It’s foolish to think you can buy a good business for $0 down

There are several supposed gurus who lure unsuspecting people into expensive courses, boot camps and seminars with the absurd promise that they will teach them how to buy good businesses for zero money. I’m interested to know if these so-called experts have had any success at all, let alone any success, with the strategies they teach and charge people thousands of dollars for these stupid tactics.

I’ve had more inquiries about the “no money down” concept over the past few months, so I can only assume that these world-class traders are making an impact. Unfortunately, they take money from those who can least afford to throw it away.

Some of the strategies I’ve heard them pitch are insane. My favorite is that they claim with great enthusiasm that they will teach you how to consistently buy solid, profitable businesses and get the seller to finance 100% of the deal every time. This is pure madness!

Business Buying Lesson #1

Good business owners don’t give the keys to complete strangers for free and let them pay off the entire purchase price over a long period of time.

That would be a great situation for a buyer, I agree. I don’t want to trample on the hopes and dreams of people who want to buy a business. However, it is extremely important to understand what is true and how to do it effectively and not waste time or money on schemes that simply do not work in the real world.

Seller financing is great – but be realistic about it

I’m a big believer in seller financing. I’ve been teaching and preaching it for over thirty years, whether I’m representing the buy or sell side of the deal. This is the most effective way for the seller to confirm any promises they may have made about the business. It provides the highest degree of buyer comfort when the seller has the proverbial “skin in the game“.

However, the seller’s role is not to be the bank. The idea that they will underwrite the entire deal is simply not realistic. I don’t care how much these gurus charge people to teach this crap. I suppose it can happen on the rarest of occasions, although I have yet to witness it and I have only been in this sector for thirty-two years.

Think about it: Why would the seller of a good, profitable business offer to just give it to a complete stranger and let them pay the entire purchase price? Do you think someone is going to take their life’s work and hand it over to an unproven operator and cross their fingers and pray that he continues to run it successfully and pay them?

How much can a buyer expect to finance a seller?

So what exactly is it when it comes to seller financing for smaller deals? In the real world, seller financing will average thirty to fifty percent of the deal. This has been the setting for decades, and my guess is that it will remain so for decades to come.

That means the buyer has to figure out the rest. If the buyer is not in a financial position to finance the capital investment in the deal (the down payment), don’t despair or give up. There are options available such as bringing in an investor/partners, acquiring less than one hundred percent of the business or potentially working there for a period and earning capital. We will discuss these in future posts.

As you pursue your goal of buying a business, understand what is realistic about the business buying process and focus on meaningful strategies that you can use effectively. Buying a business is a dream for many people, so stay focused and don’t get sidetracked by fantasy scenarios that will never materialize.

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