I often mention why people sell a business; the passion runs out and it’s time for a new adventure. The same goes for those who seek to be self-employed, with only one minor difference; buyers have never realized their passion.
You see, business owners were at one time a hopeful business owner. They were employees, a cog in the wheel. They were hopeful to one day own a business, have freedom and be the boss. They went through the struggles to find a business, go through the SBA loan process, and buy that business. They went on to ignite their passion further to grow the business.
To the employee who has never taken these steps, the passion has not been opened up within them. They are working for their salary, the health insurance, the 2 weeks of vacation, and the confines make them feel safe. However, as soon as those confines become a burden; its only a matter of time before they start checking out their 401K or IRA account to see how much money they have to buy a business.
Corporate America has done a pretty good job of being competitive to get people to work for them. The tricks of the trade are pay, health insurance, 401K contribution, paid time off, and ability to move up in the company. These benefits keep people in their jobs and the corporation thriving. Companies who offer these benefits are competing for the job applicants that other companies are wanting as well. The better the benefit package; the better built mouse trap they have. Having said that, many people get tired of the day-to-day drone of being employed. That week of vacation happens really fast, and the politics are enough to drive even the mildest tempered person insane.
When the confines of Corporate America drive a person out, that person looks to be self-employed. They are looking to know what it feels like to live with passion, be their own boss, and call their own shots. This is the majority of business owners.
The other type of business owner is the smart entrepreneur who knows how to use the leverage of QSI (Quantum Stack Investing) to build wealth. The bigger the down payment you have, the bigger business you can buy. When you sell your business for 3X what it pays you annually, you did two things when you sold; bought yourself 3 years of your working life back and graduated to a much larger paying business NOW. The idea of retiring “one day” is over by using QSI methods.
Buying a Business is the start of using the power of Quantum Stack Investing. Selling is the second step to using Quantum Stack Investing. The returns on investment with this investment model outrun any 401K package that the corporate guy has, and out runs any model of the business owner wanting to run his one business “until one day” he retires.
People often ask, “what does it take to buy a business?” I then ask them, “how much liquid do you have?” You see, it doesn’t take much more than that to buy a business. It takes the money for the down payment. Credit is less of a concern; your personal financial statement is less of a concern; it’s cash that matters.
Cash is king in Acquisitions. The more money you have to put down, the more of a fire breathing cash producing business you can buy. The name of the game is cash. For the corporate America guy, he needs to buy a business and run it, while he moves the needle up on earnings so he can sell for 3X what is pays him a year, so he can move to a larger business. For the business owner, its likely that he could have enough money for the down payment and run his business without selling it. The same applies. He could buy up his competition, he could expand outside of his geography.
This only applies if he still has the passion left for the business. When the passion goes away, he will sell. When he does, he will have a liquidity event where he can apply Quantum Stack Investing to buy a much bigger business. It’s the same result for both types of buyers.