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

Four reasons you should NEVER start a new business

By on May 19, 2014

Four reasons you should NEVER start a new business

By: KC Truby

When I was 16 I wanted to start an auto detailing shop.   Then I discovered that at 16 you cannot sign a lease or buy insurance or get a business checking account. I was stopped dead in my tracks by the law.

The solution I came up with was to buy a detail shop that was going to close down, Friday. We just kept the lease, insurance and bank account intact. I simply mailed in the change of signature card to the bank and in those days they did not request a date of birth. As long as I paid the lease and insurance no one ever asked my age, so I did not volunteer.

So for a grand total of $5,000 I owned my first business. Even funnier I postdated the very first business check I ever wrote by 3 months so in reality I got my first company for nothing down. The seller was happy because it was his best offer and he had to move to St. Louis to be with his son in the VA hospital.

Every day I hear bright eyed hopeful entrepreneurs talk about writing a business plan, raising money and starting a new business that is going to change the world.   Check back with those people a year later and 99 out of 100 are still getting ready.

Here is what happened – dreams met reality.

Number one: financing a startup is hard to do. Unless you have your own money or a rich uncle you are going to play hell getting an investor. I know we read about big buck venture capitalist every day, but in real life – it is a long way between the dream and the reality. Oh, and if you’re thinking the bank will loan you money, keep this in mind. Regardless of your credit rating, only 7% of all business financing is done by banks and that includes the established business that needs expansion capital against signed contracts.

Number two: Your business model is unproven in a startup. We tend to believe our own BS when we dream up a good idea and we’re almost always wrong. What’s worse is we ask our friends and neighbors if it’s a good idea, most will have absolutely NO IDEA. So they give you two answers. The negative people tell you it is way too risky, the positive people in your life paint a rosy picture. Both are wrong. Opening up on an unproven model is almost always a sure sign of failure, and it comes quick.

Number three: You don’t have any customers to speak of. People willing to buy your product or service at a price high enough that you can profit are hard to come by, no matter how great your hot new idea is. Customers are the life blood of your business and the source of your future cash flow. When starting a business we generally accept ‘on faith’ that people will flock to do business with us.   Dangerous.

Number four: The most important reason of all not to start a business is one simple word, infrastructure. Running a business requires you to get a location, employees, web sites, insurance, bank accounts, accounting software and hundreds of other little details. You’ll also need to make 1,000 strategic decisions any one of which could be fatal if you make the wrong decision. These are the details that keep us from ever getting off the ground.

So what is the answer? BUY A BUSINESS that is already generating cash flow and introduce your ‘hot idea’ as a line extension. You will have the 100 details done, you will have employees in place and it is far easier to get financed to buy an existing business, then to start a new one.

Buying a company is far easier than you know. Your starting point is to look for a business that…

  • Currently is in the business you want to get into. Then bring your better management systems to bear.
  • Currently sells to the same type of customer you hope to reach so you can simply add your product line.
  • They have the infrastructure you need and the culture of the current employees matches yours.

You can buy a company for 2.5 times earnings on average and pay for it over five years, many times with owner financing. So you skip the need for raising money and you are cash positive the first day on the job.   Who could ask for a better platform to launch your new idea from?

Your chances of success just got better.

Remember that 99 out of 100 hopeful entrepreneurs never get started. Well they may be the lucky ones. As we’ve all heard over and over 80% of all startups are out of business in five years. Taking the owners personal wealth down the drain with it.

Why take the risk. Simply buy a business over 5 years old with employees, infrastructure, cash flow, customers and vendor relationships in place and you will prosper.

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. Nick

    June 9, 2014 at 5:12 am

    Buying a business and then adding the new idea as a line extension is brilliant; then if you really wanted you could always spin it off anyways.

Leave a Reply

Your email address will not be published. Required fields are marked *