Buy your way to a Million dollars? Sure why not.
Out of the self-made millionaires created in the world today 84% are created in the area of business. If that many self-made millionaires are made in this category it definitely merits a closer look.
Here are a few options:
Starting a business
You may have a great idea for a business. Keep in mind not all businesses are winners. A lot of business in fact fail and the vast majority of businesses make under $200,000 a year. That quite a distance from a million. So what are the key factors that make a businesses success more likely? Here’s a few quick questions that I try to create when building a business and ask when buying a business.
Is there an interested audience ready to pay for this product or service?
Are there systems to make this transaction or if not, how easily can one be created?
Is there management in place to keep the system running or improve upon it?
Does this business model have the potential for growth?
Is this business something that interests me?
Depending on how powerful the answers are to those question dictate whether or not I will move forward. You’ll notice that I don’t spend a lot of time wondering if I like the business. It’s actually the last question. While I think it’s important to be involved in something I enjoy it’s more important to remove emotion from the equation. If you aren’t making money you won’t have the privilege of being in business long and it certainly won’t help you to reach your goals of becoming a millionaire.
Quick tip: While there is a sense of satisfaction in starting your own business you can spend a lot of money doing so. It is always easier and generally more productive to buy an existing business with all of the systems and tools in place. It generally allows you to begin with cash flow in place.
You don’t have to start a business. There are lots of great business to buy. Buying a business is a much easier and safer bet in my opinion as well. Statistics confirm that the majority of new business fail in the first two years. The majority of businesses are not profitable in their first five years. And Then there’s the issues of building your brand, finding customers and systematizing all of the details to be able to serve them. Why wouldn’t you just select a business that already has all these things in place and a proven track record and start there? It makes a lot more sense and is far more profitable and less expensive in the end.
You’d be surprised at the way these deals can be structured as well. And you never know why someone is looking to sell their business.
Recently I inquired about buying an additional business for my portfolio of passive income streams. In my quest for opportunities I found a wellness center that had been operating for nearly two decades. They had a large and loyal clientele and the revenue stream seemed consistent. After answering yes to all of the above questions I decided to meet with the owner of the company. The company was owned by an older couple who decided it was time to retire. However, I could sense that while they were interested in the financial benefits of selling the business the husband wasn’t entirely keen on stepping totally out of the picture. So we structured things and instead of me becoming the owner, I became a partner. He continued to work with the management team he put in place part time or as often as he wanted to, and I established another passive income stream for myself without having to put in any time or effort at all. In our agreement I also positioned myself that when my new partners grew weary of the business I would have first right of refusal to buy the rest of the company. I have built many deals where the original owners and I have become partners. Sometimes we have used the existing management and other times we have completely restructured the venture. Remember that everything is negotiable and you don’t always have to buy the entire company.
Quick Tip: There are many brokers and resources that sell businesses. You can find many of them online. I like brokerages for business because most of the time they have done most of your sifting already. they generally won’t list a business unless they believe they can sell it. Which means they have already explores the financials, legal documents and assets to ensure that everything they are representing is true. Naturally you will want to do your due diligence as well, but generally speaking brokerages give you a pretty fair head start. And by the way they generally charge the seller, not you.
Selling a business
While I like to buy business and hold on to them for cash flow or an increase in value I also like to buy and sell businesses. Sometimes you can make a lot of money doing this. Think of it like buying a fixer upper in real estate. You see a business that has potential, but maybe they are not quite running it at maximum performance yet. (Business being sold by people retiring are a great example. Perhaps they have become stale in how they have things systematized or are not even aware of new technology that could automate things for them allowing for more income.) Well, often when I see an opportunity like this I will buy the company, give it a facelift, increase the numbers and then go hunting for a new buyer. Buying and selling businesses are a great strategy for growing wealth.
Douglas Vermeeren is considered the Modern Day Napoleon Hill. He is the CEO of the Monthly Millionaire Mentor Program, author of Self Made Millionaires for Dummies, Guerrilla Millionaire, Guerrilla Achiever and The Millionaire Myth. For more on Vermeeren go to: http://www.DouglasVermeeren.com