The whole point of your article was that this guy would be able to buy a Ferrari entirely from the revenue generated by this incredible business opportunity, but it never happened. Buying the Ferrari with income from other business ventures has nothing to do with the hypothetical example you provided. It is your logic that is flawed, Billy Murphy, not everyone at GRS.

If the other business ventures that allowed the cash purchase of the Ferrari somehow relate to your original tale of the $20k Ferrari, then please provide the details of his income so that we can see the correlation between the two.

No, Billy, they're not.

You see, I understand that the market is efficient. If low-risk, 1 x earnings-multiple deals were plentiful, people would snatch them up until they weren't plentiful anymore. Thus, they cannot currently be plentiful.

The market has collectively decreed that the risk involved in owning a small business commands a premium equal to around 2 years of net earnings. That's how the market generally values businesses. Of course, this varies based on the probability that the business will succeed. Things such as the age of the business, experience of the management staff, local competition, market trends, and so on. But risk is directly tied to return. Making your money back in a single year's earnings is considered a very high return. Thus, it correlates with a high risk. Steady, reliable, rock-solid companies provide a more guaranteed revenue stream, and thus trade for much lower multiples. It may take 5 years to get your money back from purchasing a small credit union, but it's been around for 35 years and is the only one in the tiny town, so it's a pretty safe bet.

You are claiming you can get the low-risk, virtually guaranteed return of a bank, in the ridiculously short period of 1 year. That's simply not true, for two reasons. Firstly, someone else would outbid you. They'd offer 1.5. Then you'd counter with 2. Eventually, you'd be up to 5, which is the standard market rate for that level of risk. Secondly, why would a low-risk business undersell themselves so drastically? If I owned a credit union with rock-solid returns, why would I let it go for the fire-sale price of just a single year's earnings, when I know the market will pay 5? Why would I leave all that money on the table? Why wouldn't I try to maximize my own investment? Wouldn't I ask for 7 years, and let you talk me down to 5?

See, shysters like you rely heavily on people not knowing stuff like this, not understanding that none of this is new - the market figured all this out decades ago. There are ratios and values and standard benchmarks for risk premiums that the market settled on decades ago, and much as you might wish you were, you are not unconstrained by them. I'm sorry to be throwing cold water on your MLM-like sales pitch.

It's interesting that "K" did not even follow his own logic with the purchase of the Farrari...



Then two paragraphs later...



The entire blog post is pointless.

Billy,

Since there seems to be a dispute about the authenticity of your story, perhaps you can provide some additional information for verification. Which state (or province) was this in? Which year? What model number was the Ferrari? Of course any information like the name or nature of the business would also be helpful.

Because, you see, there are very few Ferraris sold in the US every year (and far fewer still in Canada). Given a year and a model number, it is often possible to trace the vehicle to a buyer, or at least a state.

Of course I expect you to simply ignore this request or give some stupid excuse why you can't provide any evidence to back up the "facts" you claim in your post. Hopefully no one is dumb enough to pay you any money for your worthless scheme if you can't support your claims with evidence.

All of the talk about the Ferrari being the entire point of the article is wrong. Probably my fault since I'm new to writing- the point I was trying to make was not about a car, but about the ability to acquire deals that seemed to good to be true, but aren't-- these deals are often easier to acquire than mediocre deals because all your potential competition assumes it's a "scam", and with proper due diligence as well as the ability to properly calculate EV, you can confidently go after these deals while other people are worried about other things.

Most people have never heard of, or know how to calculate EV.

I've bought multiple deals in the last 18 months that were 1x yearly income or less. Are they "riskier"? Sure. Are they more +EV -- absolutely.

It was you who focused on the car.

How do YOU define EV? Because i am quite familiar with it.

How do you define income when you claim youve bought for 1 year income? Do you mean revenue? Net income? Sales? I am sure you can buy businesses at any price under the right circumstances. The skill is in determining whether you should.

I guess Billy isn't coming back to answer your question... :/

Hopefully folks don't get lured into any of this.

It's great that there are people on this site that can confront and expose scams. Unfortunately, there are too many people out there that fall not only for the elaborate scams like the ones pitched in this thread, but also for other sales techniques.