There is this small business in my area that is for sale for ~$1.2 Million. I know that the business is a bit struggling (and I know the reasons). As a customer in the sector, I know that there is demand and I have some ideas to increase the gross revenue and the profit margins. This is an absentee-run business with ~12 employees and a manager.
I have a full time job (in a different sector) and I want to keep it. I have never run a business but I have successfully managed big long-running projects. I have a CS degree but read some books on finance and business. I am married with a kid and we have a net worth of $500k. It is a bit scary to buy a million dollar business.
Question: I am curious if anyone has any suggestion on how to tell if it is okay to buy a business twice someone’s net worth. Is it too big of a step for a first business? Any suggestion on risk analysis or minimizing the risk here?
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If you get a loan to buy this business, it will be personally guaranteed.
Do you mean that getting a loan would definitely cause losing life savings? That is something I am afraid of. It feels too much is at steak. Would it make sense to ask for a seller financing somehow tied to future earnings to avoid the risks of a sinking ship?
You can probably make more. Quite your job and go fulltime and focus on growth… get rid of few employees. I bet there are few just not worth keep them around.
absentee-run business are run poorly and always room to improve.
I am in a similar boat. But after recently going down the YouTube rabbit hole of buying a small business starting with Codie Sanchez, then looking at other content providers like Acquiring Minds, and David Barnett, and then branching into looking at Tax Strategy and business structure and other related business topics I have become completely convinced that this is what I have to do. I’ve never really calculated my net worth, but I have a 6 figure W2 Salary that is closer to 200k then it is 100k and have a fair amount of equity in a home that is decent size, although not one that most would consider luxury, and I don’t have a lot of liquid. My wife earnings are fairly minimal compared to mine. I am looking at a business right now that would likely cost me between 3-4m which includes two real estate properties associated with the business. I’ve already met with the owner and more due diligence is occurring.