HOW TO BUY A BUSINESS FOR $1 DOWN

6 replies
Now, I don't know if you'd find this of interest, in these days of affiliate marketing, clickbank, JV Zoo, and all that... not to mention the hundreds of MLM companies you can join for a few hundred bucks up front... but sometimes... a real business might be interesting, just let me just think aloud with you about this idea.

If you go to buy a house, the chances they will take $1 down, is slim. Why? Because LOTS of folks want to buy a home, right? But if someone owns a business and you walk in asking "Do you want to sell this business?" Likely they'll get excited, and say "Why, YES I do want to sell, sit down, let's talk."
In my days as an entrepreneur I've bought, about 6 businesses this way.

Keep in mind you're buying a cash flow.

So, you don't spill the beans that you're only going to offer $1 down. No, you sit down and ask all the questions you need to ask to determine the real cash-flow of the business.
How much inventory do they have?
How many lawsuits they face?
How old are the trucks, or permanent fixtures?
How much overhead they have?
How many employees? What are they paid?
How much debt you're assuming?
What kind of ad budget they have?
Where they advertise?
How many customers do they have on file?
Who are the vendors?
And so forth.
What you're looking for is how much cash comes in, vs how much goes out.
Come closer, because I want to reveal the 2 key questions I always asked, which told me if it was going to be worth the trouble.
I wanted to make sure they had a decent ad budget. AND... I wanted to make sure they DID NOT have many words in their ads. You see, "the more you tell, the more you sell".... so, if they had ads that only had 5 or 10 words, I saw that as a "hidden asset"... I knew if I jammed 800 to 1,000 words in the same ads, I'd get MANY TIMES the response, and I've have a better cash flow than they did.
Next, I'd make sure they had plenty of customers on file, but I wanted to make sure they did not mail to their customer file very often. And I'd get excited if they only mailed once a quarter or once every six months.
You see, "the more you tell, the more you sell". So, when I took over, I'd "mail like hell" to get old customers to come back again and again.
They might think their business is worth one million bucks, but I had to make sure I could pay it off in a reasonable time.
Sometimes they'd be so desperate to sell, that I'd structure the purchase so that there was NO INTEREST PAYMENTS when they carried the note.
If they are lying about their numbers, then the "nothing down" will reveal their ruse, and you could always renegotiate or give the business back to them.
I would sometimes make sure they stayed around to help the transition, as they would know things about the business I could never know, at first.
Sometimes, after asking all my questions, and making my proposal to buy the business for little or nothing down, they would laugh me out of the office.
But I didn't care... it was business. Let them laugh.
But if they accepted my terms, and I saw "hidden" assets in the advertising and customer list, I was excited and we were off to the races.

On rare occasions, you can find other "hidden assets"... like if they are top-heavy with employees, or the business "owns" something useless like real estate, or a yacht you can always sell off the useless junk and really get things started.

And, keep in mind, after you take over, build up the cash-flow, you can always sell the business at a higher evaluation.
Just thinking.
Linwood
#business #buy
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  • Profile picture of the author Alex Cohen
    I'm amazed that you found 6 businesses for sale where the owners were willing to finance all or part of the purchase price.

    I did a short stint as a business broker (1 year), and every business owner looking to sell I ran into just wanted to cash out. For various reasons, with burn out and retirement being the two biggest.

    And they had little to no confidence that a new owner would be successful.

    Alex
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    • Profile picture of the author AdmanMrWoo
      Originally Posted by Alex Cohen View Post

      I'm amazed that you found 6 businesses for sale where the owners were willing to finance all or part of the purchase price.

      I did a short stint as a business broker (1 year), and every business owner looking to sell I ran into just wanted to cash out. For various reasons, with burn out and retirement being the two biggest.

      And they had little to no confidence that a new owner would be successful.

      Alex

      I made plenty of offers where they laughed me out of the room.

      But I did find some deals.
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  • Profile picture of the author max5ty
    "On rare occasions, you can find other "hidden assets"... like if they are top-heavy with employees, or the business "owns" something useless like real estate, or a yacht you can always sell off the useless junk and really get things started."

    A yacht for 1 dollar?

    Does this 1 dollar have to be cash or can it be a promissory note?
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    • Profile picture of the author AdmanMrWoo
      Originally Posted by max5ty View Post

      "On rare occasions, you can find other "hidden assets"... like if they are top-heavy with employees, or the business "owns" something useless like real estate, or a yacht you can always sell off the useless junk and really get things started."

      A yacht for 1 dollar?

      Does this 1 dollar have to be cash or can it be a promissory note?

      Max... it's really just a figure of speech... I have literally bought businesses for $1 down... but that IS your promissory note...



      The larger thought here is TO DO YOUR HOMEWORK and discover value.

      If the business is actually worth something... and is a real gem... you might be able to find investors to help with a larger amount down.



      I have arranged for entrepreneur's loans before.



      Another point here is this: By offering $1 down, you're making sure the old owner is shooting straight with you, as his payment is going to come from the cashflow of the business.



      Lot's of business owners will jigger their books to make the business LOOK more valuable than it is.



      Just thinking
      Linwood
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      Linwood Austin, Direct Response Copywriter,
      http://theadmansdiary.com/ .. Phone: 801-895-9598

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      • Profile picture of the author AdmanMrWoo
        max5ty

        RE: that "Yacht" that came with the business... that one involved some kids whose parents died, and they wanted nothing to do with the business, but the business owned a yacht, and the yacht had a on-staff crew...


        Fire the crew..
        Sell the yacht...

        instant "free" business.
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        Linwood Austin, Direct Response Copywriter,
        http://theadmansdiary.com/ .. Phone: 801-895-9598

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  • Profile picture of the author max5ty
    @AdmanMrWoo - I was just messing with you - hope you didn't it take it wrong. Sometimes my humor doesn't come across right.

    I value the information you provide, and have no doubt in my mind you're the real deal.

    I believe you can do what you say.

    There's so many things a person can do to make money. Sometimes it just takes a little work like you said.
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