YOP028: Ace Chapman- Break Your Limits

By May 19, 2015 Podcast Episode No Comments

Bio: Ace bought his first business when he was nineteen. it was an online stock market simulator called CoolWallStreet. After selling it and seeing the benefits in buying a business over starting one, he caught the business buying bug. Since then he has bought and sold over thirty businesses and has helped his clients all over the world buy over one hundred businesses.

Show Notes:

Email: Ace@acechapman.com

AceChapman.com

Ace’s Twitter

Ace’s YouTube

Transcript

Zephan: Hey, everybody, Zephan Blaxberg here on another round of the Year of Purpose podcast. And today, I have Ace Chapman. Now Ace boght his first business when he was just nineteen. It was an online stock market simulator called CoolWallStreet. After selling it and seeing the benefits of buying a business over starting one, he caught the business buying bug and since then he has bought and sold over thirty businesses and has helped his clients all over the world buy over one hundred business. Ace, welcome to the show!

Ace: I am glad to be here with you! Excited to chat a bit.

Zephan: Yeah! So I kinda wanted to start with, you know, where this all got started. You know, I started a business when I was sixteen, it was my first business. I ran a computer repair company, and nothing is more of a learning experience that placing an add in a local newspaper, getting clients, and having your mom or dad drive you to the client’s house to fix their computer and have your mom or dad sit in this random strangers living room, like, watch what you’re doing, having no idea what’s going on. And I’m sure you might have experienced some of the same things. Like, my parents have no clue what I really do. They just know that I work for myself and that I have money to pay for my rent.

Ace: [laughing] It’s not homeless.

Zephan: So you started when you were pretty younger too.

Ace: Yeah, yeah. Absolutely. Yeah, so—and my parents knew they were in trouble when I was about five years old. My mom gave me some money for my school pictures. So I went to the pictures, you know, a couple months later—the pictures came back in the day when it took a couple months to get your pictures back. And so we get the pictures and I see—we’re at church later that week, and I see my mom is handing out the pictures to everybody. And I remember, I’m like “She gave me twenty dollars for those pictures!” and twenty dollars was like an infinite amount of candy for a five-year-old.

So I’m thinking, like, “This is a lot of money!” So I go up to her, I’m like “Are you charging anything for these pictures?” and she’s like “No! You can’t charge for the pictures. You gotta give them away!” and I’m like “No, we gotta charge for them!” and I pitch a fit and I’m crying, and she’s like “If you want to try and sell the pictures, go ahead. Nobody’s buying your pictures.” And she was wrong. I was a cute kid and people were willing to pay twenty-five cents and fifty cents for my picture. So that was my very first business. Unfortunately, it didn’t last long. I’m not nearly as cute now as I was then.

But fast forward to when I was nineteen and, you know, just trying little things here and there up to that point. And one of the best ways to find businesses—one of the things that most people don’t think about is that, you know, at some point, every business that you do business with is either gonna sell or close. You know, there are only two options. The owner of that business, they either have to pass it down to somebody, and a lot of times the kids don’t want the business so it has to go to somebody else. Nobody lives forever. So every business is gonna have some kind of exit at some point.

And I came across a business when I was nineteen, I had no intention whatsoever of buying the business, but I loved—I was a business nerd, like I said, since a young age, and so I was using this stock market simulator back when that was a neat new thing, and the customer service was bad, the site was always going down. It was just a terrible experience.

And summer was coming up, at that point I was a freshman, so I reach out to them and basically said “Hey, how would you guys like to have a free intern this summer? I’d love to come down, work with you,” kinda hoping they’d pay me something, “But I can tell you guys are obviously really busy because everybody’s complaining about it.” So it took a while to hear back, and eventually they got back to me and they said “Actually, we don’t want this business. We got a web developing business. We’re wondering if you want to buy the business instead of interning.” So that escalated pretty quickly.

So I’m like “How much would you want to sell it for?” turned out to be a really great price, and at that point, I knew nothing. So all I knew is they wanted seventy thousand dollars for this business and I had like three thousand I’d saved up from the summer before doing some web development stuff. And I basically was like “Okay, I’ll take it!” and then started trying to figure out how I could come up with the money. So that became my first kind of leverage buyout, but I realized later what an amazing deal that was once I sold it and started looking out and finding other deals and what the normal price was.

So that was my first deal.

Zephan: Very cool. So, I mean, you just—you had to find a way to make up sixty-seven thousand dollars to buy out this company. I can’t even imagine.

Ace: So the firs thing I did was actually—and it’s funny because, like I said, I had no idea what a great deal they had given me—basically just the price itself normally should have been about a hundred fifty thousand instead of the seventy. So I went back to them and basically said “Okay, I’m gonna need y’all to finance about fifty percent of this,” which was pretty outrageous based on the deal they’d already given me! But they said yes! And so sometimes just ignorance can help.

And then, the other thing, I had a buddy of mine who put in about fifteen thousand. He became an investor. And then I actually got credit cards, which my parents would have actually—probably strangled me. I would be where I am today, because I would be gone if they had any idea that I went out and gotten some credit cards to make up the difference. But, yeah, got into the deal, everything went really smoothly.

And one of the biggest transition points, because as a kid I would always have these ideas and I would try to start businesses and do things, and this was like that transition where—literally, I remember. We closed on a Tuesday. We’d gotten everything done. We sent the money to them, the accounts were now in my name. And I remember at the end of the day on Wednesday, looking at my back account. And I had gotten a deposit that day. And it was positive money that was mine that was profit.

And compared to starting a business from scratch and you look at that journey of what it takes to start a business from scratch to just get to the point of taking your first customer—especially if it’s offline and you got to rent a space and pay a deposit and do build out and hire employees and train those employees in order to have a few customers. By the time you open the doors, you gotta spend some money on marketing and eventually after those months of spending all that money, you get to open your doors. And in the internet, you’re spending money on development and employees and marketing—the same thing—and you finally open your doors to the business and you get customer one. But guess what, you’re still losing money. So you still have another year just to get to break even.

You compare that to the storyline of buying a profitable business—and that’s why I’m a very big believer. Even if you have a vision for the business that you want to build, it’s great to go in, take over a profitable business, especially since it can be done creatively because nobody’s doing it. Nobody thinks about this stuff so it’s not like you’re going in to buy that business and you gotta bunch of competition that’s gonna pay more than you. Kinda whatever you bring, a lot of times, is gonna be their only offer. So then you can build your vision on top of another business.

Zephan: Interesting. So, it’s a crazy lesson from a young age. Because I’m sure now, knowing what you know, we don’t just look at a business and so “Oh, it would be cool to own that. Let’s just shell out seventy grand,” right? That’s—there’s probably a lot of things that you learned along the way and I know that you were saying in your twenties, there were a lot of things you tried out just to kind of test the waters and see where it was at.

What was your struggle like, you know, as far as having loans, having debt, being broke? I mean, a lot of people are kind of in that boat right now, you know, and they want to perhaps start a business—or maybe after today we’ll be able to convince them to buy a business that already exists. But, you know, what were you going through personally? What were some of your fears and some of your struggles there?

Ace: Yeah, I—man, it was really interesting. One of the—probably the biggest source of a lot of my stress and the down periods was not—was trying to fit into a mold, basically. Because there was no definition for what I was doing. And honestly, I didn’t see it as something—at that point. I’m talking intelligently about it now because I can look back. But at that point, I was bumbling through the dark. You know, I just happened upon that deal and happened to figure out, “Okay, this is interesting.” but at that point, I didn’t really see this as “Oh, okay, maybe I can go out and flip businesses!” I definitely didn’t consider that. At that point, I still saw what we all see as the entrepreneur journey—has to have a business, you grow it into this huge entity. Eventually you get to the point where maybe you take it public, and you become Steve Jobs. Like, the goal is to become Bill Gates or Steve Jobs.

And so my vision at that point was to—I realized and I learned, “Okay, well maybe instead of starting something from scratch, I’ll buy a business and grow it.” And I became hugely frustrated because, even with the CoolWallStreet, we would hit a ceiling. And at that business, I waited too long to sell. Which did make me a little trigger happy when I came to sell, which is another thing that just happened organically that turned out to be a really good thing. And so—but I still didn’t have a vision for “Oh, go buy, grow, sell businesses.” It was “How do I fit into the entrepreneurial mold with this little tweak?” And “how do I grow the business?” You know, so it was just a tweak to the process.

And the interesting thing that happened was, with the CoolWallStreet thing, I waited until after the bust and sold it. So we sold it for like a tenth. And, you know, I still came out with a profit, but sort of a tenth of what it was worth at the height. So that was one of those things that did spur the sense of “Okay, if I’m not gonna explode it, then let me sell it as quickly as possible!” and that came in real handy. I bought a couple units of franchise called HomeVesters that bought and sold houses. And when I bought it, they were buying and selling about twenty-five houses a year. We took it up to a hundred. Took over a unit in Alabama, and I—you know, that was my fourth business at that point, and it was just one of those things where it’s always for sale, I love to grow it.

And a guy came to me and wanted to buy it and I sold it and right after that was 2008, which was the end of everything. And he was a really wealthy guy, so he was able to kind of whether it, but if it were me, it would’ve been the end. That would’ve been like starting—not the end. I would’ve been starting from scratch and rebuilding and going through that whole process.

But one of the big realizations that I was also really grateful in that business was we did grow that. I mean, as you can imagine, we’re buying and selling a hundred houses a year—it was just a really stressful business and my health was really bad. I mean, literally, my doctor—I went in and I had these things that turned out to be hives on me. I go to the doctor and I’m like “Hey, I need you do get rid of this.” And the doctor’s like “There’s nothing that we can do to get rid of that.” I’m like, “What do you mean??” He’s like “It’s you! It’s your stress. My only prescription is take a vacation.” And I went—I remember going on that vacation with the girl I was dating and, you know, basically she’s like “You just set up your office in the hotel room and you’re sitting here working! This isn’t a vacation!”

And so I really went through a transition after selling that business to looking at my lifestyle and having that as a lot more important. And I had a vision when I was young “OH, I want to be this super mega millionaire!” and now I would trade freedom and time and enjoying my day and what I do for any amount of money. That is the most invaluable thing you can have. And now I wake up, I do what I want, I travel when I want, and all that and I feel very, very rich.

Zephan: You brought up some very good points there. so one of the things that first comes to mind is that I was kind of raised under this mold of you grow up, you go to school, you get a degree, you get a job, you hold it for thirty/forty years, you retire, and that’s your life and that’s it. And you are living proof that, you know, you’ve had all of these businesses and you can change what you’re doing. If you don’t like it, you sell it and move on to the next one. and that’s kind of something that I think a lot of people ignore or don’t want to understand because, you know, they’re so used to this label of “I went to school and got this degree in blank and that is who I am and what I do.” And, you know, my degree was Digital Video and Cinema Studies. I’ve done everything from work at the genius bar at the Apple store to being a maintenance driver where I drove a tractor around a summer camp to being a pastry chef.

And my first business was computer repair. So it all—it can change at any point in time, which kind of leads me to the next thing. You were able to basically look at what was going on in your life and kind of rescript your story and mold it around what you were doing so that you could live life in the way that you wanted to and that’s kind of where I’m at right now, is I took like of working non-stop, you know, eighty hours a week, for myself thinking “Oh, this is great, I’m making a lot of money” and now it’s like I’m leaving for San Diego tomorrow for five days and next month I’m heading out to Texas, and after that, I might be heading out to Phoenix and, you know, it’s nice to show people how possible it really is to live a life on your own terms to be able to actually sit down and say “This is what I want financially. This is what I want for myself personally. This is what I want with my relationships.” And it sounds like you really were able to do that.

Ace: Yeah. Yeah, absolutely. And it was—not to say that there’s not a constant struggle. I think always, in the back of your head, you’ve got that voice because we grow, the life scripts are constantly being kind of rammed into our subconscious. And, you know, it starts from a very young age when we’re extremely impressionable. But even now, through movies and music and conversation and bosses and all that stuff. I mean, it’s really tough to get out of that. And I remember one of the tougher things, for me, I bought that business, I was in college. I had some investors that were interested in investing and kind of taking it to another level. And they basically said “We want you to quit college,” though and this is after my—I ran it from college for a year. After my sophomore year, we’d grown it and things were looking good.

And I remember going to my dad and kinda—you know, they had made a lot of sacrifices for me. I went to a Top 20 college. Made a lot of sacrifices and all that stuff. And I expected him to just completely flip out at the audacity of me even bringing up quitting college. And I think the weird—the really interesting things is that I almost wanted that. I wanted him to blow up, say “That’s just outrageous. There’s no way you can quit” and make my decision easy. And then I could say “No, my dad wouldn’t let me. I’m off the hook and I don’t have to take this challenge.” And he basically said “It’s up to you, hundred percent. I trust your decision.” And I was like “No! That’s not what I want! I don’t want to have to make this decision! This is too tough!”

But yeah, it was a very—it was a tough decision because that had been—literally a degree equaled success. You’re just gonna—and that’s rammed into our heads. So it’s tough to get off of that life script but it’s so exciting and powerful when you do to break through each one of those limits. Because you start to realize, like, “Wow! Okay, if I can break through that, then what else is am I limited just through my thinking not by my power?” and it’s kind of like that trainer who’s training somebody and it’s like “Hey! You’re stronger that you think you are! You just gotta keep going!” and you’re like “I can’t do it! I can’t do it!” “No, you can!” And if you can become—if you can reiterate that voice and kind of my mantra is—I read in the morning—is that. You’re strong than you think you are. Because our head’s a lot of what holds us back.

Zephan: Absolutely. You just reminded me of a little story that a friend of mine, Kyle Maynard—Kyle was born without arms and legs and he crawled to the top of Mt. Kilimanjaro. So, A, if you thought you had an excuse, you don’t. But, B, he has this crazy story of being just so warn out, and they’re like halfway up. And he was in this tent one night and just lost it. He thought that he was gonna give up. And he remembered that he was carrying the ashes of, I believe, a soldier who had passed away to the top, and this was kind of like his mission, his thing to do. And he started to tell himself “Not dead. Can’t stop. Not dead. Can’t stop.”

And it’s so true. You’ve gotta be able to—I call it embrace the suck. You have to be able to embrace the suck, you have to be able to push through that. Realize that the grass it definitely going to be greener but for right now, you’ve gotta push that lawn mower over it for a really long ways.

And I guess so many people look at what people like you and I are doing. They’re like “You know, I could never do that.” and they kind of have that voice in their head of “I can’t get there.” and it’s like “But you can! Just stop saying that! keep going!” and so what—when it comes to creating this mold, and designing the life that we really want, what aspects of our life do you think we should kind of sit down and look at? Obviously, you had health. You had the hives breaking out. What are some other things that you think we could kind of examine and really dictate how we want them to look before we get moving with our plan?

Ace: You know, I think one of the more valuable things is—because it’s too difficult, it’s too overwhelming to try to say “Okay, what do I want my life to be?” and, you know, start to like build that vision. I think a couple of simple things. Number one is looking at a specific day and what you want a day to look like.

And that’s just “change” for me. I lived in Encinitas. I did that a while back and, you know, when I envisioned that day, I saw me running on the beach. I saw me hanging out with friends and being outdoors and—and where I’m from in Tennessee, it’s like one of the top worst pollen places so I couldn’t do as many outdoor activities as I want. So I ended up living in San Diego. After a little while, I basically kind of redid that, and as I started to envision that day, family became a lot bigger part of what I wanted there, and so seeing my nephews and being able to go to a game. Being able to have lunch with my dad, which I’m doing right after this. Those things were a lot bigger part of how I envisioned that day. And so that brought me back here.

And so I think that can start to be that first thing. And then the next thing’s obviously money. I’m just a big believer in the fact that being able—not even stacking up a ton of money—but knowing that you can create income if that’s—that’s kind of that first step. Just being able to almost create income on demand. But, number two, being able to start to build some long term wealth and know that “Hey, crap hits the fan, I’ve got something to fall back on.” Because that’s where a lot of just the lack of freedom comes from, is having bills, not having a lot of cash, and that kind of thing.

But I do believe that once you start to create freedom, it doesn’t take as much money as most people think. And it’s one of the most rewarding things in the world, for me, to work with a client that thinks that it’s just this impossible thing. We had a mom who was working and had a great paying, six-figure job but it required her to travel basically every week. And she had a baby, she was on maternity leave. She had three months of maternity leave, and she’s like “I can’t even fathom leaving my baby every week. It just—I can’t allow it to happen. But my expenses and everything, I also can’t not have this job.” And so that was just one of many cases, just had all kinds of different cases, where it’s like “Here’s the plan and here’s what we’re gonna do.” And we got a great testimonial video up of here on YouTube.

But that’s a valuable thing. Is to see people go through that transition of “This is just impossible. I don’t know what I’m gonna do.” You know, it’s one thing for us to be like “Oh, I want to travel! I want to do that!” but when a mom wants to just like not leave her kid, that’s even more powerful. But it can take a lot less.

I think Wall Street has sold a lot of people on a product, and their product is “Give me a lot of money, which, in order for you to give me a lot of money because you make so little, it’s gonna take you forty years and then you’ll be able to start getting some of that money back.” And there are a million alternatives to that. It just so happens they’ve got a ton of money, they’re able to advertise that. And, again, you’re just falling into one of those scripts.

Zephan: Interesting. And kind of jumping back to buying business, because I think a lot of people at this point are realizing that this could totally be a good option for them. Is there a certain industry that you look at or are you more looking at the numbers behind how the business functions? What, to you, are the key flags of “hey this could be a good business to buy”? Because I’ve heard you bought online businesses, you’ve bought offline businesses—it sounds like you’ve had experience in real estate, but you’ve also had experience in online stock market simulators. And they’re all totally different things.

Ace: Yeah. So, yeah, I’ve bought a lot of different kinds of businesses, from tanning salons to real estate, like you said, to teeth whitening. We just bought a teeth whitening business. So we do a lot of different types of businesses. What it really comes down to is what I call low-hanging fruit.

So there are a lot of things that, at the end of the day, we look at in a business, and there’s due diligence process, there’s valuation process. We’re looking at how we’re gonna structure the deal and all of that. But the one common denominator that is in all of my businesses is that they’re some type of low-hanging fruit. And I know that doesn’t mean a lot to folks, but what—I’ll give you a couple of examples. I just mentioned the teeth whitening business. With that business, the owner of that business basically had a warehouse, had employees, was shipping out everything. And all of that cost represented about forty percent of his revenues. And we knew, going in, “Hey, instead of us doing that, we can send everything to Amazon. And that’s a little step for us, but they’ll ship it for fifteen percent.” So that drops twenty-five percent right there down to the bottom line.

So a lot of people think that what we do is we try to go in and just get a deal at a rock bottom price. But the—and sometimes, a really motivated seller, we’re able to go in and help them, or they just don’t want the business like in the case of CoolWallStreet, whatever. I bought businesses where people are having to move really quickly and they need to just get rid of it. And then there’s people who want to retire. So you can get those things that are really inexpensive, but I would say a great majority of the time, I pay asking price because I see something in that business where we’re gonna be able to make a lot more money really quickly.

Another case was—I mentioned the tanning salon. So I go into this business, this is a case where the owner was really motivated. She had to move to Europe. And I’m talking to here, we’re talking about the business, and I see that see mentions the database. She’s got a database of fourteen thousand customers that have done business with her in the past. This thing as done business for over twenty years.

And bottom line is, you know, I’m asking her about the database. I’m like “How often do you contact them?” or whatever. She’s like “Eh, we don’t really do that.” I’m like “Okay, when was the last time you contacted them?” She was like “We don’t really do it.” I’m like “So you never emailed them, phoned them, mailed anything to them, ever, in twenty years?” She’s like “Nah. No, we never have.” I was like “Alright! I’ll take it!” So with that business, we were able to almost triple the size of the business. We bought it, grew it, and sold it in about six months for about double. Paid it off completely, actually, in the first few months, just from income from the business. Because we did get that one at a really good deal because she wanted to get rid of it quickly.

But what we’re looking for, those kind of things, where we can go in and just have this immediate impact. And some of the other, smaller things, like I mentioned with the offline business, the last business I bought was thirty-three years old. You just have these things where it’s a great business, making six figures a years, and all this stuff. We’re getting a great deal on it, and this guy didn’t have a website, social media, customer database, not doing any of like—you know, “It’s 2013 and you don’t have a website?” So, yeah, that’s what we look for.

Zephan: Cool. So you’re looking for places where you can really go in and easily turn that around. I mean, if you don’t have a website, if you’re not emailing the people on your list—these are all things that are super easy to put into place. And then it sounds like, you know, with the amazon thing is you’re also looking too, “How can we make this cheaper, easier, more efficient?” and it’s kind of just, like you said, low-hanging fruit. It’s sitting there waiting to be picked. So that’s really cool that those options are even out there.

Just to kind of wrap this up, do you—is this something where you teach other people how they can do this? Do you go in as a partnership with people? How does that work?

 

Ace: Yeah, so we do a couple different things. Basically, we act as kind of investment banker for people that are looking to buy a business. And it’s not even something where we say “Oh, you should buy a business!” and then that’s it. Just like big companies are always in the market, they’re always analyzing their competitors, they’re always look for opportunities that may be synergistic, they want to grow through acquisition because that’s the easiest way to grow. That’s the easiest way to increase your bottom line, but once you buy that business, yeah you can go out and you can test a million different marketing strategies and whatever, or you can just go and buy a competitor and instantly make money and know how much that’s gonna be.

So we want to help the clients we work with grow long term through acquisition as well. So we basically have a program where we help folks buy their first business, we take them through the process, help them through finding the deal, doing due diligence, doing valuations, getting the financing. And we’ve got a lot of testimonials on YouTube and different places that talk a little bit of the case studies of how that works.

But—and then I do tend—the main reason I started doing this six years ago is I reached a point where I couldn’t do as many deals, because there were a lot of opportunities out there, but I only have so much time. So I wanted to start to train some other people so I could start to invest in their deals. There’s just very few things out there that give the kind of return. I can’t set my money in the stock market and be happy with that.

So I started to train people, and so when I train people, I invest—the call before this one, I was talking to a couple of clients who are partnering on the deal and I’m investing in their deal. And so, yeah, I do end up partnering if they’re interested in taking my money. Sometimes they don’t want to anymore. It’s weird how that works. When I was first starting, you know, everybody wanted my money because it was proof that what we did worked. He’s like “Okay, he’s will to invest. I want your money. That shows me that it’s real!” Now we’ve got a hundred testimonials, all this stuff, so as soon as I say—you know, I just had this guy say, Antonio—awesome client. But as soon as I’m “Oh, I want to invest,” he’s like “Eh, I’m glad you do, I’m glad, but that makes we want the whole thing. I’m sorry.”

So that’s how it works.

Zephan: That’s cool. That sounds like it really worked out for you. I’m glad that you were kind of able to break through this mold that so many people have set forth for us. And you’re a great example of, you know, you don’t have to get stuck in one place doing the same thing, working in the same business or industry the rest of your life. And, you know, if you want to go out there tomorrow and make a difference or create that type of income or lifestyle that you’re looking for, it’s there. You just have to figure out how to do it. And this seems like a really good way to go about doing that.

What are some of the best places for people to find you online and follow what you’re doing and get some more information?

Ace: Uh, you can find me on Twitter, @acechapman. I’m on Instagram, which is fairly new for me. It’s ace.chapman. But the easiest thing is people have questions about this stuff, feel free to shoot me an email. You can shoot it to ace@acechapman.com.

Zephan: Awesome. Well thanks for spending some time with me here today. I’m actually getting ready to head out tomorrow to San Diego, so I’m excited. I’ve never been there before. I know that you lived there for a little while, so hopefully it should be nice and warm and sunny.

Ace: It will be! I can almost guarantee it!

Zephan: That’s something that’s someone was saying. He was like “You know, it just stay between like sixty and seventy degrees all the time.”

Ace: Yeah. I remember, I had been in the place for like forever and one day it got chilly. And, like, I realized I didn’t even know where the HVAC thing was. I was like “Where’s the thermometer in here?! I can’t find it anywhere!” So yeah, it’s good.

Zephan: That’s awesome. Well, thanks for spending some time with me today, and enjoy lunch with your dad!

Ace: Thanks!

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