Is your partner worth $5 million?

Posted on April 29, 2009 by Adrian

I guess by now you know my true feelings about partnerships, but you may have other ideas …

… after all, your intended partner may be the Yin to your Yang … she may be the finance whiz while you run rings around operations … or he may just be your buddy since you shared a dorm together.

All I can say is: I hope that whatever your partner brings to the table, that they are also bringing The Big Idea.

You see, if you are the one with The Big Idea and you choose to share it with a partner because you [insert too scared to go it alone reason of choice: need more capital; need finance/operations/marketing skills; need somebody with a level head; need somebody to burn the midnight oil with; need somebody to hold hands with; etc.; etc.], then you are effectively paying your partner $5 million for the privilege!

By now you’re thinking that I’ve gone entirely off my rocker, so let me explain:

Let’s say that you have worked your way through all of the exercises and you believe your Number to be, say, $10 Million in just 10 years … where are you going to get it from?

Well, The Big Idea of course!

You’ve had this great idea and you will build a business around it and you will sell it for $10,000,000 in 10 years and …

… ooops!

You forgot that you invited a partner to join you … and when you sell, they are going to get half: $5,000,000.

That’s $500k a year for 10 years PLUS whatever salary that they took for those 10 years PLUS whatever perks that they got (e.g. trips, cars, laptops, phones, etc., etc.) PLUS 50% of any profits.

And, now you’re only half-way towards your Number!

Was your partnership worth it? Or, could you have hired people when you needed them for far less cost? I’m venturing that the answer is ‘yes’.

Another way to look at it is: will I be able to sell my business in 10 years for $20 million, so that my half still gets me to my $10 million 10 years Number? Or $30 million, if I decide to have 2 partners 😉

So, the question that you need to ask before considering going into business with somebody else is: am I more likely to get to my Number with or without this person?

And, I’m guessing that unless you’re a total doofus who just happens to have The Big Idea and not much else going for them, the answer will be “NO, I can get to 100% of my goal without this person, MUCH easier than getting to 200% of that same goal with them”.

So, what if you don’t have The Big Idea, but the guy who happens to have it asks you to go into business with him?

That, my friend, also depends on whether you are more likely to get to your Number with or without this person … and, their Big Idea?!

Can't think of a side-business to start?

Posted on April 24, 2009 by Adrian

Everybody wants to be an entrepreneur, or so it seems; but, where to start?

If you can’t think of a side business to start, Trent at The Simple Dollar gives you a ‘kick-start’ with this list of 50 Side Businesses You Can Start On Your Own …

… you can click the link and browse through all of his ideas, but here is a sampling:

What follows is a list of 50 of those ideas that I’ve collected over the last year or so. Each of these ideas is very simple to start, and most can be done as a sole proprietorship at first (meaning you don’t have to file any legal documents to get started, though you will want to do that if it starts to take off). Most of these can be done at home in your spare time in your spare space, too.

Ready? See if there are any ideas below that fit you well. If you find an idea, seek out a guide on how to get started in that area.

Blogging If you enjoy writing, find a topic you’re passionate about and start a blog on the topic. All you need is a computer, some time, and some energy to consistently write.

Candle making Candle making is a great little craft to learn. You can often easily sell the candles at local shops and also through websites like Etsy.com.

Event coordinator Events like family reunions and large parties are often full of busywork that many people simply don’t want to tackle. That can be the perfect place for you to step in and take charge of the planning and coordination.

Jewelry making If you have a good eye for detail work and a lot of patience, homemade jewelry can be quite profitable. As with other items on this list, there are many opportunities to sell such items through local gift shops or at sites like etsy.

Pet walking Many busy people leave their pets home all day, but realize that those pets really could use a vigorous walk (and an opportunity to relieve themselves) during the day. Pet walking is a great opportunity for exercise, fresh air, and some pocket money if you have free time during each day.

Scrapbook making Many people dream of having beautiful scrapbooks. They collect all the materials they want in the scrapbooks but never follow through on the actual creation. You can step in here – take their ideas and materials and assemble a scrapbook for them.

Virtual assistant Many ultra-busy professionals appreciate having someone who can check and answer their email, organize task lists for them, update their calendars, and so on, with minimal interaction. The best part is that you can provide this service from home with a good internet connection.

I’m betting the readers have many, many more ideas along these same lines.

I’m also betting that my readers have many, many more ideas along these lines … and, each is a potentially GREAT Making Money 201 idea that can:

– Produce a little extra income

– Boost your savings rate (remember, you WILL save at least 50% of this extra money, right?)

– Help you build up some capital for future businesses investments (putting the 50%+ savings to its highest/best use)

BUT … did you spot the problem?

Almost all of these business ideas (and, I mean Trent’s full list, not just the random few that I have sampled above) seem to have one – I feel – major flaw:

They (almost) all rely on the fruits of your personal labor.

And, it’s easy to understand why: you have a skill – perhaps learned on your job or via a hobby – and you naturally apply that to a business: you start making some cute little cuddly toys for your kids, then friends, then the school fete, and before you know it … you’re in the Cute Cuddly Toy Business!

Even though you are in the business of making PRODUCTS (i.e. Cute Cuddly Toys), you are really in the SERVICE business, because it is all tied to YOUR ability to keep making Cute Cuddly Toys.

The problem is that these businesses are hard to expand past … well … YOU. And, any business based on Y O U is actually just another J O B.

Sure, you can expand by hiring people to do what you do, but then:

– Will you be able to find / train sufficient people to manage growth?

– Will you be happy with their quality?

– Will you be able to manage people (they get sick; ‘forget’ to turn up; have temper-tantrums; etc.; etc.)?

– Will YOU be around (will you get sick; have family conflicts; etc.; etc.)?

There is a simple solution:

Turn these service-based businesses into product-based businesses; here’s how:

1. Start with your service-based business, but keep it small as you will probably shut it down pretty soon

2. Video yourself doing what it is that you do (including how you buy/sell/make) … every step, sequentially … and, explain what you are doing as you go along

=> you are creating a series of short instructional videos 🙂

3. Write down the same steps that you followed in the videos … every step, sequentially … and, explain what you are doing as you go along

=> you are creating a series of short instructional manuals 🙂

4. Write down a list of materials required and places to get them

=> you are creating a Buyer’s Directory 🙂

5. Package the lot up!

=> you are creating a course in [insert part-time business of choice] 🙂

6. Buy a web-site-building package such as Bebiz and/or Site Build It! and sell your course (and/or materials required to make Cute Cuddly Toys) online!

=> you are creating an internet-based business 🙂

Can you see what you have done?

You have turned your ongoing personal labor (i.e. making the Cute Cuddly Toys) into once-off personal labor (i.e. developing a course on how to make/sell Cute Cuddly Toys), and then selling those toys online … once the course is complete and the web-site is set up, you can outsource most of the manual work of the business (fulfilling/shipping orders) to someone else when you get too big (or too sick) to fulfill them yourself.

Not to mention, you can make a lot more money; for example this guy who turned his hobby of wire-sculpture jewellery-making into a $600k per year online business.

What if you don't want to exit?

Posted on April 6, 2009 by Adrian

I wrote a post about the real (nay, ONLY) succession plan for any small business: sell it!

But, Steve asks about the alternative:

What if you don’t plan to leave? I mean, Maybe the plan is to run it till you can’t any longer, then the wife runs it till she is ready to sell, or pass to the kids(if they are even interested in that type business). My idea is to find Businesses that provide (mostly Passive income) where you don’t need to spend much time at the shop daily. Where your biggest job is probably gonna entail paperwork.

This is the ‘pipe dream’ of many a small business owner – and, was certainly my father’s ‘dream’ … bring the kids into the business and then pass it on to them. After all, look at the advantages:

– Continuing ‘passive’ income … your kids will eventually run the business and look after you

– You’ll be smart enough to keep a chunky % of the business for yourself to ‘guarantee’ a healthy share of the ongoing profits

– No issues around selling the business, finding the right buyer, or handing it over

– It’ll keep the kids off the streets (probably, my father’s greatest motivation)

And, that’s certainly the central theme of a book that I reviewed some time ago, called Get Rich, Stay Rich, Pass It On: where the authors suggest that the ONLY way to ensure that your wealth carries on through the generations is to have roughly 50% of it in “continually innovative enterprise/s” a.k.a. a business:

What we mean here by a continually innovative enterprise is one that either offers a product or service that breaks new ground or changes a traditional product or service so much that it becomes virtually new.

As I said in my review: “that is something that you do before you retire so that you can retire rich … you take risks, you innovate, then you sit back and reap the profits (or sell)”.

But, there’s a serious flaw in this logic: 99.9997% of small businesses are inextricably tied to the owner; large companies know this, that’s why when they buy a small business, it usually comes with an employment contract to tide them over until they can ‘wash out’ the Owner/Founder Effect:

This is the truism that the business IS the owner/founder and the owner founder IS the business!

The reality is that owner/founders and their businesses cannot be parted so easily and these large companies should NEVER buy small businesses because of the Owner/Founder Effect … inevitably, the owner falls afoul of the new management, leaves disappointed [AJC: hopefully, with bundles of cash in her pocket to help console her 😛 ], and the business goes downhill thereafter.

Eventually, the business becomes ‘absorbed’ in the overall enterprise and they conveniently ‘forget’ that they totally stuffed it up … and, more often than not the old owner eventually buys back his own business for 25 cents in the dollar.

Friends of mine started a computer company and sold/bought it three times … each time selling high, buying low and making a heap on each subsequent sale 😉

Do you think it’s any different, Steve, when you ‘sell’ your business to your wife and/or children?

Because that’s exactly what you are doing: selling it to the least qualified purchasers; you may be able to teach them some of what you know … perhaps even a lot … and, there’s a VERY slight chance that you will be able to teach them (assuming that they have the will and ability to take on what you teach) 98% of what you know …

… but, you can NEVER pass on that last 2%: the Owner/Founder Effect ‘magic’ that made your business one of the few small-to-medium business success stories.

That’s why I called the book’s concept of encourage people to start/buy, then keep, these innovative enterprises “the most dangerous idea in retirement planning that I have ever read”, because that last 2% – the bit that is IN you and ONLY in you – is the bit that you CANNOT pass on and will eventually send your family broke.

Of course, there’s at least (my best guess) a 0.0003% chance that your business COULD become the next Walmart and pass on to at least ONE more generation, but I wouldn’t be willing to bet my family’s financial future on that.

So, instead of trying to fit your business into your Life, here’s what to do:

1. Find Your Number, the one that allows you and your family to live their Life’s Purpose

2. Apply a FULL 100% of YOU to molding the business into something that can be sold for at least Your Number (LESS the value of any investments that the excess cashflow that you truly outstanding business has been able to fund)

3. Spend your free time TEACHING your kids how to fish for themselves

… that’s what I’m doing for you, and that’s what I suggest you do for them 🙂

What's your exit strategy?

Posted on March 31, 2009 by Adrian

My Dollar Plan asks: “What’s Your Exit Strategy?” giving the example of his father’s business:

My dad has been sick this week, and I’ve been spending a considerable amount of time with him at the hospital. Since he’s a successful small business owner for 30 years, we’ve spent some time discussing his plans for the future.

Since I’m in a very ‘anecdotal’ mood at the moment [AJC: Don’t worry, I’m sure it will wear off soon. Who could possibly be interested in my boring life? ;)], My Dollar Plan’s brief mention of his sick father reminds me of how I started in business:

I think that I’ve mentioned before about my father who started a little finance company in his 60’s after being unceremoniously ‘booted’ by his former partners, and for some unknown reason, we mutually decided that I should join him in that business as a 1/3 partner [whoohoo!].

A couple of years later, just as I realized that the business was in serious financial trouble, my father fell terminally ill. He was also unfortunate in that I wasn’t able to save the business, but I guess by bringing me in – had things not already been so screwed up (initially, well hidden from my view) – my father was creating the classic family business ‘exit plan’: bring in the children …

… bring one, bring all!

You see, my father’s Grand Plan, unbeknown to be when I joined, was to bring in both of my sisters as well … and, we had a wonderful 6 month period where he actually hired my younger sister and I would fire her the same day, then we would repeat the farce a week or two later, until he eventually gave up. Before you judge me too harshly, let me share two small snippets:

1. The business – as I found out all too late – could not afford me, let alone my sister, and

2. I would sit at my desk in the afternoon working at feverish pace trying to catch up on all the paperwork and phone calls (at the same time, naturally; who has time to ‘single task’ in their own business?!) having been ‘on the road’ all morning rushing from appointment to appointment; only to watch my sister working at snail’s pace on some basic task (I wish I could have taken a video of her very slowly and deliberately unstapling some papers sheet by sheet, by sheet, by …. [yawn] …. and, taking a minute’s rest between each sheet!), which drove me absolutely bonkers given the absolutely frenetic pace that I had to work at.

This also reminds me of the country’s richest families; the business empire was started by two brothers who opened a butcher’s shop together and parlayed that into a multi-billion steel and manufacturing conglomerate: realizing the family issues that would eventually be created upon succession (who would get/run what?), they deliberately broke up their huge conglomerate while they were still alive and in-charge and gave one division of the conglomerate to each child to own and run as their own.

Very clever exit plan: exit while still willing and able to handle the ensuing family ‘issues’ …

So, the point 0f all of this is that I am not a fan of family businesses; some run very well, but others don’t run at all.

Oh, and every business needs to have a ‘succession plan’ before you even go into it (i.e. before you either start it or buy it): work out how much you will need to sell it for, and by when, in order to achieve your Number/Date and go out and find that buyer as soon as you reach that predetermined profit/date target.

Another way to mitigate risk?

Posted on March 9, 2009 by Adrian

riskquadrant

Say that you’re a venture capitalist who has found some semi-reliable way of categorizing entrepreneurs on their capacity to undertake action with / without first doing a lot of research … which group in the above matrix would you be most likely to back (assuming that they all come to you with equally good ideas, etc., etc.)?

Before I share my views, I want to quickly talk about risk: you see, we have some readers who, I believe, are overly concerned with risk …

… as it happens, I am (by nature) one of them, struggling to overcome my own ‘addiction to fear‘. I’ve done OK, but not without some personal psychological ‘cost’ along the way … nothing serious, just a few extra grey hairs … maybe 10 or 20 years off my life … the usual 😉

One of the ways to avoid risk, course, is to do some research before you take irrevocable action; it’s the old proverb:

Look before you leap!

newcoke Coming from my famous 20/20 hindsight, though, I can say that this an overblown theory. The reality is that too much research is just as dangerous as not enough … perhaps more so.

Let me explain …

Let’s say you take on a project and despite years of research before you plunge into it, it fails!

Can’t happen?

I have only two words for you: New Coke 😛

So, you’re out …

Now, let’s look at somebody a bit more ‘gung ho’ … they jump into one project after another, fail early and failing often … but, in just about the time that it took for you to jump into (and crash back out of) your Well Researched Project they have finally struck gold (after failing 4 times) … 5 times lucky 🙂

Contrived example?

Perhaps not as much as you might think …

… you see, venture capitalists work on the Power of 10 Formula; for every 10 businesses that they fund:

7 Fail, causing them to lose their entire investment
2 return their initial investment, nothing more
1 makes it all worthwhile

Despite all their research, VC’s can’t tell in advance which of these businesses would succeed (or, they wouldn’t bother investing in the other nine, d’oh!). What ‘saves’ the VC is action … they act/fail/act/fail …. act/succeed.

So, if we look at people on a scale (in the chart above) of how much research they tend to do in advance of action (or, otherwise), I would much rather back the guys in II over the guys in III; I would almost be prepared to back the guys in II over the guys in IV simply because of their capacity to implement more ideas sooner … in my book, trial and error in the real world produces faster results than any form of theoretical research.

What’s the takeaway?

Get started in something that has a low set-up cost and you can get into the market (and, out of again) quickly … if it succeeds, more power to you. If it fails (as it probably will) you can dust yourself off and try/try again.

Internet businesses are ideal ….

The Art of the Pitch …

Posted on November 30, 2008 by Adrian

“Everybody is selling something all the time” [Anon.]

I don’t know who said that (probably me!) but it’s true; everything is a sales pitch:

– asking a girl/guy out on a date

– a marriage proposal

– a loan application

– a job application

– a promotion request

– a sales visit

– a venture capital ‘pitch’

Guy Kawasaki outlines a great approach to ‘pitching’ for anything in his masterpiece for budding entrepreneurs, The Art of the Start.

And, consummate VC, Chris Rose, fills in some of the blanks in this great 14 minute video … watch it, bookmark it, you’ll need it (one day) ….

Now, hear the word …

Posted on November 23, 2008 by Adrian

I don’t normally chain my video-on-Sundays (too much hard work for both you an me on ‘day of rest’ Sunday) …

… but, I showed a video that explained how important marketing is, to which Scott responded:

I completely agree that marketing and being a good marketer is one of the most important wealth building tools you can have. A definite and powerful Money Making 201 skill, but one I personally don’t enjoy, lol.

It’s not that it’s so bad, it’s just the part of my practice that goes into the “work” category, along with paperwork and dealing with insurance reimbursement, when I would rather be focusing on my ‘life’s purpose’ part of my practice, which is helping patients.

However, it’s only when I step it up and be more of a marketer and insurance master that my income goes up.

It’s funny, in school I thought the opposite would be true, that I would be more financially successful if I focused on being a better, more caring and more compassionate doctor.

Scott, you’re a doctor so, just remember:

Your marketing bone is connected to your income bone … your income bone is connected to your investing bone … your investing bone is connected to your Number/Date bone … your Number/Date bone is connected to your Life’s Purpose bone …

… Now, hear the word!

When you truly understand this (through trying it and beginning to see results), you will magically shift your thinking:

Marketing will no longer be in the “work” category (along with all of that other boring stuff like “paperwork and dealing with insurance reimbursements”) …

… it will pop into it’s own “enabling me to truly live my Life’s Purpose” category and you will grow to LOVE it 😉

Riding in the big boat while carrying the little boat …

Posted on November 22, 2008 by Adrian

There was a great article in eLance’s blog today (AJC: I didn’t know they had a blog, but I used the site to find my research assistant, Muhammad, who lives in Pakistan and is doing a great job for me at $4 an hour!) …

… here is a summary (with my thoughts in italics):

Tips for Incubating your Small Business Idea While Still Working Full-Time

Sep 4, 2008 6:38pm

Have you considered starting a business while still employed?

My Shanghai-born friend, Annie, says the Chinese have a term for this: “riding in the big boat while carrying the little boat.”

Some entrepreneurs only launch their business officially once they leave employment. However, they incubate the business concept while employed.

Other times, they actually launch the business and run it on the side while still employed. They may continue to run it as a side business for a period of months or even years. Only later do they leave their jobs.

No matter how you do it, I’ve got 6 practical tips for starting a business while you’re still employed:

1. Consider Your Employer Your Banker
I am a huge fan of bootstrapping a business, i.e., using personal money to fund growth. One form of using personal funds is to set aside a portion of your salary to fund your business. That means you need to protect your funding source — your job — until you are ready to cut the cord.

The author of this article suggests that you need to canvass your employer on ‘moonlighting’ otherwise you should wait until you leave your job to start the business – I would suggest that if the business is critical to your financial future (and, if you’re reading this blog, it probably is) then you should take steps to find a replacement job asap – and, let the new employer know that you are “working on a business ‘on the side’ to improve your business skills” … they might even see that as an asset!

2. Write a Business Plan
Sure, much of your plan will turn out to be incorrect (same goes for most startup business plans). But it’s not the plan that’s important … it’s the planning.

I agree – to an extent: as with your Life’s Purpose, having a Plan for your business is a great idea … but, trying to plan every detail is (at least for me) a waste of time … but, don’t let me stop you! If you want to see a practical approach to planning for any business – certainly, fast-moving startups – read Guy Kawasaki’s Art of the Start.

3. Get your Spouse’s Buy-In
Your husband or wife needs to be committed to your startup. If it isn’t a shared dream, or if your spouse is resentful of the time you are spending away from family, you’re adding stress on your relationship.

You want to stay married and have a business that sucks up all of your non-working time?! ‘Nuff said ….

To secure buy-in from your spouse, talk frequently about your dream. Paint a picture in words. Get him or her involved, too. Nothing creates buy-in better than being actively involved in business decisions.

4. Choose the Right Business

Here are some examples of businesses that can be operated on the side indefinitely for years, or eventually taken into full-time businesses:

Software development

Web design

Freelance writing

Online businesses

Graphics design

Consulting

eBay business

Event planner

Any hobby that you can turn into a business

The author recommends these because you can often be flexible in hours and/or hire outside staff/contractors … the catch is that a number of these businesses aren’t dramatically scalable, which is the #1 criteria that I look for in a business …. remember: scalable = salable.

5. Set Aside Dedicated Schedule for Your Startup

Many entrepreneurs who have successfully started a side business do it by setting aside dedicated hours each day for their startup. I’ve known budding entrepreneurs speak about going home to “start the second shift.” That’s exactly how you have to think of it. Commit to spending X hours per weekday and/or on weekends on your business. Stick to a regular schedule – it makes it easier. P.D. James, the novelist, worked for years as a hospital administrator, arising early to write for 2 hours each morning before work.

This is the best piece of advice in this already excellent post … it is hard to come home from work, only to have to go to ‘work’ … but, it must be done (hence, the prior discussion with spouses and bosses).

6. Turn Your Employer Into Your First Customer
Think of your employer as your first big sales target (assuming your product or service is relevant to your employer). Many a business has gotten off to a great start when the owner’s former employer became the first customer.

Good luck on this one! Still if you CAN get your employer to become your first big customer, it’s a great start: not sure how the whole employee/supplier co-existence thing will actually pan out … I think it will be better if you are able to transition from employee to supplier …

If yuor objective is to build a second income stream to support your investing activities – or, perhaps to build up capital to start That Big Business of yours [AJC: I would never let a little issue of capital stop me from starting that one NOW 😉 ] – then this article provides some great suggestions …

… however, if you want to build a ton of money, fast, then you may have building the next Facebook in mind and this article (along with this one) presents a way to get off the ground with minimal risk.

They don't want a drill …

Posted on November 20, 2008 by Adrian

I came across this neat summary of a great quote by Perry Marshall the other day … a quote is as good as a post, so here is one of the greatest pieces of advice about marketing your business that I have ever come across:

“Nobody who bought a drill actually wanted a drill. They wanted a hole. Therefore, if you want to sell drills, you should advertise information about making holes – NOT information about drills!” – Perry Marshall

What that means is that people do not care about your opportunity, what they care about is a solution to their problems.

So, what you need to do instead of pitching your [whatever it is that you sell] to your prospects, sell them inexpensive or free information on how to solve their problems, on how to drill that “hole.”

If you can show them how to make that hole, your prospects will come to the conclusion that they need a drill from you because you gave them free knowledge or inexpensive information on how to accomplish their goal, and therefore earning their trust in you.

Put simply: education sells!

In fact, this is the way to sell ANY client ANYTHING … it’s what I did to make my businesses a success. If there is anything that neatly encapsulates the reason for my business successes, this is it. Really.

Can you diversify a business?

Posted on November 4, 2008 by Adrian

I’ve just loaded 3 new videos into the Vault (click on this link, or check the VodPod Widget on the right hand side of this page for the latest) …

Now for today’s post …

Now listen up!

You want to keep working that job forever? Stop reading today’s post! If you’re determined to stay poor forever, you deserve the extra 2.5 minute break 🙂

You want to work your job AND invest in real-estate? Well, keep reading, because SOME of what I’m about to say, applies to RE, too.

But, if you want to blaze the business path … hang about, because Dustbusterz has a GREAT question for you:

Tell me here ,if I am wrong in my assessment. I believe diversifying(i.e. buying or starting many businesses) is better than having all your money tied into just 1 business.
Currently, we own about 5 small businesses, which bring in small amounts of cash. Our intent here is that we will build these businesses up gradually over a set time frame , and at the same time, continue to buy or build more businesses to add to our income stream.
By having these several businesses, we somewhat mitigate future problems if say,1 of these operations should suddenly be stricken with cancer and we are unable to restructure and save it.
So having 10 smaller businesses (1 goes bankrupt or gets sold) it is less of a drain on your income stream as having all your cash in only 1 or 2 bigger businesses.

As I said to Dustbusterz, there are some great reasons TO enter into multiple businesses and some equally great reasons NOT to …

… but, I have to admit, diversification was never on my list … until now

First, let’s look at why you might want to buy/start just one business:

– You can concentrate on it ( THE reason not to ‘diversify’)

– One business can become many through territory expansion, franchising, joint ventures, etc.

– A bigger business can be more atractive to the people who will pay you more (say, 6 years’ profits) than the typical ‘small business purchaser’ (who might only pay 3 to 5 years’ profits); these uber-purchasers include: e.g. the private equity firms, large corporations, IPO, etc.

Now, let look at how you may end up with multiple small businesses:

– The businesses are related in some way (this is how I ended up with a portfolio of businesses)

– The first business that you buy or start doesn’t have enough potential so you open up another on the side and … it just keeps rolling from there

– You are in the business of ‘flipping businesses’ … really!

Before I continue, let’s take a break to satisfy the real-estate guys:

With real-estate you can own one property or multiple … across a single location or many. It matters not, so long as you put good management in place.

And, if you decide that you are going to be in the business of flipping RE – well, then you have no choice but to be hands on with multiple properties … you just have to hope that it all holds together!

Not so with businesses; the management requirements in small business – indeed, any business – are relatively HUGE (certainly, when compared with the management stresses in real-estate). This usually points to having one business that you grow and grow, slowly and carefully adding management layers underneath you.

I believe that by diversifying, you are exponentially INCREASING management risk (hence, failure) … which may or may not offset the potential diversification ‘benefits’.

But, it can be done … as I said before, I managed it.

And so has Brad Sugarswho is a bit of a legend where I come from … I recall going to a free ‘business seminar’ and being surprised by the speaker: a lanky kid in his 20’s in a slick business suit. And, he’s gone from there to found a well-regarded multi-national business coaching company.

Brad spoke about how he would buy small businesses, often with ‘no money down’ and fix their basic money and management problems, and then sell them off. Brad often didn’t even work in the businesses himself, so I guess that you would say that he’s to ‘random’ small businesses as Ray Kroc was to McDonalds.

I particularly loved this technique that Brad shared:

1. Buy a business for as close to zero dollars as possible (this IS possible … just offering to take on the lease payments – as a take it or leave it ‘final offer’ – is often enough),

2. Install a manager

3. Help the manager build the business up

4. Sell the business to the manager (after all, they have seen how quickly it has grown!)

5. Repeat!

Personally – like RE flipping – this is a ‘business’ (that buys/sells businesses), not an investment. It’s not the kind of business that I like, because there’s no HUGE upside; although, if you can scale upwards of 50 such transactions … 😉

7million7years

How to make 7 million in 7 years …

Category Archives: Business