The ridiculous promise that gurus can teach individuals how to buy good businesses that can be purchased with no down payment is luring unsuspecting individuals into expensive courses, boot camps, and seminars. These so-called experts are charging thousands of dollars for horrible tactics they have never even tried, let alone succeeded at.
It appears that these world class marketers are making an impact as I have received more inquiries about the “no money down” concept in recent months. Money is being taken from those who can least afford to lose it.
They have presented some ridiculous strategies to me. In one statement, they claim enthusiastically that they will show you how to consistently acquire profitable businesses and get the seller to finance 100% of every deal. What a crazy idea!
LESSON #1: HOW TO BUY FOR A BUSINESS
Business owners who own good businesses don’t give away their keys for free to complete strangers and let them pay the entire purchase price over time.
A buyer would have a great deal to gain from this situation. Buying a business is a dream for many people, and I am not trying to crush their hopes and dreams. It is crucial, however, to understand what is true and how to do it effectively, and to avoid wasting time or money on schemes that are simply ineffective.
BE REALISTIC ABOUT SELLER FINANCING
Seller financing is something I strongly believe in. It is important to me that sellers are able to finance their properties. In order to validate promises that may have been made about the business, the seller will need to carry out a due diligence. There is no greater sense of comfort for a buyer than to know that the seller has “skin in the game”.
In spite of this, the seller does not have the role of being a bank. It is simply not realistic to believe they will underwrite the entire deal. The amount they charge people for this nonsense does not matter to me. In my many years of working in this field, I have never witnessed such a thing, although I can’t say I haven’t seen it before.
If a seller of a good, profitable business offered just to give it away with the whole purchase price paid out to a stranger, why would they do that? Would someone trust an unproven operator with their life’s work and cross their fingers and pray that they will succeed and pay them?
CAN A SELLER FINANCE A BUYER’S PURCHASE PRICE?
Which seller financing method is most accurate when it comes to smaller deals? Most real-world sales will be financed by the seller in the third to fifty percent range. The parameter has remained the same for decades and my guess is it will remain the same for decades to come.
It is the buyer’s responsibility to provide the rest. Be not deterred by the inability of a buyer to contribute the down payment (equity investment to the deal). Investors or partners can be brought on board, less than one hundred percent of the business can be acquired, or equity can be earned by working there. These topics will be discussed in upcoming posts.
Focus on meaningful strategies for buying businesses that you can use efficiently as you pursue your goal to buy a business. Keep focused and stay away from fantasy scenarios that will never come true if you plan to buy a business.
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