Why 97% of Entrepreneurs Are Building Wealth the Hard Way (And How the Smart 3% Do It Differently)

When I first heard Carl Allen share this statistic, it stopped me cold:

Back in 2022, 6.6 million Americans started businesses from scratch, and only 206,240 acquired existing businesses.

That means 97% of aspiring entrepreneurs chose the startup path—building from zero, facing that brutal 96% failure rate by year 10.

Meanwhile, just 3% took the acquisition route, buying proven, cash-flowing businesses that were already past the “danger zone.”

It's like choosing to build a car from scratch when you could simply buy one from a dealership and finance it with other people's money. Yet somehow, when it comes to businesses, we've been conditioned to believe that starting from nothing is the only "real" entrepreneurial path.

Now Carl — the founder of Dealmaker Wealth Society — is sharing why that thinking could be costing you millions, and how the acquisition approach can transform your wealth-building strategy entirely:

The Hidden Crisis Creating Your Opportunity

Right now, there's a massive demographic shift creating the greatest wealth transfer opportunity in modern history. Every day, 10,000 baby boomers retire in the United States alone. These aren't just any retirees—they're business owners who've spent decades building valuable companies.

Here's where it gets interesting: 62% of these retiring business owners have no succession plan. They're simply planning to "shut the doors and turn off the lights" when they retire. That's not just a tragedy for these business owners—it's a massive opportunity for acquisition entrepreneurs who understand how to step in and provide a solution.

Consider the math: The average retiree has only $202,000 in their retirement account. If a business owner's company represents 70-80% of their net worth (which is typical), and they can't sell it, they're facing financial disaster. At $202,000, they're looking at just $956 per month if they stretch it over 20 years—barely enough to survive, let alone maintain their lifestyle.

This desperation creates motivated sellers. And motivated sellers create exceptional acquisition opportunities.

The Three Pillars of Acquisition Wealth Creation

When you acquire a business through what Carl calls a "leveraged buyout," you're creating wealth through three distinct mechanisms:

Pillar 1: Immediate Cash Flow Unlike a startup that burns cash for months or years, an established business generates immediate cash flow. After servicing the debt used to acquire the business, everything left over flows to you as the owner. This isn't theoretical future money—it's cash hitting your account from day one.

Pillar 2: Pay Down Debt As the business generates cash flow, you're simultaneously paying down the acquisition debt. Whether it's bank financing or seller financing, each payment increases your equity in the business. You're essentially being paid to own an asset that's becoming more valuable with every payment.

Pillar 3: Multiple Expansion Through Growth This is where the real wealth creation happens. When you buy a business, you're typically paying 2-3x EBITDA (earnings before interest, taxes, depreciation, and amortization). But when you sell an optimized, growing business, you can command 4-5x EBITDA or higher.

How this works with real numbers:

Buy a $3 million revenue business generating $300,000 profit at a 2.5x multiple = $750,000 purchase price. Over three years, grow revenue to $5 million and improve margins from 10% to 20%, creating $1 million in annual profit. Sell at a 5x multiple = $5 million exit.

After paying off remaining debt, you walk away with approximately $4.5 million in profit—plus the $1.5 million in cash flow you collected during ownership. Total return: over $6 million on a deal that required minimal personal capital investment.

The "Annuity Deal" Strategy That Changes Everything

One of the most powerful structures in acquisition is what Carl calls the "annuity deal"—essentially buying a business like you'd lease a car, with monthly payments over an extended period.

Here's why this works brilliantly for both buyers and sellers:

For sellers, it solves the retirement crisis. Instead of taking a lump sum and paying massive taxes, they receive steady monthly payments over 10-20 years. They get more total money, pay less in taxes, and create the retirement income stream they desperately need.

For buyers, it eliminates the need for large down payments while providing immediate access to cash-flowing businesses. You can literally own a profitable business with zero money down, as long as the business generates enough cash flow to service the debt.

The key metric is the Debt Service Coverage Ratio (DSCR). Take the business's annual cash flow and divide by your annual payments to the seller. A ratio of 1.5x or higher means the deal is safe. A ratio of 2.0x or higher means it's a goldmine.

For example: A business generating $300,000 annually with $120,000 in annual seller payments creates a 2.5x DSCR—meaning you have substantial cushion for growth investments, unexpected challenges, or simply taking money off the table.

The Wholesaling Opportunity Most People Miss

Here's where it gets really interesting: You don't even need to own businesses to profit from this market; you can wholesale deals for massive returns.

Using the same annuity structure, imagine you find a business owner willing to sell for $120,000 annually over 10 years ($1.2 million total). The business generates $300,000 in cash flow. You negotiate to take $90,000 annually and pass $90,000 to another investor who wants the business.

Your total return over 10 years: $900,000—for simply finding and structuring one deal.

This approach allows you to build a portfolio of cash-flowing assets without the operational responsibilities of business ownership. You become a deal-making machine, collecting consistent returns while other investors handle the day-to-day operations.

Why This Beats Real Estate (And Everything Else)

Carl shared a fascinating comparison with real estate investing that perfectly illustrates the superior returns of business acquisition:

Real Estate Flip Example:

• Buy house for $300,000 (25% down = $75,000)

• Renovation costs: $60,000

• Total investment: $135,000

• Sell for $425,000

• Profit: $65,000 (48% ROI over 6 months)

Business Acquisition Example:

• Use same $75,000 as 10% down on $750,000 business

• Business generates $250,000+ annual cash flow

• Add $100,000 in improvements over 6 months

• Sell at 4x multiple on $350,000 cash flow = $1.4 million

• After debt payoff, profit: $725,000 (967% ROI)

The business acquisition delivers nearly 20x the return of an excellent real estate flip. And that's just one deal.

Your Next Steps Into Acquisition Entrepreneurship

If this approach resonates with you, here's how to get started:

1. Define Your Buy Box: Stay in your lane. If you worked in IT, look at IT companies. If you have healthcare experience, focus on healthcare businesses. Stick to $1-5 million in revenue—below $1 million is buying a job, above $5 million gets competitive with private equity.

2. Master Deal Flow: Most opportunities come from off-market sources. Build relationships with business brokers, accountants, attorneys, and other professional service providers who know business owners considering retirement.

3. Focus on Motivated Sellers: Look for owners facing health issues, burnout, retirement pressure, or family transitions. These situations create pricing opportunities and deal flexibility.

4. Structure Creatively: Don't assume you need cash. Seller financing, SBA loans, investor partnerships, and creative structures can eliminate your capital requirements while still securing profitable deals.

5. Think Systems, Not Single Deals: Build a repeatable process for finding, evaluating, and acquiring businesses. The goal isn't one deal—it's becoming a serial acquirer who consistently finds and closes profitable opportunities.

The acquisition entrepreneurship opportunity has never been stronger. With millions of baby boomers retiring and most entrepreneurs still focused on the high-risk startup path, you have a massive competitive advantage simply by understanding this alternative approach.

The question isn't whether these opportunities exist—they're everywhere. The question is whether you're ready to join the smart 3% who build wealth by acquiring instead of starting from scratch.

While everyone else is grinding through the startup struggle, you could be collecting cash flow from day one, building equity with each payment, and positioning yourself for massive exits down the road.

The choice is yours: Join the 97% building the hard way, or learn from the 3% who've figured out the shortcut to entrepreneurial wealth.

Thanks for reading. Catch Carl’s full presentation about this topic from the 2024 Business Acquisition Summit HERE.

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