10 Sep Acquiring Minds: Buy a Business with Your Tax Bill
More and more people want a business they can see, touch, and drive to. That’s what drew today’s guest to his unusual acquisition: an escape room. Adam Whelchel had built a $1.5 million accounting firm with 22 remote employees. A good business, but, as his daughter put it, what do you actually do all day? Then an escape room came across his desk. As a business broker, it was actually his own listing: seven rooms, $365k in revenue, and about $105k of SDE. But it was operating at just 7 to 10% capacity. That was the thesis. Rent, staff, and hours are largely fixed, so additional sales can flow heavily to the bottom line. Adam’s goal: grow from 10% capacity to 15%. There was also a tax angle. Facing a roughly $95,000 tax bill, Adam negotiated for $108,000 of the purchase price to be allocated to depreciable assets. Using bonus depreciation, he could create a first-year loss to offset income elsewhere. The result: the tax savings exceeded his deposit. Instead of sending that $35,000 to the IRS, he used it to buy a cash-flowing business. Adam made slides walking through the math, linked in the show notes. Here he is, Adam Whelchel, owner of Lakeland Escape Room.
