Neil Asher – How To Buy A Business For No Money
NOW is the best time to buy a business
There is no doubt that 2009 will bring some continued uncertainty and ongoing economic challenges. However, better days will eventually be the norm, and so as a new year begins, we are, at least time-wise, a step closer to that end.
Given that we are embarking upon a new year, let me go on record to say categorically that business buyers are now at one of those “once-in-a-lifetime” forks in the road. One path is the status quo. Unfortunately, that means uncertainty and mediocrity. You can sit idly by, do nothing to influence your destiny, and just hope that you will somehow benefit in the future when the economy turns around. Or, you can embrace the upheaval and use it to your advantage to negotiate a deal that you could never possibly achieve in “normal” times.
Over christmas, I had the opportunity to think quite a bit about one of the biggest issues that plagues prospective business buyers and how that obstacle will undoubtedly play a more significant role in a tough economy. I am referring to risk, and how it often times derails the mindset of anyone thinking about going into their own business.
There’s an old expression that states “big risk equals a big reward”. That is definitely true when it comes to the stock market, or investing in speculative real estate, but it certainly should not be the case when buying a business.
Stocks and real estate are especially risky because you have almost no control over the outcome; they both rely on factors you cannot influence. Plus, you are severely limited to the amount of detailed analysis you can do before you are required to jump in, and that is precisely why they are referred to as a “leap of faith”.
Buying a business on the other hand, should never be a leap of faith. In fact, it should not be a significant risk at all. Seasoned business buyers negotiate favorable deal terms, and diligently investigate the companies they consider buying, and so they see very little risk in the deals they get done. Similarly, they have the know-how and discipline to walk from the others where the risk doesn’t make sense. In other words, where there is simply too much risk given the potential rewards.
Conversely, inexperienced business buyers take on enormous risk because they don’t have the knowledge or skill to reduce it before they buy, and more often than not, they find one problem after another surfacing after they close the deal, and the results are usually disastrous. Or, they are unable to manage the risk by putting together the right deal, and so they end up never buying a business at all.
The beauty of buying an existing business is that you can learn how to drastically reduce, and even eliminate the risk. This can be done easily but only if you know how to identify a good business with solid fundamentals, by accurately valuing it, arranging favorable financing, negotiating great deal terms, and above all, by knowing how to uncover all of the potential problems before you buy it.
The whole objective of buying a business is to eliminate the risk BEFORE you buy it, so you’ll enjoy all the great rewards that come with owning a good business. That is precisely why you do not need to take a big risk to reap a big reward.
But here’s the problem – most people have never bought a business before. They don’t know what type is right for them or where to find it, or what questions to ask, or what “red flags” to look for. They have tons of other questions such as: How will I know if it’s a good business? Will the customers still buy from me? What’s the right price? How much should I offer? Will the employees stay? How do I know if the seller has cooked the books? And on and on the list goes. When you face situations that you don’t know how to handle or questions you cannot answer, then of course you are putting yourself, and your investment, and your future at great risk.
Your entire success boils down to whether or not you have the skills and knowledge to make the right decisions during the various stages of the buying process.
If you take the time to learn how to successfully navigate through the process, the end result will be phenomenal. You will own a good business and control your own destiny. Plus, once you make the move from employee to employer, you will finally put yourself in a position to be properly compensated for all of your hard work.
That’s all the good stuff. The flip side is that if you don’t know what you’re doing, if you’re not an expert at buying businesses, if you try to take shortcuts or guess your way ahead, then you will be taking a massive risk. It’s not just “a leap of faith” – it is more like jumping out of a plane without a parachute.
Buying a business is one of the least risky investments you can ever make, if you do it properly. It would of course be misleading for me to state there is zero risk, but compared to other investments like stocks and real estate, at least you can control the outcome.
If you are an enterprising individual, do not let the naysayers or media dampen your hopes and dreams. Let the beginning of the new year revitalize your hopes. And while hope is great, it simply is a launching pad for dreams – only knowledge guarantees your success!
So get smart and stay focused on the task at hand.The end result is that you will own a business and control your own destiny. And once you own a good business, and make the move from employee to employer, you will finally put yourself in a position to be properly compensated for all of your hard work.
I hope that 2009 is your breakout year!
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