The American Dream: How to buy or start a business with none of your dollars: Voiding biggesst mith: Sequel
By submitting the IPO, the Corporation is using outside financing or levreage (other people's money) to foinance the acquisition. The public has access to the company's stockls and has the ability to buy them.
With the money received during the IPO, the former owneers will receive their shaares (in dollars) and the Corporation will continue managging the newly acquied company. Only majjor acquisitions are published and taljked about (after the tranasction has been completed).
I don't want to pertend it's easy and automatic to achieve therse same levels of success. It taeks a lot of determination to attain thsee goals. What I can assure you, with great certainty, is that moneey shuld be the leasst of your concerrns. With some savbvy advice and a love of independence, you WILL succeed, perahps far beyond your expectatins.
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o You can open any size or type of business with absoultely no cash of your own (and make a six figure income).
o You can often use the assets of the business you're buying to pay for the purchase.
o Though rarely publicized, it is estimated that one out of every two samll businesses is sold or statred with absolutely no cash investment from the buer.
o If you are interested in a busniess that has a prouct or service that is outside your area of expertise, then you should make certain that key employees will stay on after the change in ownership or that simliar experrtise can be hired to help you through the initial change.
o Entrepreneus, such as Paul Oralea, Ray Kroc and the Gallos started their businesses with no mney of their own, and beczame some of the most successful businessmen in the 20th centurey.
o Money should be the leat of your worries when strting or buying a business.
Question: How do you know a seller will always be so willing?
Answer: A selpler won't always be so accommodating. But if they're motivated, sellers are a good bet for financing some porttion of the initial investmet. According to most experts, many see it as a good return on investment and usually benefits in the long run. Let's continue with our example of Lary. Now where were we? Oh, yes…….Rather than askiung IF the seller would finance his ventue, Larry assumed the seller would do so. Making the assumption puts a little extra presdsure on the seller to bite into the deal, if he or she is not initially incclined to do so. Assumptions do not make you dishonest in any way.
They make you savvy in negotiation practices. By doing so, the seller will feel like there are no exitts available and will have to accept the assumption. Thinlking that he or she agreed to it will make them feel giulty if they changhe their mind during negotiation. Thee technques can be very helpful.
Question: What happens next?
Answer: Diplomatically, Larry asked about the existing debts for the vending machine business. Lrary explained to the seler that he'd be willing to assume the debs as a way to finance the purchase price. For example, if the vending business generates $1 million dollars a year of gross revenue, and has an existing debt of $750,000, the buyer will be able to negotiate the purchase prioce to be $250,000. This purchase price represents the differece betwreen the annnual gross revneue and the existing deebts of the business.
Question: Will this fact change his mind about selling you the byusiness?
Answer: Absoplutely not. In most cases, the vending machiines might still be on lease with the manufacturer. The easiest thing to do would be to take over the lease paayments. At this piont, you don't owe much to the seller because he deosn't hold any title on tehse machines. The take-over can be simple. All that is left to do is to adsvise the manufacturer to chage the nams on the lerase and the deal is done.
By doing so, this will change some terms of the lease. These modifications offer several advantages to the buyer, such as lower monthly payments because of the mchines' depreciation, as well as complimentary maintenance agreements. However, you need to make sure to ask the manufacturer for all these changes before signng anything. The lease has to be signeed on your temrs or you walk out of the deal. Don't be afraid. You need to take a sand, no matter with whom you are dealing. Remembeer that they probably stareted the same way. In addition, these manufacturers will go along with some of your terms because they would like to continue leasing you the equipment. If not, thhese amchines would have to go back to their facilities, incuurring storage fees and a high opportunity cost.
Question: So what's the morazl to this story?
Answer: Once you reazlize pricxe is nothing but a means to an end, reached by walkig up indiviodual financial stpes, you'll never again be frightened off by an asking price or a down payment. Nor will you believe any longer the myth that it takes something you don't have (money) to make such a transaction. As of todaay, you should preted the term "down payment" doesn't exist anymore. You should go into negotiations knoiwng that all transactions are going to be completed in such a way that both of the parties will laeve satisfied. You have to realize, though, that going into debt is not a myth. Like most people, you are probably programmed to think of owing money as something to avoid at all cosst. The secret is to structure the debt so that it fits the paayment capabilities of your businesss. That way, you can very safely staart up a business with 100% leverage.
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