Mindy: Welcome to the BiggerPockets Money podcast show number 325, where we interview Tim Delaney and talk about buying a small business with low money down and turning it into an amazing cash flowing asset through hard work.
Guest: With this particular business, it didn’t work out. I didn’t buy that business, but it kind of opened my eyes to the idea of the banks are willing to give me money and the seller might be willing to to finance a little bit of that of that transaction and I can actually buy myself a paycheck day one as opposed to gambling and starting a business from scratch and never really knowing when I was going to make enough money to actually pay myself. So, that prospect of buying a business became much more front and center and much more interesting, and I more actively started pursuing business idea or business to purchase.
Mindy: Hello, hello, hello. My name is Mindy Jensen and with me as always is my amazing cash flowing investment through hard work co-host, Scott Trench.
Scott: And with me as always is my intoxicated with the numbers co-host, Mindy Jensen.
Mindy: I like that. Scott and I are here to make financial independence less scary, less just for somebody else. To introduce you to every money story because we truly believe that financial freedom is attainable for everyone, no matter when or where you’re starting.
Scott: That’s right. Whether you want to retire early and travel the world, go on to make big time investments in assets like real estate or start your own business or buy an existing business, we’ll help you reach your financial goals and get money out of the way so you can launch yourself towards those dreams.
Mindy: Scott, we are talking to Tim Delaney today. He is a small business owner and an absolutely wonderful saint who is better than everybody in every single way. Just kidding. Not really. He volunteered for the Peace Corps and then he moved to Ethiopia to help a German company, uh, help the Ethiopian country industrialize their economy, and then he pivoted to help small businesses learn how to grow using social media, and then he wanted to start his own business, so he started looking for businesses. He’s just like this give, give, give kind of guy. And then he found this business that he wanted to buy. He decided, he he ran the numbers, that’s very, very important. He ran the numbers and he has an amazing, very lucrative business that he works, what did he say? 10 hours a week in now, now, after nine short years, overnight success in nine short years. And is really living the life that he wants to live through one of the four, uh, levers that we suggest pulling. Save, invest, start your own business or what’s the other one?
Scott: Create.
Mindy: Create. Well, that’s this one. Start your own business.
Scott: Yeah. Spend less, earn more, invest and create.
Mindy: Yes. Okay, there we go. Spend less, earn more. That’s what I forgot. Uh but he’s earning more. He is spending less and he is creating this business which is which he did not create from scratch, but is growing it exponentially and crushing it.
Scott: Yeah, this is a great story and what I think you’re going to really like about Tim’s story is how repeatable it is. This is not a guy who had a huge head start financially in a lot of ways. This is somebody who um bought a liquor store and put everything he had into it and was able to turn that into a success. And the reason for that is hard work and intelligence, yes, but also really good strategy. This is the asset class and I mentioned this later in the show as well, that I think Americans today have the best chance of becoming wealthy in. There are 12 million baby boomer ownned businesses right now that are expected to come up for sale in the next decade or so. 12 million businesses of this type, small businesses that generate 50, 100,000, $200,000 in cash flow or or net operating profits. You can buy these businesses for one, two times cash flow, maybe even less in some cases, plus inventory, right? And and then and then these these are businesses in many cases that don’t have any systems implemented, that um are not using technology, they don’t even have websites or or basic um online presence like social media. And and there’s a huge opportunity here for I think the um young or ambitious entrepreneur um who wants to get out of the the corporate 9-5 to buy this business. And and guess what? You’re going to take a small pay cut at first and you’re going to do a lot of hours um at first. But if you are diligent and thoughtful and buy the right business and put the right systems in, you can expand profits, make the business exponentially more valuable and create a passive stream of income that can open up other options down downstream. So I I really am excited about this asset class. I think it’s something that we want to explore more here on bigger Pockets money. If you have a story about buying a small business and improving it over the years, we would love to hear from you. Please apply at biggerpockets.com/guest and I’m just so excited to uh introduce Tim here today.
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Mindy: Tim Delaney, welcome to the Bigger Pockets Money podcast. You have such an amazing story. I am so excited to jump into this with both feet. But before we get into your current money story, let’s hear a little bit about where you started.
Guest: Thank you so much, Mindy. I’m really excited to be here and share my story. I’ve been a long time listener and glad to be here. Um, so my money story begins when I was small. I was uh I grew up in a small family businesses, my parents owned a couple different businesses, some were successful, some not so much. Uh and through that I always learned to be pretty frugal. I saved all the time, uh from allowances to first jobs. Uh I was just constantly saving. I I think that my father taught me early on, save at least half of your paycheck every single time. So that’s what I was doing from a very young age. Um I got my first real jobs when I was uh barely old enough to work in New York State. I think it was 15. Uh I started working at the local coffee shop, donut shop at the time. I think now they’re called a coffee shop. Back then it was donuts. Um and I was just I just constantly saving. I I worked as much as I could through high school. I tried to save. I was um also very interested in business and the economy, the stock market. Uh my grandmother lived with us for a brief time and she had always been a stock market uh follower. So she taught me how to read the stock pages in the newspaper. Uh I guess I’m dating myself a little bit with that when they would publish the stock prices once a day and that’s when most people would get updated on what the shares were going for on that day. Uh so I just kind of learned how to how to follow share prices, how to how the stock market worked from her. Um at a very young age, I think I was like 11, 12. Uh it’s you know, so I always had a pretty good understanding of money and and the economy and uh how businesses operated. Um, but then I, I guess, you know, around the time of college, I went off to college, I started spending all of that savings that I had saved up for college. Uh I started accumulating some, some student loans. That was my my arrangement with my parents was that I had to take as much loans as I could in order to fund the school that I wanted to go to. So I started accumulating those loans. Um but at the same time, I guess my a little bit different than some students in the sense that I had been educated about credit cards and their dangers. I had a credit card, but I was always taught, you only spend what you can pay off every single month. I still took that, I still follow that principle today. So which uh helped me a lot. So the only debt that I graduated from college with was that student loan debt. I think it was around $22,000 uh at the time. I think we’re you know we’re in year 2002. So at that point right after I graduated, I uh had an opportunity, I kept getting emails about consolidating my student loans and I didn’t really pay attention to them at first and then finally read them and understood what that meant and was able to lock in a uh ridiculously low interest rate looking back on it. Uh I think it was below 3%. So I was consolidate, lock in and then I really kind of never had to um, you know, they were always there looming, but it wasn’t uh as pressing because it was such a low interest rate. Uh after college I um I took a year, worked part-time while I was waiting to go into the Peace core. So then I deferred my student debt, so the interest kept accumulating, but again, it wasn’t horrible because of the the low rate. And I joined the Peace core about a year after college. Uh a volunteer basis, so accumulating uh absolutely zero dollars in country uh where I was stationed, and the Peace core is very generous and at least at the time, they were putting $200 a month into a savings account that I could access when I left service. Um most volunteers stay for 24 months. I stayed for 36, so I could earn that extra year of $200 a month in savings that I was really looking forward to tapping into when I get out. Um, so I was yeah, so when I finished uh Peace core, I still had the student loan debt. I think I actually even had to start paying on that while I was still in the Peace core because my two or three years of dement eligibility were up. Uh but I so I continued paying that. I had this very small amount from the Peace core and I went to Ethiopia to take a job with a nonprofit out of Boston, um, who I had done a brief internship with right out of college. Uh I learned um kind of I I guess it was like one of the first things I did where I learned to just kind of take a chance and take a risk and go for it. Um, I was communicating with my old boss at the time and he said, just come on over here, we’ll find a job for you when you get here. And with the little savings I had in my bank account, the idea of just jumping on a plane to go to Ethiopia without a locked in job or uh a contract was a little daunting, but I took it anyway. Um so while I was in Ethiopia, um continued to save, I I took that job, I I worked that job for about a year and then I transitioned to a German company and I actually started getting paid a more nominal amount plus a little cost of living allowance. And that’s where I was able to really accelerate my savings. Uh I never bothered, I I contemplated paying down my student loans because I could, but the interest rate was just too low. it didn’t seem to make sense. So uh those couple years with the German company is where I really accelerated my savings. I lived very frugally. My wife and I, my wife had joined me in Ethiopia. We lived as frugally as we could. Um we really enjoyed our time. We didn’t, you know, we didn’t make massive sacrifices, but we lived very very frugally, very comfortably within our means so that we could continue to save and um stockpile some funds for future endeavors.
Scott: Awesome. So what was your what was your position um kind of at the end of this journey towards the end of your time in Ethiopia?
Guest: Um I had probably saved up uh around 40 probably around 60 to 70,000 US. Uh that was in a bank account in Europe, um some in stocks in Europe because I was getting paid in a euros at the time, and I kept it in euros as long as I could. Uh so that was that was that was pretty much my cash position. I still had quite a bit of student loans. I don’t remember exactly how much, but I was just making the minimum payments throughout on those. Other than that, I didn’t really have any any other assets, any other debt at all. That was kind of it.
Scott: Awesome. and how long when did you uh when when did your um stay in Ethiopia end and you came back to the States?
Guest: We moved back to the States in 2010. I maintained my job with the Ethiopian with the German company for uh for about another year and a half or so, working remotely from Buffalo. uh helping them out uh on a consultancy basis. and uh yeah so I continue working for them for about a year and a half.
Scott: Awesome. Okay so it’s 2011 and a half uh and and you’ve got 60 75,000 in in total net worth and it sounds like that’s your time at the German company coming to an end. What what happens next?
Guest: So in that interim period, when I first, after my first moved home, I was intent on starting a business. Um I kind of played around with a little uh importing business with some some things from Ethiopia, some iPad sleeves and some other leather goods and none of that was really panning out to the level that I wanted to. And that savings was was depleting because I was spending it on on possible business ventures. Cost of living here was much higher for us than it had been in Ethiopia. Uh so that that savings was dwindling a little bit. And then somewhere in that time period when I was playing around with starting businesses, an opportunity to buy a business fell into my lab. and I had thought about buying a business, but never really seriously considered it because I I felt like if somebody was selling their business, it was at its max value and therefore it wouldn’t have very much benefit to me. Um but with this particular business, it didn’t work out. I didn’t buy that business, but it kind of opened my eyes to the idea of the banks are willing to give me money and the seller might be willing to to finance a little bit of that that transaction and I can actually buy myself a paycheck day one as opposed to gambling and starting a business from scratch and never really knowing when I was going to make enough money to actually pay myself. So, that prospect of buying a business became much more front and center and much more interesting and I more actively started pursuing business idea, business to purchase. Uh and that is where I transitioned into looking for consulting opportunities for local businesses that needed help with social media in 2010, 11, 12. Facebook was still relatively new, especially in the business realm. I had been active on it personally for a while and felt like I could add some value to businesses uh in teaching them what to do, how to do it and uh you know, trying to build their businesses that way. I also had an alternative motive of hoping to come across a business that was looking to get out and maybe meeting the right person and being able to transition.
Scott: Awesome. So this is an intentional process to buy a business that you began in late 2011, um sh. and and you began and and you begin uh experimenting with things, you’re doing research, you’re actively consulting for small businesses from marketing standpoint it sounds like. How how long does that time period last and and how do you end up uh what what ends up happening?
Guest: So that was a little over a year. Uh the whole time I was still engaging with uh business brokers. I was still looking online at Craigslist, bisbysell.com. I was having regular coffees and lunches with accountants and lawyers that I was networking with, asking them for leads, telling them what I was trying to do, uh in the effort of trying to find that right business that I could ultimately buy and grow. Uh and that happened around the end of 2012 is when this my um wine and liquor store came up and I put it under contract.
Mindy: I have a really quick question. You were looking to buy a business in 2011. That seems like counter to what everybody else is doing in the room because weren’t people going out of business then?
Guest: I guess so. It’s um I you know, I I lived in Ethiopia during the height of the financial meltdown of 2007, 8, 9, 10 and for me it wasn’t as um we didn’t feel the effects as much. Uh partially because I was getting paid by a uh a government, quasi governmental company, there was never a danger that we were, you know, we were never in danger of losing our funding. They had a multi-year contract with the Ethiopian government. And so I think when I came back in 2010, I I knew, you know, I knew that there had been a, you know, stock market meltdown. I knew that there had been a crisis. I knew that small businesses were suffering to some extent, but it never felt as real to me. I guess, maybe because I didn’t have the assets that lost massive value and I wasn’t actively in it at the time. Um I uh yeah, that’s I guess, I mean, and then on the other hand, I I guess I liked to say that I was, you know, running in when everybody else was running out, but I I don’t think that was the case for me. It was just more of a it never felt as bad as it did to other people at that time.
Mindy: That was the quote that was running in my mind was be fearful when others are greedy and be greedy when others are fearful. and I was like, oh, he’s he’s doing this. So just take the win. I was totally on purpose. I was living Warren Buffett’s life.
Guest: Yeah, I I wish I could say that was really it, but I I I it was partially, I guess maybe, maybe partially, but maybe subconsciously, but it was more of just I I knew that there were still businesses, they were still operating. You know, as bad as it got, there were still, you know, there were still other businesses that were successful and still going forward and and and to that point, there were some business owners that were tired that were feeling the effects and and were ready to get out. You know, that was when I started hearing that baby boomers were ready to ready to start selling and they were going to be retiring and getting rid of their small businesses and droves. Still hearing that today, but
Mindy: That’s a really good point. And were you looking specifically for physical businesses or were you looking for online businesses, or were you open to whatever?
Guest: So, because of my knowledge of social media and e-commerce to some extent, I was looking ideally for a physical business that had not moved online yet. That was kind of my criteria. And I was not industry specific, um and and in fact, I at first I just ignored a couple wine and liquor stores that had been sent my way because I knew that selling wine and liquor online would be a huge challenge and I was looking for something that would be a little bit uh easier transition into the online into the online space.
Scott: What what peaked your interest about this specific liquor store?
Guest: So when this specific liquor store came across my desk, I I guess I just had time to actually look at the numbers and then when I did and I saw the location of it, uh it was a location that I knew from a friend in high school whose parents had moved out to this particular town and I knew that there were um more and more people moving out there. Uh it’s a suburb of the Buffalo area and it is traditionally a farming uh town where there’s lots of land and low taxes. And so people had been moving out there, buying big pieces of land, putting up very expensive houses, but there was also a very good base of loyal customers, the kind of, you know, that that I still have to this day that are very loyal supporting small business. Um at one point before I bought the liquor store in my, you know, in my research about the town, there had been a right aid that had tried to move into the town and the town would not allow it because they already had a locally owned pharmacy. They weren’t going to allow a right aid to move in. So it’s, you know, that that kind of town that great core customer base that loves small business and then I knew that there were more and more people moving out there every single year and they continue to move out there.
Scott: What were the the sellers like and their motivations for selling?
Guest: Uh they were fantastic people. They had owned the store for about 20 years. Uh you know, again, and again like with buying a business, you get the history of the business with it and that that long, that stability that that comes with it. The the business had been there for about uh close to 50 years at that point. Uh the sellers that I purchased it from owned it for 20 years. They purchased it from another family that had owned it for almost 20 years, who had purchased it from the founders who had owned it for a few years. Um so the sellers were just looking to to retire. They uh the gentleman had retired from a telecommunications company with a nice pension. Uh the wife had been running this liquor store for 20 years and they were just ready to spend more time with their grandkids and uh travel more.
Scott: Awesome. And so what what were the numbers that attracted you? What what what what what what peked your interest once you got into the the spreadsheets?
Guest: I guess the the biggest thing was that it was profitable enough to pay myself a wage, a a small salary day one. And the the economics of the town and the the products that they were selling, I knew that I would be able to increase the quality and the price points uh and bring in some different stuff that would ultimately drive sales up quite a bit. Um but yeah, that it was really that that initial thing was I knew I would be able to pay myself day one, and I knew that there was a huge potential for growth.
Scott: What was the how how did that work between, was it a pay cut to go and and and and run the business versus your previous job or was it about the same or how did that pencil out for you?
Guest: It was a pay cut from the working for the German company, uh but it was about on par with what I had been making doing the consulting gigs. Uh I was never, that was never a super lucrative venture for myself because I never really wanted it to be a long-term thing. I I’m I I didn’t like the idea of getting into consulting long-term where I’m just was would be constantly trading my time for money. I knew that I didn’t want to tie myself into that forever.
Scott: What were what were some of the big opportunities you saw in the business um in in this underwriting stage where you first what were some of the the opportunities to build it that that attracted you?
Guest: Uh so product selection, number one, but then also technology. Uh the sellers were using an old-fashioned cash register with you know every every single bottle in the store had a old-fashioned price tag on it, you know 9.99. So somebody’d bring it up to the counter and you’d hit 999 uh taxable wine, 999 taxable liquor and so the idea of bringing into bringing in a point of sale system right away, uh and then also introducing online social media, they had no website, they had no social media, and I knew that as challenging as selling wine would be online, I knew that I would be able to do it to some level. Uh so I knew that we would be able to expand that way as well.
Scott: aside going to the first one, aside from cutting out work, what are the advantages of installing a point of sale system like that? What what business outputs that that impact the PNL happen?
Guest: Uh number one, tracking inventory. So in a business where you have thousands of bottles or you know, thousands of products in your store at any given time, being able to know exactly how many of those bottles or how many of each product you have is super vital to making purchasing decisions, to being able to track where your, you know, what’s selling, what’s not selling, how fast they’re selling, um what your gross margins are on various products and various segments of products. So that’s it’s um Yeah, yeah, I mean that those are the biggest things right there.
Mindy: Information is king.
Scott: Awesome. and obvious advantages to being able to drive your business forward a few months, few years down the road.
Guest: Exactly. yep. there’s, you know, so day one it doesn’t besides tracking the bottles, it doesn’t give you a lot, but now nine years into it, I can still go back and see what products were trending when and you can look up seasonality of different products and you know, tequila sales start going up in May and uh, you know, red wine sales start going up in September. And so we know to to adjust our inventory levels based on those things as well.
Mindy: So, a few moments ago you said, I had time to look at the numbers when Scott asked what made this one so uh intriguing to you and I just want to highlight that for a moment. If you don’t have time to look at the numbers on a on a business, don’t buy the business. You have to have time to really digest these numbers and yes, this was 2011 and we’re in 2022 now or 2012 and we’re in 2022 now. Still, if you don’t have time to to look at the numbers and really understand what you’re getting yourself into, then you don’t have a business that you want to be able to purchase and that also, you know, that includes anything like uh any kind of investment. Um if you can’t digest those numbers, if you don’t understand what you’re getting into, stop and take a minute. And you know, in this spring we had this uh super high real estate market where people were like, I’m just getting in with both feet. And I’m like, oh that’s such a bad idea unless you know what you’re doing already. Um but I want to look at the numbers that you were looking at at the time because you didn’t, I mean you bought a really, really nice business for not a huge money, not a huge amount of money out of your pocket.
Guest: Yes. Um, yeah, I I agree 100%. It’s important to look at the numbers and it’s important to look at the numbers repeatedly. I um, you know, I think Brandon Turner says it all the time, just analyze property now, in the real estate world, analyze as many properties as you can and you start building that muscle for for how to do it. Um, and with this one, when I looked at the numbers, I like I wouldn’t have I would have just ignored it because it was a wine and liquor store, but I decided to look at the numbers and I was really impressed with the numbers, so I dug further.
Mindy: Well, let’s go what were the numbers and how did you purchase it?
Guest: Um, yeah, so uh they were doing about $600,000 a year in sales for the for the previous couple years prior to me purchasing it. Um, gross margins in wine and liquor stores are about 25%. um maybe a little bit higher if you’re doing really well and finding good deals and a little bit lower if not. And they were on the lower end of what should be um, you know, what what should be expected. So I knew that there was room to improve the margins a little bit. And I think that goes back to the point of sales question too, Scott. I think the way that, you know, if you’re not tracking every day what you’re paying for your products and what you’re selling them for, it it you can kind of get lost in the shuffle and we that’s something we routinely review nowadays just in case we miss something. Um, the sellers were taking a a salary of about $100,000 a year and so that’s where you know, in profit they weren’t showing a ton of actual bottom line profit. Uh but I knew that between the investments that I want to make in technology and purchasing more inventory, there would still be enough left over to pay myself at the end of the year as long as the sales continued to be where they were, but I had aspirations of improving those sales right from day one anyway.
Scott: Awesome, what do you, uh, so so how what did you purchase the business, what does a business like that sell for and how did you finance it?
Guest: Yep. so the purchase price for the business, which was just basically the assets, the inventory, the shelving and equipment, and the goodwill of the of the sellers, uh, was $200,000. So, uh goodwill is basically everything intangible about the business. So, um, sorry, correction, the inventory was not included in that $200,000, that was on top of the $200,000. So most of what I’m purchasing for that $200,000 is just the name, the the shelving, which is really not worth much on a secondary market and the kind of the goodwill of the of the sellers. Uh and then the inventory was anticipated to be around $150,000 when I purchased it. again, because they didn’t have a point of sale system and an inventory tracking system, they didn’t know exactly how much inventory they had. So it was agreed that we would count it right before closing and that would be the final number. Um so it was $200,000 plus the inventory of what was supposed to be about $150,000. I applied for bank financing, um or my my offer to them was the $200,000 plus the 150 for inventory, so 350 total. I applied for bank financing of around $250,000 and I asked the sellers to hold a note of about $50,000 and then I was going to put in the other $50,000 myself. Uh that was the original plan. The bank actually came back to me pretty quickly with an approval of the loan, but they wanted to give me more money than I asked for because they wanted to make sure that I had enough working capital to cover uh expenses and to um make some improvements, make some investments in the business.
Scott: What bank did you go to for this?
Guest: Uh this was through a regional bank called M&T Bank. Uh they are very well versed in SBA financing. Uh so they’re, you know, if you’re going to be buying a business, I would highly recommend finding a bank that has experience with the SBA, the small business administration because the SBA essentially helps the bank guarantee the loan. So the banks feel, you know, there’s certain parameters that they have to follow and you know boxes that they have to check with a buyer and with the business, but essentially the SBA will back or guarantee a certain amount of the loan for the bank so they can feel a little bit more comfortable making a quote unquote risky investment.
Scott: Awesome. and so it sounds like they were very very comfortable with this type of project and the seller financing. Is that a common tool used in this type of purchase?
Guest: I believe so. It’s something that I was uh highly recommended to ask for and to to to do. Uh the banks and the SBA actually really like to see that uh on top of you know, it helps them get get the approval for the loan faster because they know that if the sellers is holding a portion of the note that the seller knows that it’s not just a complete, you know, a complete bomb of a business. They you know, if they want to get paid out, they’ve got to make sure that the business continue to run and that means, you know, being around to answer questions if something comes up down the line. you know, I think officially we had like a two- week consulting period tied into the contract, but uh in reality, uh you know, the owner uh unfortunately the the woman passed away a couple years ago, but her husband still comes into the store and I could still in theory ask him questions if I needed help with something. So uh they you know, they have that vested interest in making sure the business carries on uh and and succeeds because they get paid only if the business continues and succeeds.
Mindy: If you could go back and rewrite the contract, would you continue with just a two-week consulting period or would you make that a little longer? That seems short to me, but I’ve also never bought a business.
Guest: I think it really depends on the type of business. I I was comfortable with that because I also knew that the sellers were going to let me start coming around prior to closing the sale or to closing the deal. So I did, you know, I did learn a lot leading up to that. Um and I I it might have been a two-week hands on and then a couple months where they had to be available for uh for questions or to you know, if I had things that needed addressing. But yeah, I think depending on the type of business, I would recommend a longer period if it’s something that is really complicated and hard to wrap your head around, uh then you can, you know, you’re free to ask for however much you want. Some people don’t want the old owners to stick around because they might be set in their ways and they might not like what you’re doing with their baby and their business. So it may or may not be beneficial always to to keep them around.
Mindy: That’s a really good point. Okay, well, let’s talk about the uh slight changes that you made to this company as soon as you bought it.
Guest: Yes, so uh as I mentioned earlier, the point of sale system was the first and biggest thing. And again, being able to get in there a little bit early, I went through in the weeks leading up to the sale and uh scanned in every single skew in the store, so that the barcodes were all in my system ready to go day one. Uh I got spreadsheets from the distributors, so the you know, the sellers just wrote everything, they wrote their orders down in a marble notebook uh every day, every week of what they were going to order. So I was able to contact the distributors and get spreadsheets, print outs of what had been ordered over the last few months. So I had product titles and I had um cost of goods amounts that I could put into my system and then I could read the sales prices on the shelf and put those uh you know, the the customer facing sales prices in the system so that day one, so we were we were scheduled to close on a Monday morning uh in May. Sunday, we spent, um we met at the store at probably about 8:00 a.m. Sunday morning, I had a like six or seven friends that came with me, the seller had six or seven people that they um you know, they knew and trusted. And we everybody paired off, partnered off and we went through and counted, I had printed off my spreadsheets of what I, you know, all the products that I thought were in the store at the time. And so everybody went through and had different sheets and counted every single bottle in the store. I spent the rest of Sunday night inputting all of those quantity numbers into a final spreadsheet and into my point of sale system so that we could get a final cost of all the inventory uh that the sellers then double check themselves and the the final cost of the inventory actually ended up only being a little over $100,000 instead of $150,000. Um which is a little thing to be aware of, I guess, if you’re ever do buy a business to plan for different contingencies on whether the inventory is going to might end up higher or lower at closing if they if there’s not a good system in place where they can give you an accurate projection. Um because in retrospect if the inventory number had been significantly higher, we might have had problems at the closing table with where the additional money was coming from to to buy it. Um but because it was lower, it was beneficial to me. I was able to put some extra money in the bank account to have some additional working capital. Uh so that that point of sale system was the biggest and first thing that we did. Um number two was setting up the website, social media accounts, which I had started getting set up before closing. Uh and so we started rolling with those right away. And when I say we, I mean me. Uh it was all me at first and so just regular posting every day, uh multiple times a day, introducing people to new products, teaching them about the differences between products, uh terminology, all those kinds of good things. Um and then eventually I got into payroll software and hourly, you know, employee time tracking software and building out standard operating procedures. I have a library of uh screen recordings of how I do different tasks so that my managers and assistant managers can, you know, if they forget how they were taught something, they can go in and look at those videos and and see the screen share of how it was done. Uh which is, you know, I I think those types of things are super helpful for any business owner.
Scott: what when did start when do things start improving for the business or when did it begin growing?
Guest: Um it did start growing right away. Um I was I had a goal of 10% sales growth every year. Uh and we mostly hit that every single year since then. Uh fell short a couple of very little short a couple times. Um so it was growing. I was just choosing to reinvest a lot of that money into growing the inventory and constantly and then, you know, starting to hire more people that I could lean on a little bit more so that I could free up more of my time to think bigger, work on the business instead of in the business. So that that it it even though there was on paper what looked like a pretty decent uh bottom line coming into the business every year, a lot of that money just went just kept I just kept rolling right back into the business as a means of growing it and looking at the longer term bigger picture.
Scott: Is more inventory mean more sales in your business?
Guest: Um, not a direct correlation, you know, just because you have the inventory doesn’t mean you’re going to sell more, but
Scott: more selection, it’s it’s hard to yes, so bigger selection, adding more products uh is very important. especially nowadays, it’s a constant we see now more than I’ve ever seen in my, you know, nine years in the business, people are grabbing something different every time they come in the store. They want to try new, new, new, new, uh, and they the the big brands are rolling out new products constantly. So it’s a a balancing act of trying to bring in as much new stuff as we can without getting stuck with too much of the old stuff. Um, it’s a uh, you know, that’s everyday challenge.
Scott: when when did you feel like you had a business that could produce a really comfortable amount of income to to give you a good quality of life, um, and and and more free time? Where where is an inflection point in this journey?
Guest: I don’t know if it’s well, uh two different things. So, I think it could have produced a decent quality, a decent quality of life for me in year three, maybe, somewhere between two and four, if I had chosen to just stagnate the business and not reinvest constantly in inventory and new technology and trying out new things. You know, I I tried launching a mobile app a few years ago that didn’t really take off. um you know, that we invested quite a bit in it. So I I think there early on, I could have uh set a a life where maybe I was working 40 hours a week, 40 to 40 hours, 40 to 50 hours a week and making a decent living and uh but just knowing that I wasn’t going to get a ton of vacation time and I was going to spend most of my days at the store. Uh but I didn’t want that. I wanted to build a business that ultimately wouldn’t need me there every single day. So I pushed that further than it needed to be. I would say the real inflection point where I’ve been able to kind of step back and not be in the day-to-day and still bring home a decent uh uh uh dividend and paycheck was in the last uh two to three years.
Scott: Awesome. And what changed, what brought about that that outcome?
Guest: Um partially sales and margins and profit were where they could be to sustain my me and my life and and pay another, you know, enough employees and management and people that have the responsibility to to do good things with the store. Um and part of it was I now have three children, um 10-year-old and two six-year olds that I enjoy spending time with more and my commute to the store is is about a 40-minute commute to the store for me. So an hour and 20 minutes a day was something that was starting to get a little bit uh tiresome for me. So I wanted to make a commitment to go less days so that I am not burning up that time uh during the week.\Mindy: Do you have any plans to open up a second location?
Guest: Uh that is probably one of the most frequent questions I get and the answer is no. I, so it’s two part. Number one in New York State an owner can only own one liquor store. Uh we’re a non-chain state. And number two, so in theory my wife could open a store and she could run and manage her own.
Mindy: I was just going to ask that. So that is a possibility. I’ve I’ve been approached by other people that wanted to do joint ventures ish, and let me run it from behind the scenes. Um, I I also don’t like the idea of putting all my eggs in this basket either. Uh with being in such a highly regulated industry, one change of the law could change my profitability quite drastically overnight. So, uh the the big thing in New York State is that the grocery stores cannot sell wine right now but they make a constant push to be able to sell wine. We make better margins on wine than we do on liquor. So if the grocery stores are allowed to sell wine, our margins would go down and as many for as many people that say, oh, we would still shop here, we would still shop here. I know that everybody has good intentions in their heart. I would love to buy all my meat from a butcher shop and all my flowers from a florist and all my bread from a baker, but how many of us really do that in reality nowadays? It’s just so much easier to grab all of those things at the grocery store.
Scott: that makes perfect sense to me. So so but financially, what what what what change there? And how how does your how does your business run in, perhaps the last year or the year before. What does it look like after nine years of growth and what you’ve done to it?
Guest: So I hired a really good manager. uh somebody that has been working for me for quite a long time now. He actually started as a one- day a week part timer uh and then 2018 I believe I was hiring an assistant manager. uh so he applied for that job and started working full time for me and then over the last year, he’s turned at the beginning of this year, end of last year, he’s transitioned into a full-time general manager. So he takes on much more responsibility for me. He’s doing the scheduling, he’s in charge of the the staff, he’s in charge of all the ordering, uh in charge of scheduling tastings and most of the day-to-day. I still handle the bookkeeping and the payroll, the actual payroll um and some of the marketing tasks as well. Uh and I’ve also kind of given more responsibility to some other employees. I have an amazing employee that’s taken on a lot of the social media posting, uh and you know and responding to comments, engaging with people. Um I have other employees that have really stepped up and helping my manager with inventory management, putting, you know, making sure that we’re we have the space, one of our biggest challenges is always finding enough space in our store to put in the inventory we want to carry. So I have another amazing employee that’s kind of really taken that under her wing and being responsible for the inventory. So it’s it’s really delegating and um being able to trust these amazing people that are have helped give me some of the freedom back. Um
Scott: Awesome. How many hours a week are you working right now?
Guest: Uh my goal for this year was to be at the store 10 or 10 hours or less per week. and for the most part I’ve hit that this year. There’s been a few weeks, you know there’s certain times where I step in more and certain times where I’ve been able to do a little bit less. so it’s I I’d say I’m pretty on course with my goal this year.
Mindy: And what about next year?
Guest: Uh probably the same. I I’m I my biggest thing is whether or not I want to hand off bookkeeping, uh partially because it’s something I know that I could hire somebody to do pretty easily, but it’s something that I really enjoy doing and it’s something that allows me to keep my finger on the pulse of knowing exactly what’s going on on a on a regular basis.
Scott: What is the what does the business look like today in terms of size? Like um it sounds like it’s probably grown a lot and increased in value. Do Do you have any any thoughts around that?
Guest: Yeah. So I would say that we’ve at least 4X in total value from the time I purchased it. Um I think that, you know, and then if you add in inventory, it would be significantly more. We’ve we carry about three and a half times more inventory than I did when I bought it. Um we are and we’re turning it over much faster than we ever used to. So that’s it’s a a fine line in any inventory heavy business is making sure that you can turn that inventory on a regular basis. I was given the advice when I got into this by another liquor store owner that said 90-day turns, so you want to sell your inventory every 90 days, all all of it should turn over every 90 days, so four turns a year. Um and we’re hitting that plus a little bit more right now over the last couple years. So I’m happy with that. Um so yeah, the the equity wise for the the the little I invested in it cash has uh gone up exponentially.
Mindy: Do you have any plans or opportunity to expand this location? Like if you’re in a strip mall and then the the directly next door unit goes vacant, can you expand that way rather than like do you have the ability to do that or does your, I don’t know how liquor licenses work.
Guest: And In theory yes we could. Um my focus over the last couple years has been growing online. So where we can just pack and ship and not have to um build out the retail front anymore. Uh I am in a strip mall. I actually was able to purchase that strip mall in 2019.
Scott: What? Wait what wait what are you talking about that? Did I miss that part of the story?
Guest: I guess so. I I I considered that part of my real estate journey, so I I I kind of don’t bring it up in the in the liquor store in. But I I you know, I guess to that point, I did it is, you know, that’s I guess one of those reasons that I didn’t transition sooner into a more passive role is because I was constantly looking to reinvest my money. Um so I had an opportunity late 2018, uh the the owner of the plaza was looking to retire. He had always told me, I had been, you know, again this is one of those things where you just, you ask, you constantly put it out there what you want. I had been kind of been asking him or bothering him every few months for the time that I had owned the liquor store that if you ever wanted to sell the plaza, I’d be interested if you ever wanted to sell and in mid to late 2018, I had to be talking to him and I said it again, and he was like, oh yeah, he said, somebody was just offering me money for the plaza. So thinking about taking it. I was like, John, I’ve been telling you for years, I want to buy the plaza. He was like, oh, I didn’t think you were serious.
Mindy: People have said that to me too.
Guest: Yeah, it’s uh it’s amazing. and it’s that’s just to that point of really just constantly hammering the point to everybody around you of what you’re looking to do, really pays off. Uh so I did purchase the plaza. I have an amazing tenant in the unit next to my liquor store uh that will be there for a while. And it’s a weird plaza. I think I mentioned earlier, he my land, my former landlord bought the liquor store building and then he built out the plaza next to it, but he left about a four- foot gap in between my store and the next unit. So he kind of built a new building. So if I did ever want to knock down the wall, I would have to knock down two walls and try to connect them. It would be a much bigger project than just knocking a hole in one wall unfortunately. So it’s a possibility. It’s not highly likely right now, but I wouldn’t ever rule it out in the distant future.
Scott: Okay, well, let’s zoom out here because we got, we got a lot to cover now and and we’re we’re actually only at at Okay, so we have a we have a business that you bought for, uh, you put everything into it in 2011, 2012, um, and had a successful outcome here. You’re able to generate a good amount of income, Um, certainly not a, you know, a crazy amount of income. Probably not probably not even not anywhere close to six figures for the first couple of years, rounding out six figures, I guess in the later years and now it’s now it’s in that ballpark passively or semi- passively today. Is that a good way to phrase it.
Guest: That’s that’s a very good assessment. and I I guess to, you know, in full disclosure, I put about 30, everything I had at the time in 2013 was about $35,000, so that was everything I put into it. Um I was supposed to have a little bit more at closing, but luckily because of the bank financing and the seller financing, I didn’t actually need it. So I was working on ways to get that prior to closing.
Scott: Now I want to point out that you could have probably gone and got a job that would have paid more immediately in those first three four, five years, but you wouldn’t have been building uh an asset that’s worth close to a million dollars today, um during that same period of time and you’re probably generating more income passively today than you you would have otherwise. You had to work harder and for less money for a few years and put and take some risks. But now you’ve got this situation. And that’s before we get into your other investing activities. So let’s zoom back to 2012 and can you give us your investing journey up until this point as well, in well in parallel to the building the of the business here.
Guest: So, investing parallel to when I purchased the business was basically nothing. So, when I I took everything out of my stocks, I took everything out of my savings accounts, I put it all towards this business and then every dollar, I mean, I guess, you know, in reality, I was reinvesting in the business all those years. So instead of pulling that money out and paying myself a 401k or uh a self, you know, a self-directed IRA or whatever, I was just taking every profit, I was paying down the principle of the loans, which, you know, so there was substantial debt payment for the first uh five, six years, and then I refinanced that at one point. And so extended it out a little bit longer. I I just finished off paying the primary loan in 2020.
Scott: Was that a cash out refinance?
Guest: Yes, So what I did, I would say probably in 2015, I think I saw the interest rates potentially starting to go up and with an SBA backed small business loan purchase, it generally is a variable rate. And so I knew that I didn’t want to be in a variable rate forever. And so I think around 2015, I talked to my bankers and they were able because I had this couple year history now, they were able to get me a locked-in rate. and I took out enough money to pay off the sellers’s portion of the loan as well because they were actually at a higher rate than uh uh I had been paying the bank. So I paid off their and I I negotiated with them and got them to take a little bit less money because they were going to get the rest of their money faster. So they knocked a couple thousand off of what I owed them. Uh and then so so it was a cash out refinance, but that cash went right into paying off that seller notes. So then I was down to the, you know, more one consolidated loan. Um actually it wasn’t consolidated. For some reason they kept my original loan, they locked in the rate, they gave me a second, the bank gave me a second loan, even though I wanted it all consolidated, but they gave me a second loan. So the first loan got paid off last year and that second loan, I have, I think about six or seven more months of payments left on.
Scott: Awesome. And and so, okay, so what do you, as that those years are passing, you’re accumulating cash to some extent because you, I I assume so in order to purchase this, this strip mall um that you that you purchased there. what other how how does that come to be and what other investments are you making in the those years, the last five, six, seven years?
Guest: So, I think actually in early 2018, I got introduced to Bigger Pockets. Uh I had been I really hadn’t been accumulating much cash prior to that. I really everything went into my cost of living personally and into back into the business. Um, in 2015, my wife and I bought our primary residence. um we bought my the the house that I grew up in actually from my mother who was looking to downsize. Uh she was able to uh with the bank, she was able to gift us a the down payment. um so basically raised the purchase price of the house, gifted us the down payment and then the bank covered the other 80% of the purchase price on the mortgage. Um so that was a very fortunate situation for us to buy our primary residence. Uh and then in I late 2017, I started, I got the real estate bug. I had always, you know, even growing up, I just always had a an inclination of wouldn’t it be nice to own a lot of real estate, but it was always something I thought you needed a lot of money to get into. And so in early 2018, I got introduced to Bigger Pockets, I started listening to the podcast, I started making a couple offers on some BER opportunities on on doubles and singles, nothing was happening uh in that front and then that’s when my landlord said he was willing to to sell. And I uh was actually able to uh purchase the plaza with 100% financing. so I didn’t need cash to purchase it. Um he was able to he was willing to hold a note for 90% and I found another private lender that lent me the other 10% and because it wasn’t with a bank, he didn’t seem to care that it wasn’t actually my money that going into the down payment. So it was 100% financed. So I didn’t need cash to invest in it. It’s really only in the last couple years that I’ve been starting to accumulate cash and uh making some more real estate investments. Uh I’ve also been maxing out my wife and I are the our HSA and last year was the first year we ever did a Roth IRA, um because that’s um we we we’ve never had the cash to do it prior. My you know, my accountant would always suggest doing a SEP, a self-employment um IRA, but I always chose to use the cash to kind of reinvest in the business and have it available for and then and then to start this last couple years to start having it available for more real estate purchases.
Scott: Awesome. So what’s your what’s your portfolio look like today? You’ve got the the strip mall um in in various uh stages of being paid off with the seller financing loan. You’ve got the business that seems like it’s it’s thriving and you’ve got a couple of other rental properties.
Guest: Yes, we have I I I the plaza I own by myself and then I partnered up with um somebody that I have been doing uh business with for a few years, who’s a general contractor. and together the two of us own uh we had eight units uh until a few weeks ago we just closed on a 28 unit uh portfolio, which is seven quadplexes. Uh and that we were planning to burr all of those in over the next 12 to 18 months.
Scott: Wow. So it’s been a big the last three years have been huge for you. They’ve really been
Guest: Yes.
Scott: a a a transformational in terms of your overall financial position and your business.
Guest: Correct. Yep. and it’s you know, I think a lot of it comes down to being able to, you know, I built the business to the level where I have the employees, the the employees that I can afford to pay well to do what they do uh and give me more time, uh just even mental time to focus and think about other other projects.
Scott: Awesome. Um, so what what what’s next for you?
Guest: Um, I it’s it’s a good question. I
Mindy: isn’t this enough?
Guest: Kind of. I, you know, I’ve always liked teaching people. I’ve never wanted to be a teacher. I actually uh when I got assigned to the Peace Corre, I told them I would go anywhere in the world and volunteer, do anything they wanted in the world except for being a teacher and they put me in a school and told me I was going to be a teacher. I never liked it, but I like talking and teaching other people. I’m I’ve been toying around with the idea of trying, you know, trying to help other people that are interested in small business, like get their small business off the ground, um, you know, through coaching or through helping. I’m also always looking for other other small business opportunities. I’m uh you know, if the right opportunity came across my plate, I would gladly purchase it and do this whole process again.
Mindy: All right, Tim, before we head out, we’re going to I think we’re going to skip some of the famous four today, but we want to hear two of the most important questions, which are where where can people find out more about you and what is your favorite joke to tell at parties?
Guest: So my favorite joke to tell at parties is something my 10-year-old found 10-year-old found in her daily dad jokes. It is what do you get when you mix alcohol and literature?
Scott: Tequila Mocking Bird.
Guest: That’s awesome. That’s a really spirited joke.
Scott: She’s she’s saved that from me because of my. Um.
Guest: And uh people can find out more about me. I am on Instagram, Tim T. Delaney, and I have a uh website that I set up uh called the power ofbiz.com. and if you go to power ofbiz.com/bpmoney, I actually put my uh Excel spreadsheet up there for people to download so that they can kind of a very basic how to analyze a business, um, if it helps anybody else, I’m I’d be happy.
Scott: Awesome. we’ll link to all of those things um at the show notes. so you can find all those links and and find Tim and and all all all this stuff there. So, um, do you have any tips for lead generation?
Guest: No. Okay, yeah, I’m waiting for it. Thank you so much.
Scott: Great to have you on the show today. We appreciate it and um best of luck in the with the all the the the the ventures that are going on right now.
Guest: Thanks very much. I appreciate it. Glad to be here.
Mindy: All right, that was Tim. That was an amazing story. Scott, that was a great find. I love his story. You found Tim uh and suggested we bring him on the show. And like you said in the intro, if you have a great story about buying a business or starting a business and growing it, we would love to highlight you on this show. Please apply at biggerpockets.com/guest and let us know right there in the uh application that you have a business that you want to talk about.
Scott: Yes, we want more Tim’s on the show, right? And and the problem problem with some Tims is they’re like, oh, my story’s not that remarkable. I didn’t do anything that Yes, it is. We want to hear about you buying a small business and growing it over a decade into something that enables you to have financial freedom and lots of optionality and a staff to run it for you and that you’ve improved. That’s that’s I think the the best asset class in America today.
Mindy: Yeah, well, I think I think a lot of people feel like their story is boring. It’s not sexy. I won the lottery is sexy, but how did you do that? Was it through hard work? No, it was luck. Luck is not repeatable. But people can learn from your story that is boring. and I’m doing air quotes if you’re just listening and not watching on YouTube. But if it’s a boring story, that means it’s most likely repeatable. I did this. And when it’s repeatable, people can take tips from you, learn more and do take this into action and do it themselves. So that’s what we’re looking for. If your story is boring, we love you. We love boring.
Scott: repeatable.
Mindy: repeatable. Yeah, boring it’s not boring, it’s pronounced repeatable. and that’s what we want to share. All right, Scott, should we get out of here?
Scott: Let’s do it.
Mindy: From episode 333 of the Bigger Pockets Money podcast. He is Scott Trench and I am Mindy Jensen saying, stay classy.
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