. Things can change in a moment. I sold that fortunately, and he was a wealthy guy. A lot better able to weather the storm than, at that point, a 24-year-old black kid who hasn’t done much of anything else. He was able to weather that storm. A couple of years later, we got hit with the mortgage crisis. That whole business was hit hard.
I have a lot of friends who own mortgage companies who were living the high life, yachts and cars. I have a friend who had 100 people, and within weeks he was bankrupt. It was overnight, and it was horrible. You lived through that, too. We have people who never lived through what we’ve lived through in those years. They’re starting companies, and many of them are going and they’re doing great. Some are getting started. Others are on the way to getting traction. They may still be working that corporate job and doing this moonlighting at night. Where was your mindset at that time? Were you afraid? Are you anxious, or did you completely plowed through all of those emotions and go for it? Where did you sit?
I don’t feel anxiety as much as I feel detachment. I look at all of the businesses that I own and the deals that we do, and it’s never about the emotion. It’s about this asset that I have, and I need to monetize that in the best way possible. Sometimes, that monetization is centered around generating the income. Other times, it’s exiting out of the business. The place where I feel anxiety is diversified income. I want as much diversification of income as possible. After I sold that business, I found a mentor. I didn’t find him; I was very fortunate to run into him. I was in Chattanooga, Tennessee, where I grew up, and I had some people tell me that I should meet this guy.
One day, I am at an event and I meet him like, “I’ve had people tell me that we should meet. What do you do?” He’s like “I flip hospitals.” He could have never done anything else and tell me that to know that that was the reality. That changed everything for me, because at that point I saw myself as an entrepreneur. I didn’t see myself as even a flipper business. LinkedIn could look back now, but my goal at that point was, “I know how to do this business buying thing and grow and sell, and I know that works.” But the real goal is to one day become an entrepreneur. We want to be the Bill Gates and Steve Jobs and all that. That is the real goal.
Having the opportunity to sit down with him and have him tell me a lot of his philosophy, after that transaction, I exited out of several businesses and I had my lump sum. I felt like I’m going to go do this startup thing. I got to my mentor and I’m telling him about this idea that I have for this startup and I’m passionate about. He’s sitting across the table looking completely unimpressed after I went through all of that. He let me wrap up it and then started to ask me about my computer. I’m like, “Why is this guy asking me about my computer?”I’m like, “Are you looking for a computer? You’re not going to say anything about this passionate presentation that gave about my next business?”I told him, “I’d bought it from Dell.” He asked me, “Why didn’t you build it from scratch?” I’m like, “I don’t know how to build a computer. I don’t have parts.”I realize where he was going with that.
The bottom line and his point was when it comes to computers, we would never try to build out from scratch. When it comes to a buyer car, we would never try to build one scratch. When it comes to buying houses even, 99% of people are going to buy an existing house. If we want to get our income on our terms, we’re like, ”We have to go out and start something from scratch.” It was a big transition point for me, where after that point, a lot of my anxiety was like, ”How do I go buy more income?” That was a huge lesson. A lot of my anxiety was, “How do I go out and do even more deals?”
You’re opening my eyes to something in a way I hadn’t thought about before. Starting businesses for me is easy. I know what to do. In 48 hours, I could have a team together of seasoned professionals who have all been through it and done it before, so I have a completely different viewpoint. But I like your viewpoint a lot better because not every business I start is a success; far from it. I would bet every business you buy that generates income has already proven to you that it’s a success before you bought it.
There are people out there that are absolutely supposed to build businesses. It’s not a condemnation against building a business. There are people out there that are meant to build cars, and they are the enthusiasts; they’re passionate about it. The average person wants some income. It’s not about being Steve Jobs. It’s just, “I want to pay my bills; I want to have income.” A lot of people get caught up in the natural statistics around starting something from scratch. I’ve seen them. I’ve worked with over 100 people and helped them buy businesses. It would have ended not so well if they started from scratch, but coming in and being the operator in a business that’s been around for ten years? We’re looking at internet business that’s been in business since 2001. We get to the point where you have been in business in sixteen years even if it’s an internet deal. To come in and run that, everything’s been figured out. You can tweak and improve, but you’re getting trained like you would on a job, and then you’re following that system to be able to continue the growth of that business.
I know it shifts my perspective hearing you speak about it and I’m sure listeners are thinking the same thing. I wonder what that’s like. You talked about having a mentor, and you talked about that contribution and the way he blew your mind when he talked about flipping hospitals. What else did your mentor provide and what advice would you give our listeners about finding and getting a mentor?
The biggest piece of advice and I know the thing that made a big difference with me was the fact that I was bumbling through the dark, making mistakes, but taking massive action. A lot of people are sitting back, and this goes to both points, like, “How do you find them.” If you’re taking action in the space that you want to work in, you’re going to come across them. If I were sitting back looking for him, there’s no way I ever would have found him. It was only by me taking action and other people seeing the action. No mentor wants to spend time with somebody who’s chilling on the couch all day and then want some magical words to change their life. That little story that I gave you was almost like a parable. It was never like, “Do this.”Looking back, there was so many jewels that I thank him for that I didn’t get. I wasn’t ready for it.
I think part of it is getting the mentor-taken action, but the mentor can’t be of value to you until you’re out there doing things. There were things that I had done enough to understand what he was saying. Everybody’s journey is different. At the end of the day, you got to make this decision because this is your journey. The most powerful thing you can do is own the decision.
You hit upon the key element of the relationship between a mentor and a mentee. The key element here is if you’re not in action, if you’re not already playing in the game, then you’ll never be exposed to the level or the quality of people that you would if you are. Mentors don’t show up and work with people who are sitting around. They show up because there are people that are doing stuff in their world, and they want to be available to help some of those folks.
You said massive imperfect action. That is so critical to getting anything going. If anybody ever takes one of these internet courses or start something and sits around or read it and studies it and doesn’t do anything, that is a tragedy. You’ve got to fail. You could gain from the wisdom of others like you do, but instead go out there and make it happen. Is there anything that you could offer our audience as maybe a gift or a place that they can go to learn more about what you do and maybe learn from some of your wisdom?
I give away a lot of education. I don’t enjoy being a teacher. I love doing this stuff. The best way to learn is for us to do stuff together, and that’s what I enjoy. I went through a period where I was doing some seminars, and I wish I was doing more deals. I do a lot of teaching on YouTube channels. I take questions that people ask me. If you have a question shoot it to Ace@AceChapman.com. If it’s a question that we’ve answered on YouTube before or maybe like a podcast like this, my system will send back a link to that. If it’s something we haven’t, then I will answer that. You can go to www.AceYoutube.com and check out that channel.
What is it that you are doing or would like to do that truly has the potential to literally change the world?
My mission is exposing people to this concept. There are a lot of entrepreneurs that haven’t been exposed to this. I think about myself. I bought four different businesses before I met my mentor. I didn’t know that there were millions of businesses for sale. A lot of them that are profitable that never get sold because everybody is going out and starting a new one instead. We’re in this world where 99 % of the media, the magazine, articles, the podcasts, the trainings, the videos, all of this is all around. If you want to be an entrepreneur, you have to start something from scratch. I love even the things like lean startup where it’s a little bit of a move into the right direction. My mission is exposing people to this concept.
We’re on the way to helping you do that even more with the show. Thank you so much for appearing on the show. I hope again to talk to you soon.