Buy A Business Like This… And It’s Almost Guaranteed You’ll Go Bankrupt In A New York Minute « All About Small Business

Buy A Business Like This… And It’s Almost Guaranteed You’ll Go Bankrupt In A New York Minute « All About Small Business

May 27, 2010 by: Art Hamel

If you’ve ever wanted to buy a business that is obviously undervalued by its owner — one that is under-performing now but that you think you could turn around and make a killing with if you bought it — then this will be one of the single most important articles you ever read, and will save you a lot of money and time.

Here’s why: People come up to me all the time and ask what my best “technique” is for finding profitable but undervalued businesses to buy.

And I basically tell them two things.

1.) First of all, you have to get this “undervalued business” idea out of your head. Because you’re going to find the return you get on the money you’ve invested, and time you’ve invested (and that the investors invest if you use investors), is going to be quite significant. And there’s no reason to waste those resources going after under-performing businesses.

2.) And secondly, if you’re looking for “dogs” (businesses that are under-performing), you’re going to find that even if you solve that problem and you get your picture in the paper, and they put you in “Inc” magazine, I’ll make you a bet on the next three or four that you work on you go bankrupt and you dump every one of the companies that you have.

Bottom line: It is way less expensive…and way less worrisome and troublesome…to go after good businesses that are already making huge profits, and that are extremely easy to get investor financing for, than “dog” businesses that have lots of “potential.”