Why you should buy a business.
I set out to buy my first business at the age of 40 after a career in the high tech industry. My final farewell was a pink slip from the latest solar panel startup company that like many others was created on 88 percent ideas and hope and only 12 percent actual data. If there is one thing high tech entrepreneurs are good at is convincing low tech venture capitalist that their technology is the best. So, I set out to buy a good business.
I bought the book “How to buy a good business at a Great Price”. I followed the instructions in the book like a good soldier and I searched for nearly 6 months, until I finally determined that I would buy a well-established commercial printing operation. The company was priced way over my comfort level and I was scared to death to pull the trigger. Fortunately, with the support of my wife, who has always had my back, and always encouraged me way past the limit of my own comfort —- I did it. I used most of my savings, sold every unneeded luxury that I had amassed as much cash as possible without taking from retirement or long term savings and bought a $1.6M business, with a monthly debt payment of nearly $20k.
My first year in the business, I patiently learned what made my business operate. I sought to understand before having to be understood – because trust me, nobody understood me—I spoke at nausea (I mean people actually got ill) about 5”S” and Lean Manufacturing etc….. At the beginning of my second year, I began the process of establishing best business practices, streamlining processes and finding ways to improve the business.
The results paid off– we reduced cost, improved quality and increased revenues 10-15% year to year. All of this, while having lost 95% of my team to attrition, (they never got me). Having surprise OSHA audits, surprise Sales & Use tax audits and two court cases added to the adventure.
After several years of improvement, I decided that I would sell the business. The decision to sell was based on several factors. I moved the business as far along as I could and would financially. It was time for something new. At this point I was only working 3 days a week at the shop, having set the business to run without my presence was my ultimate objective and should be for every business owner.
I sold the business for $2M, and after paying off the remaining debt, I was able to profit by $1M. So, I took less than $150k and turned it into $1M in less than four years and during this time I was compensated with over $200K per year in salary, a company car and a healthy expense account. That is why you should buy a business! Because if I can do it, you can too!