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Old 06-10-2008, 11:09 AM   #1
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New Business Venture opinions

Hi everyone:

I'm 40 yrs. old with a net worth of roughly 1 million. (not including residence which is paid in full) I have no dependents, debt and have never been married. (nothing in the works, either.)

I DO NOT like my job and am thinking of speaking with a busines broker about purchasing an existing business. (naturally, I would quit my current job)

Here's my question:

Is it worth taking the chance if I want to retire by 50 yrs. old? I was blessed with a big mouth. Coversely, I have limited hands on technical skills.

I do not want to start up a business on my own due to greater risk factors. Also, I don't really know what I would or could do?

My current Vanguard portfolio is properly diversified.............per Vanguard's recommendations. (website & financial review) I also have a $50,000 cash reserve. (Vanguard Prime Money Market)

I feel my career is at a crossroads.

Any advice would be much appreciated.

Thanks in advance.

Space Mountain
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Old 06-10-2008, 11:37 AM   #2
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I recommend buying a book or two (or checking them out from your library) on purchasing a business. I'm very fond of Nolo books - generally well-written and informative. Here's Nolo's start page for buying a business:
Buying or Selling a Business - Resource Center

A big mouth can take you a long way in this world (ever considered politics? ). No one can provide a meaningful simple answer as to whether purchasing an existing business is the best route for you. Happy Reading!
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Old 06-10-2008, 03:16 PM   #3
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My father did that at 45. He began his biz with very little and retired very comfortably at 55. He was blessed with an incredible imagination and a drive to follow through on ideas, strong technical abilities in his area, average hands on physical skills, and the gift of gab (in a way that doesn't go overboard and get annoying) like nobody I've ever met.

As a business owner, I would suggest that the grass is often greener over here. It can be so very rewarding, but everything is on your shoulders and there will be days when you wish that you could just "punch the clock" like the good 'ol days.

Also remember, you need to sell that biz someday, so getting out can be much tougher than just putting in your 2 weeks notice.
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Old 06-10-2008, 03:36 PM   #4
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After watching my DH run his own business since 1989, I offer this observation: IF you truly have the entrepreneurial spirit, then by all means go for it. On the other hand, owning your own business, as Grizz points out, means that YOU are responsible for everything. Some folks, like my DH, thrive in this kind of environment -- others find they function much better in a more structured/directed setting. Only you know if you're cut out for it. Perhaps you could find someone in the field you're thinking of who might serve as a mentor for you while you're making your final decision.

Good luck!
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Old 06-10-2008, 03:41 PM   #5
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Quote:
Originally Posted by Space Mountain View Post
I DO NOT like my job and am thinking of speaking with a busines broker about purchasing an existing business. (naturally, I would quit my current job)

[...]

Any advice would be much appreciated.

Thanks in advance.

Space Mountain
Space,

Even if you invested all your $1M (which I would not advise), there are very few good businesses that can be bought for that amount.

Why?

1. The vast majority of businesses that small, really depend on the hands-on labor of the entrepreneur. Unless you can personally replace the owner, don't bother.

2. Most small businesses lack the personnel necessary for growth. If you, as the new owner, can't get along with a key employee who decides to leave, that employee may be difficult to replace, and in the meantime the business could tank.

3. In the case of a business producing a profit of $50-200k/yr, that profit may come from a small handful of customers who may not continue to do business with the new owner, for a variety of reasons. Same thing for vendors. So, it's very fragile and risky at that profit level.

Instead, if you want to go out on your own, find a business that you would love doing on a daily basis, and prepare a formal business plan for yourself as a reality check. Then, take some of your capital and use it to get started on a small scale, learn from your mistakes, and build it up from there.
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Old 06-10-2008, 04:03 PM   #6
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If you've never run or been responsible for a business before, tread very carefully. Massive upside and massive downside...financial, emotional, health-wise...probably in every way. I started a business by accident and now am responsible for employees, vendors, partners, customers...many relationships and the expectations of many people. I will be so careful and cautious if I ever start another business that people will assume I had failed miserably in my first attempt, while quite the opposite case is true, we will likely continue to be successful until an eventual sale.
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Old 06-10-2008, 04:29 PM   #7
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As an entrepreneur myself who is on my second "big boy" business, I would also suggest not to buy a business, but rather to start one on your own. Buying businesses is for the big boys, and unless you really not what your doing or have the cash so that it doesn't matter, you can really get burnt.

On the whole, should I do it or not question, I would say that some people are cut out for it (self motivated), others are not. So, if you are the self-motivated variety and can find something you enjoy doing that will make you some $$$, then go for it. For me, its the only way.
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Old 06-10-2008, 04:57 PM   #8
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You didn't say what type of business you want and how much seller discretionary earning (SDE) you want. The first step is to map out your competencies and interests, and then go look for a business that isn't so dependent on the previous owner's intangibles that the business walks out with the previous owner.

The Nolo book The Complete Guide to Buying a Business recommended by a previous forum member is very good in detailing the transactional aspect of buying a business. For valuing and preparing the business for sale, I recommend the Business Valuation Blue Book or the Ney Grant blog on AllBusiness.com. To sum up their advice, both tell the successful business owner to not get too creative with the accounting in the 3-4 years leading up to the sale because the taxes you save are going to make valuing the business for sale that much more difficult. The buyer will also have a much more difficult time securing financing based on heavily reconstructed cash flow.

PM me if you need more information.
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Old 06-10-2008, 04:57 PM   #9
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I read your previous posts. You were self-employed until October 2007, then went to work for someone else. Why not just return to self-employment, or go to work in the type of business you might like to buy, learn it, and then buy into that company.
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Old 06-10-2008, 05:33 PM   #10
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IMHO - If the business cannot yield more than your $1M invested in a diversified portfolio of stocks and bonds plus your earnings at your current job.... why would you do it?

The trick is to risk adjust each scenario. IMO - running a business yourself is more risk than investing the $1M and working for someone else.

I would not buy the business.
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Old 06-11-2008, 07:17 AM   #11
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Don't minimize the risks of buying a business. DW and I made the worst decision of our lives to buy a business at $300k. The cash flow dropped significantly and we felt lucky to get rid of the place two years later at $125k.

DW also learned that she was not a head honcho type.

Live and learn, sometimes you make mistakes. Just go into this with your eyes open. If all you are doing is trying to get out of a bad current work situation, you might be making the wrong decision. Make sure whatever business you buy is something you WANT to do. Don't just do it as the perceived lesser of two evils.
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Old 06-11-2008, 07:36 AM   #12
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There's nothing wrong with buying an existing business as long as you understand the business. It's the premium you pay to get a head start.

You may be able to start a similar business from scratch, but you may not get the necessary cash flow in the startup phase required to keep you going.

I would gladly pay someone $1 for an immediate multiple of that in revenue as opposed to investing $1 in a startup but not see a return on that investment for weeks, months, and sometimes years.
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Old 06-11-2008, 07:44 AM   #13
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Originally Posted by CybrMike View Post
As an entrepreneur myself who is on my second "big boy" business, I would also suggest not to buy a business, but rather to start one on your own. Buying businesses is for the big boys, and unless you really not what your doing or have the cash so that it doesn't matter, you can really get burnt.

On the whole, should I do it or not question, I would say that some people are cut out for it (self motivated), others are not. So, if you are the self-motivated variety and can find something you enjoy doing that will make you some $$$, then go for it. For me, its the only way.
I second this opinion. I bought (for mega-corp, with megacorp's money) a business for $100 million. And yes, you really have to know what you are doing (it helps to know how to deal with ulcers, insomnia, jet lag, high blood pressure and a host of other problems as well).

I found out too late that I REALLY did know what I was doing, because if I would have raised capital and bought this business on my own and raised it up the same way that I did, life would be very different now. I guess a little luck/good fortune may have been involved as well. Given comparable multiples to our closest publicly traded competitors, it would be valued at over $2.5 billion now, even in the poor market environment we are in at present. I'm a salaried CEO instead...

Would I have done it differently then had I known what I know now? Absolutely! Would I start over now and do it/buy it myself? Absolutely not...unless it was in another industry, and with a good solid plan to float it within 3 years and exit within 5, with personal profit potential of well over 20x in that period. That means having an eye for business and a feel for the target industry, with some revolutionary change that would alter the landscape, such as regulatory change, revolutionary product, etc.

Best of luck to you in your decision.

R
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