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How I invest in businesses

I’ve had a lot of meetings with people selling their businesses. I’m still learning the process, but I think I’ve started to figure out what the green flags are, and of course – the red flags. So, let’s take a brief look at what I’ve experienced so far.

Red flags: Only wants the full amount of the business paid upfront. Ok, so I buy a hamburger 100% up front, because it’s low risk. Wanting 100% cash in hand immediately is a sign that they just want to take my money and run. I don’t want to inherit a steaming pile of … Uses a broker as a defence shield to take all the questions and provide all the vague answers.

Green flags: Sees vendor financing as a means to demonstrate there is value in the business. Willing to talk about a handover period and on-going support. Cares for the future of the employees. Knows their numbers (even just ball-parking it).

So, what/how do I do things?

  1. Quick meet to see if there’s value in talking more
  2. Get more info
  3. Do my math and see if I can afford it and scale it
  4. Discussing purchase/investment options
  5. Due diligence
  6. Final decision if I’ll buy
  7. Discuss the practicalities of handover and managing Day 1, Week 1, Month 1

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