Business Buying Opportunity: Should You Buy A Distressed Business?

Everyone wants to buy a good profitable business making over $100,000 per year. The problem is there are only a limited amount of these businesses on the market. The reason for this  is everyone wants the same thing.  The results is the pricing is too high and the availability is too low. 

Due Diligence is a Puzzle

In fact, if one is for sale, a buyer should ask a very important question to themselves—not the seller. “If it is such a good business why is the seller wanting to get out?” By the way, as a footnote, never ask the seller that question because you will not get the real answer and you may actually believe what they tell you. Assume that there is something wrong that the seller is not disclosing to you, and figure out the answer yourself.

That reminds me of a story I was told about the million young beautiful single young women in New York who all wanted to marry a millionaire but there are only ten thousand millionaires available. One girl with this goal was dating a nice young man who had the potential to be a millionaire at some point in the future, but she wanted her millionaire now. A young man with prospects, sitting on your porch is a lot better than a millionaire you have not even met, who has 50 woman chasing him.

Buying and Turning Around a Business

Since there are not enough profitable businesses around, an educated businessman looks for poorly performing businesses that have a clear potential to be turned around. Very few people know how to market correctly. Those that do know how to market know they can bring the business in over time.  Buy the physical location along with the equipment and customers and you create a new profitable company that makes the $100,000 plus profit, which was purchased for asset value only.

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Image credit:  joelrichards  iStock