Comments on: When you need a taxi … http://7million7years.com/2009/07/08/when-you-need-a-taxi/ How to make 7 million in 7 years ... Thu, 24 May 2012 09:20:05 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: When is a partner not a partner?- 7million7years http://7million7years.com/2009/07/08/when-you-need-a-taxi/comment-page-1/#comment-3210 When is a partner not a partner?- 7million7years Mon, 13 Jul 2009 09:24:56 +0000 http://7million7years.com/?p=2845#comment-3210 [...] week I called out that I had an over-supply of business ideas, simply because I don’t need them [AJC: I am [...] [...] week I called out that I had an over-supply of business ideas, simply because I don’t need them [AJC: I am [...]

]]> By: Glenn http://7million7years.com/2009/07/08/when-you-need-a-taxi/comment-page-1/#comment-3186 Glenn Thu, 09 Jul 2009 20:43:58 +0000 http://7million7years.com/?p=2845#comment-3186 I have recently (in the past 13 months) purchased 2 companies of this size. One is doing very well. The other had many "skeletons in the closet" and is struggling. My projections for this 2nd company was a small but reasonable positive cash flow but has only lost money since I acquired it in December. After putting a lot more money (and time!!!) into it, it is now at the point that it is basically breaking even. I view the purchase (and valuation) of companies like real estate.... based on cash flow. Even though my projections and due diligence suggested otherwise, I spent a lot of money on a company with no (or worse...negative!!) cash flow. Positive cash flow --> less risk. I accept this as an investment risk and I am in the process of turning this around but it is taking up a lot more of my time that I would prefer. Having said that, I don't think that I would ever voluntarily purchase a zero-cash flow company. If I did, it would only be because I thought that it had EXCEPTIONALLY high potential for growth. If I really felt that I had to purchase this company. I would reduce my risk by tying the future performance (positive and negative) of the business with the current owners "deferred payments". Should the business not perform well or some of the receivables are not collectible then the "deferred payments" should be reduced. To be fair, if you are able to turn the company around the "deferred payments" should be higher... I would consider that an acceptable price for reduced risk. Finally, my personal conclusion based on the limited information provided...PASS, keep looking for other opportunities. I have recently (in the past 13 months) purchased 2 companies of this size. One is doing very well. The other had many “skeletons in the closet” and is struggling.

My projections for this 2nd company was a small but reasonable positive cash flow but has only lost money since I acquired it in December. After putting a lot more money (and time!!!) into it, it is now at the point that it is basically breaking even.

I view the purchase (and valuation) of companies like real estate…. based on cash flow. Even though my projections and due diligence suggested otherwise, I spent a lot of money on a company with no (or worse…negative!!) cash flow. Positive cash flow –> less risk.

I accept this as an investment risk and I am in the process of turning this around but it is taking up a lot more of my time that I would prefer.

Having said that, I don’t think that I would ever voluntarily purchase a zero-cash flow company. If I did, it would only be because I thought that it had EXCEPTIONALLY high potential for growth.

If I really felt that I had to purchase this company. I would reduce my risk by tying the future performance (positive and negative) of the business with the current owners “deferred payments”. Should the business not perform well or some of the receivables are not collectible then the “deferred payments” should be reduced. To be fair, if you are able to turn the company around the “deferred payments” should be higher… I would consider that an acceptable price for reduced risk.

Finally, my personal conclusion based on the limited information provided…PASS, keep looking for other opportunities.

]]> By: Steve http://7million7years.com/2009/07/08/when-you-need-a-taxi/comment-page-1/#comment-3181 Steve Thu, 09 Jul 2009 05:29:58 +0000 http://7million7years.com/?p=2845#comment-3181 A brand in decline. Not a bad thing if your the one who can turn it around . With the right marketing , a committed few employees, and a few new idea to breath fresh air into it, it might be something more than its appears. But , it will take a bit of looking into.Then again, is it something your heart is really into? Do you believe in the product or service? Do yo understand it? Lots of things to consider. A brand in decline. Not a bad thing if your the one who can turn it around . With the right marketing , a committed few employees, and a few new idea to breath fresh air into it, it might be something more than its appears. But , it will take a bit of looking into.Then again, is it something your heart is really into?
Do you believe in the product or service? Do yo understand it? Lots of things to consider.

]]> By: Adrian http://7million7years.com/2009/07/08/when-you-need-a-taxi/comment-page-1/#comment-3179 Adrian Thu, 09 Jul 2009 00:13:20 +0000 http://7million7years.com/?p=2845#comment-3179 @ Brandon - Yes, the idea of running hands-off is appealing, but the idea of partners isn't ... it's a conflict that needs resolution in order to move ahead! @ Brandon – Yes, the idea of running hands-off is appealing, but the idea of partners isn’t … it’s a conflict that needs resolution in order to move ahead!

]]> By: Scott http://7million7years.com/2009/07/08/when-you-need-a-taxi/comment-page-1/#comment-3177 Scott Wed, 08 Jul 2009 15:16:36 +0000 http://7million7years.com/?p=2845#comment-3177 Yeah, I know what you mean, that's how I feel about my practice too. It will be hard to let go completely. Yeah, I know what you mean, that’s how I feel about my practice too. It will be hard to let go completely.

]]> By: Adrian http://7million7years.com/2009/07/08/when-you-need-a-taxi/comment-page-1/#comment-3176 Adrian Wed, 08 Jul 2009 13:51:15 +0000 http://7million7years.com/?p=2845#comment-3176 @ Scott - EXACTLY what I was thinking! Yet, I was hoping to make it more of a hobby than an obsession .... albeit, a bloody expensive hobby ;) @ Scott – EXACTLY what I was thinking! Yet, I was hoping to make it more of a hobby than an obsession …. albeit, a bloody expensive hobby ;)

]]> By: Brandon http://7million7years.com/2009/07/08/when-you-need-a-taxi/comment-page-1/#comment-3174 Brandon Wed, 08 Jul 2009 13:48:19 +0000 http://7million7years.com/?p=2845#comment-3174 I think I remember you saying you don't like partnerships but you could buy it with your friend and have him run it day-to-day. If he can still assure you of those numbers when he has skin in the game then it's a smart in my opinion. I think I remember you saying you don’t like partnerships but you could buy it with your friend and have him run it day-to-day. If he can still assure you of those numbers when he has skin in the game then it’s a smart in my opinion.

]]> By: Scott http://7million7years.com/2009/07/08/when-you-need-a-taxi/comment-page-1/#comment-3173 Scott Wed, 08 Jul 2009 13:25:34 +0000 http://7million7years.com/?p=2845#comment-3173 Hey, aren't you suppose to be retired!! lol ;) Hey, aren’t you suppose to be retired!! lol ;)

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