How to buy and turn around a
distressed business or 'roll-up' competitors

On this site you’ll read real life stories of how 23 entrepreneurs find, fix and then sell small companies on the edge of failure. Sometimes we buy our weak competitors in a roll-up and get new clients cheaper by acquisition then organic growth. If you like these concepts, come to the next workshop. Learn how we...

✓  Find distressed companies that are worth saving for capital gains
✓  "Roll-up" your competitors for rapid growth with little cash or risk  
✓  Why buying a distressed business is the BEST way to do a start up

From KC Truby Lonesome Cowboy Publishing Inc. 301 Thelma Drive #426, Casper WY 82609 (760) 207-6385

Should you buy an “OLD GUY” business, or do a high tech start up.

By on July 22, 2014
buy a business

Last week I wrote an article on LinkedIn that got SLAMED with over 50 negative comments in the first few days.   WOW,  that was a surprise.  But when I drilled down to look at the commenters most of them were young enthusiastic people with little experience at failing.   I guess when you have your mind made up about how to be a success in business,  you may not want to cloud your vision with facts.

Should you buy an “OLD GUY” business, or do a high tech start up.

 

In the baseball movie ‘Money Ball’ with Brad Pitt. The team manager focused on a group of players and deals that would hit singles consistently instead of trying for the home run. It worked so well they took the championship.

 

Yet, in every business group meeting I attend about half the room is full of young ‘hot dogs’ with big dreams of creating the next Instagram or WhatsApp. All they need is a million dollars and two years and were all going to be rich. Maybe these guys should stop reading the newspaper.

 

The vast majority of young people think the secret to success is to create a web based software and then sell out to Google. The problem is – your odds of that working are the exact same odds of making the NBA because you played good basketball in high school.

 

Warren Buffet often says he only wants to own companies that make things, not ones that make things up. That is why he will not invest in Microsoft even though one of his best friends owns the company.

 

We find ‘old guy’ businesses to be far more profitable. Things like a tire store, construction business, manufacturing, distribution etc. Since fewer people want these types of ‘old guy’ companies the multiple is low. Owning an ‘old guy’ business dropping $10,000 a month net – is a nice single.

 

We especially love these types of companies because the average multiple is 2.5x trailing earnings and they are easy to run because…

 

  1. The customer understands what they are buying and why they need it. So your ‘pitch’ can focus on what makes you different or better than the competitors. The sale of a product or service that is either/or is far easier then yes/no. Sell to people that must buy from someone, and you will sell more.
  2. You are not forced to ‘create’ a market based on your personal belief of what the market needs.
  3. They already have a customer base in place that will continue to buy from you.
  4. The business can be boiled down to rules so you can hire a manager to take care of the details.
  5. The ‘old guy’ business can run when you are not there. It does not require ‘art’ to manage or innovate. The average employee can do a good job if provided a check list and instructions.

 

Now let’s look at the high tech start up.   First you will spend six months looking for money – total dead time. Each year 2 million companies start up in the USA and about 20% look for venture and angle funding before they start. According to the National Venture Capital Association about 800 firms of the 400,000 looking for money actually get venture capital each year – but of those 800 – less than 10% actually turn into viable companies.   Now remember those 800 are smart people, with good ideas, strong management and capital – and still only 1 of 10 becomes viable enough to be an acquisition target. Those are pretty long odds on hitting a home run.

For the business owner that wants to grow we recommend buying your competitors and suppliers in a roll up first. Then start looking for complementary companies that sell to the same customer base as you do.   This simple plan of hitting small singles to first base is far easier to pull off and does not require you to engage in risky deals.

Here is an example of an ‘Old Guy Business’ to buy

Carl Slicer in CT sent me this link yesterday – it is a perfect example of an ‘Old Guy Business’ that could very well be a cash cow for your retirement years.   We love ‘dirty hard labor’ companies because the sale price multiple is low, most times we get owner financing and it is easier to hire a performance paid manager for simple companies.

Link to BizBuySell listing….

http://www.bizbuysell.com/Business-Opportunity/Tire-Manufacturer-Distributor-25274/1090011/?d=/w

I have not looked at any of the details of this offering and I am making no statements about the value of the deal. I’m simply passing on a link from the Internet. DO NOT buy this business without an in depth due diligence review.

 

FIND MORE DEALS LIKE THIS ONE, RIGHT IN YOUR COUNTY – if you would like to join us each week as we review finding deals and fixing broken companies follow the link below.

http://kctruby.com/bfs-event After years of selling training and consulting – I believe he is right. Making things up is to complicated.

 

About KC Truby

From their ranch in Wyoming, KC and his wife Linnea have bought or started 21 companies as a side line to their accounting business leading them into M&A as a full time business in 2012. These companies are located all over the Western Rocky Mountains, London and India. Since 1969 through their accounting and training companies, KC has taught 18,000 business owners how to improve cash flow and find more customers by installing standardized systems in their small business. Since 1989 KC has presented over 1,000 seminars and training classes to the small business owner.

One Comment

  1. Pingback: START HERE – Read this article first if you’re looking for a way to create capital gains and monthly income, with minimum risk. - KC Truby - Find, Fix, Sell

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