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

Is “Buy a Business” cheap & selling it for big profit easy? NO!!!

By on July 9, 2014
buy a business

Is “Buy a Business” fixing the problems and selling out for big profit easy? NO!!!

 

When we Buy a Business, it is a lot of work and it will require a lot of searching and sorting on your part. This will be followed by intense personal involvement for the first 2 to 4 months while you fix the problems you find.   That work may only take 10 hours a week but it is NOT going to be a piece of cake.

 

You’re also going to need someone on your team that can understand the financial statements forward and back and be able to look for the hidden answers to the company’s future.  Plus, you will need to groom a manager or you’ll get stuck working night and day.   That is why we only do 2 to 3 deals a year.

 

Now here is why I felt compelled to tell you this.

 

I just listened to a webinar by one of my few competitors that teach people how and why to buy companies.   I was awe struck at how easy he made it all sound. The line that blew me away was to look “only for companies doing over $1,000,000 in sales that have 30% net operating profit.   Then buy the company for nothing down and pay for it out of the cash flow.”

 

Well what a load of manure.

 

FIRST: If a company is dropping 30% to the bottom line – they are NOT going up for sale. In the past year I have looked at listings for over 1,000 companies and reviewed the detailed financials of 100. None of them came even close to 30% profit. The company doing that kind of net, is a private gold mine.

 

A business owner that can squeeze that much money out of a business and build sales to one million is not a dummy. They know what they have, they know what they are doing. In my experience they simply are not going to be interested in your nothing down offer.   I’m sure there are exceptions, but come on, can you build your fortune on the one in a thousand exception?

 

The guy dropping 30% could hire a manager for 1/3 of profit and have a life time income greater than anything you could ever pay. Why would they even consider selling? Especially if you’re trying to finance the deal with nothing down and owner financing.

 

SECOND: I can promise you that VERY few companies make 30% net operating profit. The few exceptions are firms that run on the owners’ personality like information publishers or people with a lock on a new technology or long term contract.   The ‘personality’ business will NOT transfer to a new owner. Your sales will not match the ‘guru’ that everyone loves, once they are gone.  We never buy companies that are based on the owners’ personality.       The company with the lock on a technology or big contract is going ‘up stream’ when they sell, so there looking for the 100 million dollar company willing to pay six or eight times earnings in cash or stock.   You are out of the game.

 

THIRD: Only 4% of all companies ever get to $1,000,000 in annual sales so setting that kind of standard has just eliminated 96% of your potential acquisition prospects – but then holding out for 30% profit is a dream.

 

SUMMARY: This information is not to discourage you from looking for turnaround deals. It is simply a reality check on my competitor who knows this is an almost impossible goal that nobody can accomplish.   The entire purpose of such an outlandish ‘setup’ is to keep you from asking for a refund.

 

Buying a business especially one is distress is going to take time to find the right deal.  However, it is the best business investment you can make.  I left accounting after 44 years because it is worth the effort. Nothing we can do besides winning the lottery will have such a major impact on our net worth as successfully fixing a broken business and reselling it for capital gains.

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.

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