A new business owner could literally start from scratch, using current capital or borrowed funds to finance his or her operations. Or, a would-be entrepreneur could look at buying into a franchise system, where a brand and set of operational systems are already in place – saving years of time and effort of getting the business off the ground.
Or, prospective entrepreneurs could take a page out of the venture capitalist playbook and look to buy a business that is already operational but underperforming or run by owners who are looking for a quick exit strategy.
Sugars suggests for new business owners, this approach can be one of the easiest ways to get into the world of entrepreneurship – with tremendous upside potential.
“If you look at what the pros do, they don’t buy shares of stock in the markets or real estate, they buy undervalued or underperforming companies, turn them around and sell them for a profit,” he says. “For someone just starting out in business, this can be a great way to own your own company with an eye on selling it when you turn it around.”
As an example, Sugars points to the many success stories from clients of his ActionCOACH Business Coaches.
“At a certain point in your entrepreneurial career, you realize you can go into a company that is operational and fix certain things to really drive revenues and profit,” he says. “The key is to buy a company at a wholesale or less than wholesale price with the potential to do well – but is lacking direction.”
Sugars says companies in this category are operating at less than full potential for a number of reasons.
“Maybe the owners are burned out, or they are in over their heads or they simply lack the knowledge or tools necessary to turn a profit,” he says. “Whatever the reason, the owners are looking to get out, and are willing to be creative in cutting deals. You can start your search in the ‘businesses for sale’ section of any paper. Realize you might need to look at 50 companies to find one good deal, but that one deal can be very profitable for you.”
One case study Sugars cites is a couple in Australia who took over operations of a small café and restaurant for no money down, only to sell the business two months later for a $70,000 profit.
“All they did was take over the lease,” he says. “The owner just wanted out, and with a few changes to the menu, a new marketing plan and a new team of employees, they were able to turn a nice profit in a couple months.”
What are the keys to finding “buy, build and sell” deals?
Sugars suggests the following:
• Scan the “Business for Sale” sections of your local papers or online and start to visit businesses in those listings
• Be aware you may need to see 50 different businesses to make offers to 10 different owners to have one viable deal
• Never pay retail for anything. Look for deals that are priced wholesale or better than wholesale
• Realize that owners wanting out of their companies have emotional, rather than logical, reasons for getting out – ranging from divorce, sickness, tiredness, travel, or just being sick and tired of running an underperforming business
• Fall in love with the deal – and not the business
While the “buy, build and sell” model is not for every potential business owner, it offers a unique and alternative way to learn and profit from an initial foray into entrepreneurship.
“Learn all you can about business before getting into one,” Sugars advises. “Use your current job as an apprenticeship to business ownership. But if you are looking to get into business, ‘buy, build and sell’ is a great way to make that happen.”
For more information on the “buy, build and sell” model, visit Brad Sugars’ “Billionaire in Training” website at: http://www.billionaireintraining.net/
