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Millennial Money founder Grant Sabatier’s investing style has evolved over the years.

He started with an “index-first strategy,” he told Insider, and invested up to 80% of his earnings into low-cost index funds in the early 2010s. His discipline and consistency paid off and, in five years, he went from being worth virtually nothing to building a seven-figure net worth.

The timing isn’t lost on him: The 2010s constituted the longest bull market in history, “so I was able to really benefit from a lot of that compounding,” said Sabatier, who has since diversified his portfolio to include real estate, start-ups, websites, and even collectibles like watches.

While index funds are ultimately what catapulted him to financial independence in the first place, he wouldn’t necessarily go that route if he had to start from scratch today.

“I’m still very pro low-cost index funds for almost everyone,” he said. “I do think it’s very clear now that the 7-to-8% forever inflation-adjusted compounding returns is very, very bullish — and everyone’s saying that, from Charlie Munger to Morningstar to Fidelity. Everyone’s being much more modest about their growth projections.”

Lower returns mean index funds won’t grow as much, and investors potentially have to save and contribute more to hit their goals.

As an investor, you always want to be thinking about the best way to put your money to work — and in today’s environment, Sabatier believes that is investing in a pre-existing business or into building one yourself.

“I’m very, very pro-entrepreneurship as an accelerated path to financial independence, beyond index funds and even real estate, which is traditionally held up as the fastest path,” he said. “I think business ownership is really where it’s going to be for the next 10 to 20 years.”

Buying ‘recession-proof businesses’ from boomers

The baby boomer generation holds half of the nation’s household wealth, according to Federal Reserve data, and a good portion of their assets is in the form of private businesses. As this generation ages, more and more businesses are going to be up for sale, which Sabatier sees as an opportunity for young investors.

“Acquisition entrepreneurship is rapidly growing as a field because there are just so many great businesses to buy,” explained Sabatier, noting that business school grads are increasingly passing up traditional finance and consulting jobs to instead buy small companies.

He recommends using BizBuySell, the “Zillow of businesses,” to learn about businesses for sale in your local community. You can find anything from gas stations and FedEx freight routes to vending machine businesses and car repair shops for sale.

As for what types of companies to look into, think about home service-type businesses like an HVAC or electrical company. These tend to be more durable and “recession-resistant,” he said: “You always need heat and electricity, you always need plumbing, you always need HVAC. Some of these very non-sexy businesses are now becoming very, very attractive and very, very interesting to a broader group of investors.”

Another type of business he’s particularly interested in would be one that’s climate change resistant, he added: “What businesses can you buy that are best equipped to adapt for climate change issues?”

Stay away from the restaurant industry, he added, as the margins tend to be low.

How to buy a business

So you’ve found a lawn care business you want to acquire — how do you finance it? How do you actually acquire it?

It’s not as difficult, or expensive, as you may think.

You have a few options, said Sabatier. For starters, you can do seller financing, which is when the buyer and seller set the terms themselves — including the down payment, interest rate, and term length — and come up with an asset purchase agreement.

“People are people, and so you can go to that boomer who has that landscaping company and say, ‘Hey, I want to buy this. I have this amount of money,’ and then just pay them back over time,” said Sabatier, noting that you can negotiate the down payment: “For a $600,000 lawn care business, with seller financing, you might only need to put down $10,000 or $15,000.”

If you don’t have money for a down payment, consider applying for an SBA (small business administration) loan, he added.

Another option is to get a loan from a bank. While it might be difficult to secure one from a big bank like Chase or Bank of America, “this is exactly the type of thing that a local credit union or regional credit union wants to lend you money for,” said Sabatier. “Go in and talk to your local old school banker and show them the business and show them your business plan.”

Or, you could approach a private lender.

“There are people out there who have money, whose entire business is just loaning other people money to get an interest return on it,” said Sabatier. As for how to find a private lender, start by asking family members, family friends, and peers.

If you can’t secure funding and don’t have enough savings, Sabatier’s advice is to build a relationship with the business owner and ask to form a partnership and buy half or some amount of the business.

“It’s almost like renting-to-own in a way,” he said. “You come in and you buy part of it and then you work with someone over a period of two to five years and then fully transition ownership. In most cases that’s only going to work if you’re the young gun coming in and approaching someone who’s a little bit older who maybe you know or who takes a liking to you, so it’s a little bit more of a gray area but certainly can happen.”

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